Investors Price In Woodford Risk as Withdrawals Blocked
Investors Price In Woodford Risk as Withdrawals Blocked
(Bloomberg) -- Call it the Neil Woodford discount.
A listed investment trust run by the famed money manager is proving to be the perfect proxy for investor sentiment after the 59-year-old money manager halted withdrawals from his flagship LF Woodford Equity Income Fund.
The Woodford Patient Capital Trust traded at a record discount relative to its net asset value on Tuesday, a sign of waning faith in his investment decision-making.
The slump contrasts with the investor stampede of 2015, when the biggest U.K. investment company raised 800 million pounds ($1 billion). Investors who couldn’t get into the fund paid a premium of as much as 15% in the months after its creation. By Tuesday, the fund was trading at a discount of more than 19% to its underlying assets, the highest since start.
The reversal reflects “the nervousness around Woodford’s name,” said Emma Wall, head of investment analysis at Hargreaves Lansdown Asset Management. “A 24-hour movement of stock prices or discounts of the trust designed for five, 10, 20-year investment is not an accurate barometer of performance.”
Hargreaves Lansdown was the trust’s biggest investor as of May 10, according to data compiled by Bloomberg.
The Woodford Patient Capital Trust, whose biggest investors also include BlackRock Inc. and Fidelity International, tumbled as much as 20% on Tuesday before paring its decline to close down 7.2%. His main fund is interconnected with the trust, with about 1.6% of its assets invested as of the end of April, according to its website.
“Patient Capital Trust is unaffected by the suspension of the Equity Income Fund’s redemptions and Neil continues to manage the trust, investing in disruptive early-stage and early-growth companies,” said Roland Cross, a spokesman for Woodford.
The trust is designed to generate annual returns of at least 10%. It had allocated more than 65% of its funds in unlisted companies, according to a 2018 annual report.
The decision to freeze redemptions at the larger equity income fund is a stunning reversal for the manager, whose previous winning streak helped him accumulate a major following and billions of pounds of investments.
By 2013, when Woodford announced he was striking out on his own after two decades at Invesco Perpetual, his reputation was so gold-plated that the money followed him. St James’s Place Plc, a FTSE 100 wealth manager, withdrew 3.7 billion pounds of client assets from Invesco and parked it with Woodford before he had even turned on the lights.
In Woodford’s first full year on his own, his flagship fund returned 16%, beating all 50 of its peers tracked by Bloomberg. Now that trust is being sorely tested.
In a sign of the growing pressure, Woodford said he was “extremely sorry” about his decision in a YouTube video posted on his website.
The fund has dropped 7% this year through May 31 and is down 18% in the past 12 months.
“Gating of equity funds is rare,” Fitch Ratings said in a statement Tuesday. “The Woodford Equity Income fund gating could significantly damage the reputation of its investment manager.”
To contact the reporters on this story: Nishant Kumar in London at nkumar173@bloomberg.net;Suzy Waite in London at swaite8@bloomberg.net
To contact the editors responsible for this story: Shelley Robinson at ssmith118@bloomberg.net, Peter Eichenbaum
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