Neil Woodford’s Listed Trust Considers Replacing Him as Manager
(Bloomberg) -- Neil Woodford’s listed investment trust is considering replacing him as portfolio manager, deepening a career crisis that began when the stock picker stunned the financial world by freezing his flagship fund last month.
The board of Woodford Patient Capital Trust Plc is meeting with a range of fund managers and looking at all options, according to a company statement on Monday. The trust’s shares have plunged 31% since Woodford locked down his main fund after a run of poor results led to mounting redemption requests, driving the trust’s market value down to 468 million pounds ($576 million).
“I think it’s a big mistake what they’re doing,” said Jacob Schmidt, chief executive officer of Schmidt Research Partners, a global investment firm. “Woodford is managing the trust for free at the moment. He also knows the portfolio in-and-out, and knows all of the stocks. Why appoint someone else?”
Woodford also sold 1.75 million shares in the trust -- about 60% of his holding -- between July 3 and July 8 to “meet personal financial obligations, including a tax liability,” according to a separate statement on Monday. He notified the board of the sale on July 27.
That long gap between the sale and notification “reflects poorly on the manager,” analysts at JPMorgan Cazenove wrote in a note on Monday. “It is not surprising, in our view, that the board is at least considering other management options given the current situation and performance under the current strategy since inception.”
The trust’s shares were trading at a 34% discount to net asset value on July 25. Woodford won’t receive any income or dividends from the trust while his flagship fund remains suspended, according to the statement.
Suspending redemptions is a rare step for any fund, let alone one, like Woodford’s, that allows clients to make regular withdrawals. He made the decision to buy time to raise cash by selling down the fund’s holdings of lightly traded micro-, small- and mid-cap stocks that made up 97% its assets at the end of May, according to Morningstar data.
Pressure on Woodford is increasing. The U.K.’s top markets regulator recently said the money manager had failed to follow the spirit of the rules, and a top lawmaker said the fund industry should prepare for tougher scrutiny following Woodford’s woes. Bank of England Governor Mark Carney to say that funds offering daily liquidity while loading up on illiquid assets are “built on a lie.”
Meanwhile, two senior executives left Woodford Investment Management within days of one another as the firm reduces headcount.
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