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Neil Woodford’s Flagship Fund to Be Wound Up

BlackRock Advisers hired to manage the winding down process.

Neil Woodford’s Flagship Fund to Be Wound Up
Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S. (Photographer: Scott Eells/Bloomberg)

(Bloomberg) -- Neil Woodford’s flagship fund will be liquidated and the former star manager ousted, concluding a fall from grace that counts as one of the most dramatic in London’s recent financial history.

The administrator of the LF Woodford Equity Income Fund hired BlackRock Inc. to prepare the portfolio for winding down, according to a statement from Link Fund Solutions on Tuesday. Woodford ceases to be the manager.

Woodford immediately objected. “This was Link’s decision and one I cannot accept, nor believe is in the long-term interests of LF Woodford Equity Income fund investors,” the manager said in an emailed statement.

Woodford built his reputation by calling major swings in technology, tobacco and other stocks over two decades. A poor performance in recent years, after he set up his own company, led to 22 straight months of investor withdrawals. That culminated in the June suspension of the Equity Income Fund -- a step that’s considered a last resort in the industry.

“We have seen the complete demise of the most famous fund manager the U.K. has seen for years,” said Adrian Lowcock, head of personal investing at Willis Owen. “It will shake the funds industry to its core.”

Neil Woodford’s Flagship Fund to Be Wound Up

Woodford made his name during 20 years at London-based Invesco Perpetual. When he left to set up his own company in 2014, many investors followed. St. James’s Place Plc, a manager of savings and pensions, pledged 3.7 billion pounds ($4.7 billion) of its clients’ assets held at Invesco to Woodford’s new funds before the company was formed.

As an independent manager, Woodford gradually shifted the focus of his main fund from large-caps to smaller companies.

By June this year, the portfolio was almost 97% allocated to micro-, small- and mid-cap stocks, up from 40% in January 2016. In the first year on his own, the Woodford fund gained 16%, beating all 50 of its peers tracked by Bloomberg. Over the last three years, however, it was in the bottom percentile.

As performance faltered, investors fled, and the manager couldn’t liquidate his holdings fast enough to keep pace with increasing redemption requests.

BlackRock said Tuesday that in its transition management role, it “will seek to maximize value for investors, balancing the need for a timely return of capital with the challenges of the illiquidity profile of the portfolio.”

Shares of a listed investment vehicle, the Woodford Patient Capital Trust, fell the most in seven weeks and are trading at an all-time low. The trust’s board first announced in July that it was considering replacing Woodford as manager.

The U.K. regulator said it welcomes the removal of uncertainty following the decision.

“Winding up the fund will allow the return of money to investors through a number of distributions, likely to begin in January 2020,” according to a statement from the Financial Conduct Authority. “This means investors should receive some of their money back sooner than had the fund remained suspended for a longer period.”

The FCA has an open investigation into the activities that led to the suspension of the fund.

--With assistance from Silla Brush.

To contact the reporters on this story: Lucca de Paoli in London at gdepaoli1@bloomberg.net;Suzy Waite in London at swaite8@bloomberg.net

To contact the editors responsible for this story: Shelley Robinson at ssmith118@bloomberg.net, Paul Sillitoe

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