Woodford's Collapse Capped by Schroders Taking Over Listed Trust

(Bloomberg) -- The board of Neil Woodford’s listed trust picked a unit of Schroders Plc to take over the portfolio that bears his name, capping off the collapse of his business empire.

The move comes nine days after the fund manager announced the liquidation of his firm, ending a fall from grace that counts as one of the most dramatic in London’s financial history. The Woodford Patient Capital Trust Plc will be renamed Schroder U.K. Public Private Trust Plc, according to a statement on Thursday.

The trust’s shares surged as much as 32% in London trading on the news. Still, that leaves the trust down about 50% since Woodford stunned the financial world freezing his flagship fund in early June, sparking a chain reaction that ultimately sent the fund manager’s career spiraling.

“There really was no choice for the board, and it’s a nice mandate for Schroders,” said Jacob Schmidt, chief executive officer of Schmidt Research Partners, a global investment firm.

The board of the trust, which Woodford launched to much fanfare in 2015, had been looking for alternative managers since July. Between July 3 and July 8, Woodford sold 1.75 million shares in the trust — about 60% of his holding — to “meet personal financial obligations, including a tax liability.” But he only notified the board about this share sale two weeks later on July 27.

Read more: U.K. Platform AJ Bell Sees Flows Slow After Woodford’s Collapse

Woodford stepped down as portfolio manager of the trust on Oct. 15, the same day he was ousted as manager of his flagship fund and announced the shuttering of his investment firm. The shares were trading at a 50% discount to net asset value on Oct. 22.

“He sold shares and didn’t show commitment,” Schmidt said. “If you’re responsible, you’re the captain and you’re the last one to leave the ship. Woodford was the captain and should have stayed on board and if he drowns, he drowns.”

Schroder Investment Management Ltd. won’t charge a performance fee for managing the trust until Dec. 31, 2022, when it will be eligible to collect 15% of returns above a net asset value of 77 pence per share. The trust’s latest NAV was 63.23 pence on Oct. 22. After that, the firm will charge a performance fee of 15% on returns of 10% or higher, according to the statement.

No management fee will be paid for three months after Schroders takes over, according to the statement. After that, it will collect an annual fee of 1% on market capitalization up to 600 million pounds ($774 million), and 0.8% thereafter.

To contact the reporter on this story: Suzy Waite in London at swaite8@bloomberg.net

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

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