All Three Woodford Funds To Be Wound Down After Manager Fired By Corporate Governance

Neil Woodford, until recently the UK’s best known stock picker for good reasons but latterly notorious for the troubles of his personally branded and managed funds, was last night fired as manager of his own flagship fund – the Woodford Equity Income Fund. The decision was taken with immediate effect by Link Fund Solutions, the company in charge of the fund’s corporate governance. The fund’s portfolio will now be wound down with investors returned whatever cash can be recovered from largely illiquid investments in private companies, minus fees that until January will continue to be paid to Blackrock and PJT Partners, who will take on the responsibility of closing up shop as smoothly as possible. Investors expect to lose as much as 50% of the value of their original investments.

In the wake of his sacking, Mr Woodford, 59, also announced that he has decided to close Woodford Investment Management, the fund manager he set up independently to take advantage of the renown he had won as a star investor and manager of Invesco funds. That means that he has also quit as manager of his two smaller funds, the Woodford Patient Capital Trust and Woodford Income Focus Fund, valued at £313 million and £252 million respectively. They will also be wound down.

The FCA welcomed the decision reached by Link Fund Solutions with a statement that it gave clarity to investors in the vehicle, who have been locked out of accessing their funds since June. That was when the open ended Woodford Equity Income Fund was frozen to protect it against a run from investors pulling their money from it as the value of its holdings fell.

The original plan was for assets to be reallocated from the large number of private companies it held holdings in to more liquid assets. However, the illiquidity of holdings, a situation made worse by the fact many have slumped in value since Woodford invested in them, has meant that process has become too slow for Link’s comfort. With it becoming clear that the original plan to re-open the fund in December would not be practically possible, Links instead decided to pull the plug, sack Woodford and wind the fund down, selling off its assets as quickly as practically possible.

Mr Woodford has stated that he was not in agreement with the FCA and Links that the decision to wind the fund down was in the best interests of its investors. Presumably on the belief that given time he would have successfully managed the fund’s restructuring without a fire sale of devalued private holdings, some of whom he may have retained faith in their ability to bounce back. Many of the holdings are in biotech start-ups for whom one major breakthrough or successful set of clinical trials could completely change the picture in terms of current valuation and future prospects.

Mr Woodford’s fall from grace has been spectacular. Within 5 years he has gone from someone who appeared to be the fund management’s equivalent to King Midas to the polar opposite, with fate seemingly conspiring against the majority of his investment choices. After three decades of managing money, it seems unlikely at this point that Mr Woodford will, after turning 60 next year, seek to re-establish himself as a fund manager.

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