For years he experienced the highs as a star fund manager at Invesco before getting a bitter taste of the lowest of lows 18 months ago after striking out alone with Woodford Investment Management. The fund was shut down by administrators Link Fund Solutions in October 2019, marking a spectacular fall from grace.
Risky investments in large numbers of illiquid start-ups either went south or, arguably more significantly, took too long to show returns. Too many big investors got cold and moved for the exit door over a short period of time, leaving the fund unable to return all their money without a fire sale. The administrators took control, first suspending the fund, then closing it down.
Thousands of investors were locked in and the process of selling off all the fund’s remaining assets to return as much as possible to investors, who suffered heavy losses, is still dragging on. There have been accusations retail investors were miss-sold a fund whose real risk profile was greater than should have been the case.
The Woodford fund’s biggest cheerleaders, particularly Hargreaves Lansdown, the UK’s largest investment platform, lost face. More damningly, there were accusations of nepotism – promoting the product of a high-profile rock star fund manager without really considering if it was genuinely suitable for the profile of investors it was being recommended to.
The star of Neil Woodford fell so far, so fast, few thought there was much hope of a comeback. And certainly not one that involved a new fund bearing Woodford’s tarnished name.
But the weekend brought exactly that announcement. As The Sunday Times article that covered the news began, “disgraced fund manager Neil Woodford is plotting a dramatic comeback with a new fund bearing his name, less than 18 months after his previous venture spectacularly imploded”.
Not only is Mr Woodford preparing to launch a new Jersey-based fund focused on biotech companies, Woodford Capital Management Partners, but some of the main supporting cast of the previous implosion will be joining him. Most notably Craig Newman, dubbed Woodford’s ‘lieutenant’.
Mr Woodford chose an interview with The Sunday Telegraph to announce his comeback, telling the broadsheet:
“I didn’t want what happened to me in 2019 to be the epitaph of my career, I didn’t want it to be the full stop.”
“I’m not trying to rebuild an ego, I just felt I wanted to continue to do the things that I believe in. I don’t think I’m qualified to do anything else. You can imagine lots of people who have read the media about me wouldn’t want to touch me with a 10ft disinfected bargepole.”
While he accepts responsibility for a rocky period of the shuttered fund’s performance, he remains convinced regulators Link denied him, and investors, the time that would have vindicated the investment strategy.
“I’m very sorry for what I did wrong. What I was responsible for was two years of underperformance — I was the fund manager, the investment strategy was mine, I owned it, and it delivered a period of underperformance.”
He insists Link’s decision, rather than two years of underperformance and a lack of the liquidity that could have allowed a smaller fund to continue, proved “incredibly damaging”, to the closed fund’s investors. He highlights the subsequent upturn in fortunes for a number of the fund’s major holdings. The list reeled off includes Oxford Nanopore’s success in quickly developing a rapid Covid test, the massive increase in the share price of Synairgen last year (and again from December on after a heavy November correction), and Sanofi’s $1.1 billion acquisition of Kymab, a biotech developing an eczema treatment.
Aware that it is too soon to hope retail investors might put their trust in him again, the new Woodford fund will only raise capital from professional investors. It will again focus on the same profile of promising biotechs as the failed fund, “the likes of Immunocore, Kymab, Synairgen, Nanopore”.
In answer to the mutterings that the fund continued to charge investors £60,000-a-day in fees after it was suspended, Woodford insists that was unavoidable and necessary. While he says neither himself nor Newman benefitted from any income at all after the suspension of the fund, others in the business couldn’t simply be cut adrift:
“We had a regulatory obligation to continue. We couldn’t just turn the lights out and tell everyone to go home, so the fees that came into the business were used to pay the people who were running the organisation. What people have done is conflate fees with money going into Neil Woodford and Craig Newman’s pocket.”
Online investor forums such as The Lemon Fool, however, bubbled with indignation at the news. The bulletin board is seemingly an online destination for some of the 300,000 retail investors that put their money into the failed fund. General feeling on the forum is reported by The Times newspaper as the sentiment Woodford “should not be allowed near the investment area again”.