had launched an investment trust – a different type of fund that is floated on the stock market – with his popularity ensuring that Woodford Patient Capital Trust was the biggest ever investment trust launch in the UK.
DIY investors – individuals who manage their
own savings, investments and pension funds – were particular fans of Woodford, with clients of the biggest DIY investment platform, Hargreaves Lansdown, having 38 per cent of the fund at this point. In December 2015, the fund had £8.2 billion in
assets, but critics of Woodford’s approach say that, even at this point, his success contained the seeds of his downfall. Stuart Alexander, chief executive of Gemini
Investment Management, used to work with Woodford. He describes him as a ‘maverick’, adding: ‘But within the company that was OK, because there were people to keep him in check.’ Barrow adds that a huge part of the issue was
Woodford’s decision to strike out alone ‘with himself front and centre’. ‘Marketing funds on the basis of single individuals is something that needs to be carefully considered,’ he says. ‘That individual becomes very dominant within the organisation and the compliance ropes are not as tightly drawn as they might be around the individual.’
A DOWNWARD SPIRAL Setbacks for Woodford began in 2017, soon after he launched his smaller Income Focus fund. The company changed its mandate for its investment trust, Patient Capital, so that it could invest in smaller, unquoted companies – the beginning of the move into less liquid assets that was to cause the funds’ ignominious end. Then came a seemingly endless stream of bad news about companies in which Woodford had invested. As everyone from doorstep lender Provident Financial to online estate agency Purplebricks deluged the fund with profits warnings, it seemed that Woodford’s Midas touch had deserted him. The Equity Income fund fell 3.3 per cent on 22
August, leaving investors with a 2.9 per cent loss over 12 months. This placed it at the bottom of the Investment Association’s (IA) UK Equity Income sector for the period. This underperformance continued. By February
2019, Woodford’s shame was compounded by a place on the annual Spot The Dog list of underperforming
CorpComms | February/March 2020
THE FINAL THROES As the underperformance continued, big investors in the Woodford funds began to lose faith. Jupiter’s Merlin fund range, which had invested £1 billion in WEIF, had sold out entirely by October 2017. Meanwhile, the percentage of the main fund that
was invested in less liquid stocks, which are not quoted on a stock market and therefore hard to sell, was rising. The financial regulator requires funds like Woodford’s to limit this type of stock to ten per cent of the value of a fund, but as its other stocks fell in value, the unquoted percentage breached this limit. By September 2018, the firm’s funds under management had fallen to £5.6 billion. Woodford remained defiant, saying in an Financial Times interview in March 2019 that those who pulled their money from his funds were making a ‘poor investment decision’ and saying that ‘a mountain of fake information and fake analysis… pisses me off’. Barrow says that communications
like this illustrate just how poorly Woodford was advised – or else indicates that he failed to listen and act. ‘People of Woodford’s prominence,
funds, put together by investment experts Bestinvest. For every £100 that an investor had entrusted to WEIF in 2016, they would have had just £87 by this point. Bestinvest’s Jason Hollands described Woodford’s fund as a ‘Great Dane-sized entrant’ to the list.
It was not beyond the wit of man to have been more upfront
and probably their disposition, are difficult for people to advise. They are always going to need very strong people around them. There is likely to be real cognitive dissonance: he sees himself as successful and can’t reconcile what he is seeing.’ In May, a single event led to the firm’s downfall. Kent County Council - which had around £250 million in WEIF - said that it intended to withdraw the money. The fund had already seen investors withdraw £560 million that month, so Kent’s decision was the sizeable straw that broke the camel’s back. On 3 June, WEIF was suspended, trapping £3.7 billion of investors’ savings. Only at this point did Woodford drop his defiant stance, saying in a three-minute video on the firm’s
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