Fund Management

Administrator Fires Woodford, Fund To Be Wound Up

Tom Burroughes, Group Editor, London, 16 October 2019


One financial advisor described the outcome as "shocking", saying "we have seen the complete demise of the most famous fund manager the UK has seen for years."

Administrators have shut Neil Woodford’s stricken LF Woodford Equity Income Fund, which has been closed to investor redemptions since June. Woodford has been sacked as its manager, ending a saga that tarnished his stellar reputation.

The fund, which had suffered weak performance, had been hit by a major investor pull-out earlier this year, prompting Woodford to shut doors to further redemptions. Administrators Link Fund Solutions, who had taken over control of the fund, said that although some progress had been made in repositioning its portfolio, it was insufficient.

“After careful consideration, the decision has now been taken not to re-open the fund and instead to wind it up as soon as practicable. This is with a view to returning cash to investors at the earliest opportunity,” the firm said in a statement yesterday. “Following our decision to wind up the fund, Woodford will, with immediate effect, cease to be the investment manager of the fund.”

The administrator said that it expects to wind up the fund from 17 January next year; it was impossible to start this process earlier because investors must be given at least three months’ advance notice under EU regulations.

“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," Woodford said in a statement.

The demise of the fund reminds investors and advisors of how holding illiquid, unlisted assets, particularly during volatile markets, can come unstuck. (See a video involving a discussion on this subject.) Woodford temporarily froze dealing in the fund after a large pension scheme in Kent withdrew money in frustration over poor performance. St James’s Place, the wealth management group, also withdrew mandates from Woodford funds. 

The issue also caused controversy about the financial advisor firm, Hargreaves Lansdown, which had been a fan of the fund. Mark Dampier, head of research at Hargreaves Lansdown, has recently sold a large equity stake in Hargreaves Lansdown. Dampier, 62, has in the past called Neil Woodford “one of the UK’s best fund managers” and the men have known each other for more than 25 years.  Dampier and his wife Annette reportedly sold £5.6 million ($7.1 million) of shares in the business in May, avoiding a subsequent share slide that had hit Hargreaves Lansdown amid criticism of its stance over Woodford.

“Investing has become increasingly complicated and opaque, with people putting money in investment funds without really knowing what these vehicles are invested in. The latest twist in the Woodford saga is a wake-up call for investors to do a bit more homework and get a better understanding of what they’re investing in,” Iqbal V Gandham, managing director UK at eToro, said.

“We are all consumers and know when a brand is doing well, so the company behind it is probably successful too. While there are no guarantees around stock-picking, understanding these basics will help people make more informed decisions about where they invest their money,” Gandham. 

Adrian Lowcock, head of personal investing at Willis Owen, was scathing about the outcome. 

“Although there were rumours, this is truly shocking news. We have seen the complete demise of the most famous fund manager the UK has seen for years. Investors knew the scenario was bad but the indication from Woodford thus far had been that the fund would reopen,” Lowcock said. 

“This collapse is on a par with the implosion of New Star at the height of the financial crisis, and it will shake the funds industry to its core,” he said, referring to the demise of UK-listed asset management house New Star. “Woodford will be removed as fund manager and the holdings in the fund will be sold. This means investors may have to wait until next year to firstly find out the value of their investment and then to get their money back. Sadly many people will be looking at significant losses.”

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