8 minute read
Will Woodford really return?
News that Neil Woodford is planning to launch a new asset management business in the UK has, so far, not been received well by the investment community - nor indeed by the regulator. So what’s going on? And what are his chances of getting this new business off the ground?
Like many others across the UK, the Wealth DFM team were somewhat surprised to read the interview with Neil Woodford published in the Sunday Telegraph in February. It revealed that Woodford was planning a return to asset management, albeit with a new business – Woodford Capital Management Partners Ltd –(WCM Partners Ltd) targeted at ‘professional’ investors rather than private clients and based in Buckinghamshire and Jersey.
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If the proposed plans were to go ahead, then WDM Partners Ltd. would work to advise Acacia Research, an American investment group which bought many of the unquoted assets from within Woodford’s Equity Income fund back in July 2020. The new venture would likely see Woodford investing (or “advising on”) again in illiquid, unquoted and fledgling businesses – most probably those within the healthcare, lifesciences and pharmaceuticals sectors with which he had become so infatuated whilst running retail money. And which had played such a huge part in his downfall.
Of course, there are still many thousands of private investors still waiting for the last of their money back from his failed Woodford Equity Income Fund, along with other investors nursing serious losses from his management of other mandates.
So how was this announcement of his intended return greeted by institutional and private investors? It seems that the mood music so far is not encouraging for the fallen “star” fund manager.
With Financial Times reporter Owen Walker set to launch his new book in early March entitled “Built on a Lie – the rise and fall of Neil Woodford and the fate of middle-England’s money”, it’s likely that the Woodford name will be featured in the business pages as well as the news headlines for some time to come. “Built on a lie” were the words used not by Walker himself, but by the former Governor of the Bank of England, Mark Carney. The book’s content does not make happy reading for Woodford or anyone associated with him as it delves deeply into the whole history of his career in fund management. Warts and all.
And talking of headlines, Jeff Prestridge, writing in the Financial Mail on Sunday in late February certainly didn’t hold back. The headline of his article read:
“How CAN this clown return as a fund boss? Jeff Prestridge on Neil Woodford’s comeback”
It left no one in any doubt that Prestridge was not at all happy to see the former ‘star’ fund manager return to the world of asset management.
THE REGULATOR’S RESPONSE
Following the release of the Telegraph’s article, it didn’t take long before Mark Steward, FCA Director of Enforcement and Market Oversight, released a clearly worded statement on Woodford Investment Management Ltd and WCM Partners Ltd saying:
“We have noted the recent comments by Neil Woodford on his future business plans. This statement sets out our position on specific points on which we have been asked for information.
“Since April 2020, when it varied its permissions, Woodford Investment Management Ltd is no longer able to offer investment services to retail clients.
“Mr Woodford’s new business, WCM Partners Ltd, would need to apply for appropriate permissions before commencing any regulated activity in the UK. In taking any decision on whether to authorise a firm, we consider whether it is ready, willing and organised to comply, on a continuing basis, with our requirements and standards. That includes, for example, the sustainability of the firm’s business model and the fitness of its management. “There are reports that Mr Woodford’s future business proposal may operate out of Jersey. We are in contact with the Jersey Financial Services Commission (JFSC) and agreed with them that we will both share information on any application made in in our respective jurisdictions (for both a fund or entity).”
The regulator itself has faced plenty of criticism over the years about the way it handled the oversight of Woodford funds. However, the tone of this statement suggests that Woodford would have more regulatory obstacles to overcome should the plans proceed to the next stage of his proposed new venture.
A CALL FOR AN INDEPENDENT INQUIRY
As well as the FCA, pressure is also being brought to bear by Alan and Gina Miller’s True and Fair Campaign. Following the news of Woodford’s planned return, the campaign has called for an Independent Inquiry into what they refer to as the “shameful” Woodford scandal.
In an open letter to the Chairman and members of the Treasury Select Committee in mid-February, they urged the committee “to act with haste as Mr Woodford and the FCA actions discredit both the regulator and the UK FS sector. The British public deserves much better.”
Again, they left no-one in any doubt at their anger and frustration which is not just focused on Woodford’s management but also on the regulatory powers which oversaw his failed organisation and funds. Their open letter, signed by both Gina and Alan Miller, states:
“It is shameful that the FCA has allowed Mr Woodford to remain on its Register and to continue as an authorised person whilst its investigation meanders on. It also makes a complete mockery of the FCA’s Senior Managers & Certification Regime (SM&CR) – which replaced the previous discredited Approved Persons regime on 9 December 2019 – and was supposed to significantly raise the bar in standards of personal conduct and make management accountability more rigorous and transparent
“It is clear that UK investors and savers are losing faith in the FCA’s supervision of financial services firms. At a time when public policymakers should be encouraging the public to save, it is simply unacceptable that major investigations such as the one into Woodford are being delayed in this way. We believe it ought to be a very serious source of public policy concern that high profile individuals such as Mr Woodford can be allowed to re-commence trading, with the slate ostensibly wiped clean, when over 300,000 people, some of whom may be your own constituents, are scrabbling to make ends meet after seeing their life savings decimated and their prudent actions and hopes for a secure and comfortable future suddenly and unexpectedly dashed.”
RYAN HUGHES IS HEAD OF ACTIVE PORTFOLIOS AT AJ BELL. HE COMMENTS:
“With around £200m of money still stuck in his previous fund and original investors back in 2014 sitting on losses of over 25% and many thousands who invested later suffering much bigger losses, there will be little sympathy for Woodford and the comments he made in his recent interview. While some investors may well agree with Woodford’s view that investors would have been better off if his fund was not forced to suspend and liquidate, others will simply be glad that they have got some of their money back after being stuck for many months and will want to finally move on from this sorry saga.
The potential new investment vehicle looks like it will be aimed at professional investors only with the investment approach once again focused on niche, higher risk, potentially illiquid investments that Woodford had such conviction in for his previous fund.
While he may well be right that there are some great companies to invest in, his track record showed that it is very hard to identify them and many need years of funding before they become successful, with plenty falling by the wayside along the way.
Ultimately, it looks as if Woodford is looking for vindication that his original investment strategy was correct all along. While he has acknowledged that a fund for retail investors would look very different today to the one he previously ran, by focusing on professional investors, he clearly hopes that much of the emotion and fury that he has faced over the past two years will disappear. However, given the broader damage in trust and confidence that this whole affair has caused to the investment industry, it looks unlikely that investors of any kind will find it so easy to forget.”
WHERE NEXT?
Clearly, Woodford and his associates at WCM Partners Ltd and Acacia Research have got an uphill task ahead of them if they are to get this proposed new business - and alliance - off the ground. As WealthDFM went to print, The Treasury Select Committee was putting more pressure on the FCA to reveal exactly when they might announce the results of their investigation. The FCA has said that they will report by the end of May.
In the meantime, it is likely that the heated debate and discussions will continue to run riot and that the Woodford name won’t be far from the news headlines.
