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Woodford pulls plug on investment firm

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Written by: Emma Lunn
16/10/2019
Neil Woodford is closing down Woodford Investment Management after being sacked from the firm’s flagship fund.

Investment manager Woodford has quit as manager of his two remaining funds after being ousted as head of Woodford Equity Income by administers Link Fund Solutions.

The move could potentially see the end of the one-time star stockpicker’s career. Prior to setting up his own investment business in 2015, Woodford was a star fund manager at Invesco Perpetual for 25 years.

Woodford described the decision to close the company as “highly painful” and said the firm would fulfil its fund management responsibilities to Woodford Patient Capital Trust, and the LF Woodford Income Focus Fund investors and then close the company “in an orderly fashion”.

Link fired the disgraced fund manager from his flagship Equity Income Fund on Tuesday morning. The fund had been suspended since June and Woodford had subsequently failed to raise sufficient funds for it to safely reopen in December as planned.

Losing the management fees from running the Equity Income Fund, which generated £65,000 a day, would have left the company unable to cover the group’s £12m salary and pension costs.

Ryan Hughes, head of active portfolios at AJ Bell, said: “The closure of Woodford Investment Management had a feeling of inevitability about it. Without the fees from the Equity Income Fund and with no performance fee coming from the Patient Capital Trust, it was difficult to see how the business could survive.

“This creates further uncertainty for a larger number of customers and the key now is that they are given information about what is going to happen to their investments as soon as possible. The board of the Patient Capital Trust has clearly been considering its options already and I’d expect to see an announcement very soon from them. I’d also expect to see an announcement from Woodford or Link about the future of the Income Focus fund.”

Darius McDermott, managing director of Chelsea Financial Services, described the Woodford Investment Management’s closure as a “very sad end” for both Woodford’s investors and employees.

“The whole situation has been awful for investors in the funds and the trust, and damaging for the industry. At a time when people should be saving more, not less, and when UK equities are so out of favour, it is worrying that so much trust has been lost. We now need to work hard to get that trust back,” said McDermott.

“What I would add, however, is that Neil Woodford achieved some excellent returns for many investors over a very long period of time. That is why his new business was so popular. In all of this mess, I think it is important that we remember this. The last few years have been bad – there is no getting away from that – but this situation has come about from a very specific issue with one manager – the worst possible outcome would be that investors think all investments end this way and stop saving for their futures.”

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