News broke this morning that the beleaguered Woodford Equity Income will be wound up in January 2020, ending months of speculation on when or if the fund may begin trading again following its suspension in June.
ACD Link Fund Solutions said it was in investors’ best interests for the fund to be wound up as the process of repositioning the portfolio into more liquid FTSE 100 stocks had “unfortunately not been sufficient to allow certainty as to when the repositioning would be fully achieved and the fund could be reopened”.
With the board of the Woodford Patient Capital trust, set up by Neil Woodford in 2015, also perusing replacing its fund management team, Woodford’s career has hit a new low. He himself said in response to Link’s decision to wind down the Equity Income fund: “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.”
And what a shame this is for the industry. Woodford was one of the most celebrated fund manager of the late Nineties, Noughties, and early 2010s, bouncing back spectacularly from periods of underperformance.
Last year, when Woodford continued to back domestic stocks shunned by Brexit-scared UK equity investors on the view that these will outperform once there is an element of certainty on the Brexit outcome, it was easy to believe. He had gone against the market tide before plenty of times and come up trumps, why not this time?
Of course, we know Woodford’s demise this year wasn’t about which FTSE sectors he was positioned in, but as a result of investing in more and more illiquid stocks. Compared to his Invesco days of FTSE blue chips, he went completely off piste into the world of unquoteds.
I will be exploring the many repercussions of the Woodford fallout in the Wealth Managers Review 2020, particularly focusing on how discretionary fund managers dealt with concerned clients, whether they held the fund or not. Please send any reaction to today’s news on the fund wind-up to firstname.lastname@example.org
History has been made this year, what has happened with Woodford will be talked about in and outside the investment industry for years to come.
There will be many asset managers and wealth managers reviewing their processes and risk management committees to ensure nothing like this can happen to them, while the regulator will definitely have more to add to the conversation.
Investors trapped in the fund have the most to shout about. They have had their fingers burnt after putting their faith and savings with the one of the most renowned and celebrated UK equity fund managers and trying to convince many of them to part with their hard-earned cash again won’t be easy.
After this blog was first published, it emerged that Neil Woodford has resigned as manager of the Patient Capital Trust and announced the closure of Woodford Investment Management.