This week, we are with David Ricketts, asset management correspondent at Financial News in London and author of ‘When the Fund Stops’. The book reveals the untold story behind Neil Woodford, one of Britain’s most successful fund managers.
There is a lot of uncertainty and speculation surrounding Woodford’s story amongst investors. As an expert on the former fund manager, Ricketts will provide some clarity on what turned out to be one of the most extraordinary stories in modern day fund management.
On the Podcast
David Ricketts gives us an insight into how Neil Woodford capitalised on his success during the dot-com bubble of the late 1990s to become one of the most famous retail fund managers in the UK. Instead of following the other investors at the time and ploughing money into stocks which operated within the technology sector, Woodford stuck with blue chip companies that were less affected by the volatility witnessed around that time. In the aftermath of the crisis, Woodford was vindicated for his investment choices and emerged as a popular figure within the investment world.
His status gained further admiration as his portfolio was equally as successful during the Global Financial Crisis of 2007 – 2008. During his career, he was named by investors as the “Oracle of Oxford” and went on to run the Invesco Perpetual Income and Invesco Perpetual High Income funds, managing over £30 billion by 2012.
In April 2014, however, Woodford left his role as head of UK equities at Invesco Perpetual to set up Woodford Investment Management LLP. His initial successes resulted in the further launch of Woodford Patient Capital Trust in 2015 and a second equity income fund in 2017.
Woodford’s triumphs quickly turned into miseries as, in March 2019, after two years of poor performance during which fund assets contracted by more than £5 billion, The Sunday Times carried out an investigation into the fund which found that the fund held less than 20% of its assets in FTSE 100 companies compared to over 50% when it was created, and over 20% of assets were in small Alternative Investment Market (AIM) companies. On 4 June 2019 trading in Woodford Investment Management’s largest fund was suspended, resulting in large withdrawals of funds by many investors.
The causes of the fund’s failures are not completely known, but the fact that Woodford broke away from his previously successful methodology of investing in blue chip companies is often seen as an important driver of its downfall. The fund’s portfolio selection decisions rested largely upon his shoulders, with little consultation from other experienced investors, as he began investing in niche markets, such as the biotech sector, without having any professional knowledge or experience in life sciences businesses.
Today, investors are still waiting for final repayments to be made and for the Financial Conduct Authority (FCA) to comment on the ongoing investigation into the fund’s suspension. In February 2021, Woodford did claim that he was planning to make a comeback in the fund management industry, which caused uproar amongst investors. Although this is unlikely to happen, the former fund manager has already been working closely with the likes of Acacia Research in an advanced consulting role.