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Star investor Neil Woodford suspends flagship fund after client exodus

Top stockpicker stops withdrawals after dismal performance sees fund shrink rapidly

Ben Chapman
Tuesday 04 June 2019 09:27 BST
Neil Woodford has cancelled all bonuses at his firm
Neil Woodford has cancelled all bonuses at his firm (Rex)

Superstar fund manager Neil Woodford has stopped investors withdrawing money from his main fund after a series of bad bets prompted clients to rush for the door.

Britain’s most high-profile stockpicker, Mr Woodford has seen his main fund shrink from £10.2bn to £3.7bn after a long run of poor performance. The fund shrunk by £600m in just the last month, including £187m withdrawn by customers with the rest made up by the tumbling value of its investments.

A request to withdraw £250m by Kent County Council led to all withdrawals to be suspended on Monday for at least four weeks to “protect” investors, Mr Woodford’s firm said.

It marks a new nadir for a man feted in the City as someone who could consistently deliver big returns for large numbers of retail investors.

Mr Woodford has commanded multimillion-pound pay packages over the years, including the £37m he shared with his firm’s chief executive Craig Newman in January despite a dismal year.

He generated a considerable following during his 26 years at Invesco but has made a number of bad bets recently including an investment in outsourcing firm Kier, which slumped 41 per cent on Monday after a profit warning.

Now his flagship fund has dropped out of a key list, Hargreaves Lansdown’s Wealth 50.

Hargreaves Lansdown, a leader in the retail investment market, said that a “significant reduction in fund size jeopardises manager Neil Woodford’s ability to run the fund effectively”.

Emma Wall, head of investment analysis, Hargreaves Lansdown said: “The suspension follows a period of underperformance and outflows for the Woodford Equity Income Fund. We are advocates of long-term investing and think Woodford’s multi-decade track record remains compelling – but we don’t underestimate the disappointment investors must feel with Woodford’s recent performance.

“The suspension is understandably frustrating, but it’s important to remember that the value of your investment will be dependent on the share prices of the portfolio’s underlying holdings, which are not directly impacted by the suspension.”

Mr Woodford has faced criticism because of some of his investments in unlisted stocks are riskier and harder to trade, making them more difficult to manage in a fund where investors have the right to withdraw their money daily.

Questions will be raised as to whether Mr Woodford’s fund was a suitable investment for a local authority such as Kent County Council.

The City watchdog said it was in contact with Woodford Investment Management “to ensure that actions undertaken are in the best interests of all the fund’s investors”.

Daniel Godfrey, an adviser to fund management groups, told BBC Radio 4’s Today programme that Mr Woodford was “one of the finest fund managers that Britain’s ever produced, although clearly he is having a dark and terrible moment.”

He believes Mr Woodford could bounce back. “There could be a new dawn and it’s not necessarily the end,” he said.

“It’s clearly a very dark and difficult moment for Neil Woodford and his business and there may well have to be a hit to valuations to get rid of some of the unlisted holdings. But from there it’ll still be probably a reasonably big fund.

“It could well be the case that in five years’ time, we’re looking at it and anyone who bought when it reopens will have had a great performance.”

Woodford Investment Management said: “After consideration of all relevant circumstances relating to the Fund’s assets, we have ... come to the conclusion it is in the best interests of all investors in the fund to suspend the issue, cancellation, sale, redemption and transfer of shares in the fund.

“Following an increased level of redemptions, this period of suspension is intended to protect the investors in the fund by allowing Woodford, as previously communicated to investors, time to reposition the element of the fund’s portfolio invested in unquoted and less liquid stocks, in to more liquid investments.”

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