News that the disgraced fund manager Neil Woodford is looking to make a comeback in investment management has taken many in the Square Mile by surprise.
The former star manager gave an emotional interview to the Sunday Telegraph yesterday in which he apologised for the collapse of his investment company and said he is working to set up a comeback firm by launching a Jersey-based fund focused on biotech assets, Woodford Capital Management Partners.
“The news that Neil Woodford is looking to make a comeback will come as a surprise to many, especially those thousands of embattled investors who are still waiting to get the last of their money back,” commented Ryan Hughes, head of active portfolios at AJ Bell.
Reputation in tatters
Woodford’s flagship fund, Woodford Equity Income fund, was suspended in June 2019 after it was overwhelmed with withdrawal requests. Woodford, considered a star stockpicker at the time, was forced to shut the vehicle a few months later, capping off the investment industry’s biggest crisis in years.
His reputation was left in tatters and a number of investors are still going through the courts to regain some of their losses.
“With around £200m of money still stuck in his previous fund and original investors back in 2014 sitting on losses of over 25 per cent and many thousands who invested later suffering much bigger losses, there will be little sympathy for Woodford and the comments he made in his interview,” said Hughes.
Woodford disclosed yesterday that he was forced to sell his £30m home but stressed he is determined to return to investment management as “I don’t want to, for the rest of my life, hide away and beat myself up about things from the best part of two years ago.”
Woodford has advanced plans to set up an investment vehicle in Jersey, which will focus on companies in the biotech space.
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, Hughes said 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, what he called “this sorry saga.”
Niche, higher risk investment
Woodford’s new Jersey-based investment fund will only be aimed at professional investors with the investment approach once again focused on niche, higher risk, potentially illiquid investments that he had such conviction for in 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,” Hughes said.
He added that 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.”
Woodford has pledged not to repeat the mistake of investing ordinary investors’ money in illiquid stocks, which contributed to the collapse of his former business.
“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,” Hughes concluded.