As investors soured on his bets, records show Woodford paid himself handsome dividends
Ahead of the implosion of his flagship fund and his reputation as one of the UK’s most savviest stock pickers, Neil Woodford paid himself and his business partner £13.8 million in dividends in the year leading up to the impasse.
For the period between April 1, 2018, to March 31, 2019 — Woodford Investment Management made a post-tax profit of about £16.3 million, records posted on Companies House on Monday show. The company paid Woodford Capital, an unlimited company owned by Woodford (with a 65% stake) and his business partner Craig Newman (with the remaining 35% stake) £13.8 million in dividends (£9 million and £4.8 million, respectively).
But trouble for Woodford was already brewing before March. Earlier in the month, the embattled veteran was chiding his critics for steering investors away and sullying his reputation, in an attempt to stifle the bloodletting in his flagship Woodford Equity Income Fund. In an interview with the Financial Times, Woodford said the rate of withdrawals from the fund put him at risk of being “out of business in about two-and-a-half years.” In the year ending March 31, 2018, Woodford Investment Management made an after-tax profit of £33.7 million.
After 26 years at Invesco, Woodford launched his cornerstone equity income fund in 2014, raising billions to invest in the life sciences. But some of his bets — such as Prothena, Circassia and Northwest Bio, turned sour, and those wrinkles culminated in a long period of weak returns. Woodford originally anchored his reputation as a blue-chip investor in companies like GSK, but rattled by Gilead’s HIV prowess, he elected to part ways with the British drugmaker in 2017 in a lengthy blog post entitled “Glaxit.”
As the trust in Woodford’s bets waned (the size of the fund shrank from £10.2 billion to £3.7 billion in two years), he attempted to shackle his investors by suspending their ability to redeem any liquidity from the fund. Adding fuel to the fire, Woodford refused to waive his £100,000-a-day investment management fee for the cornerstone fund, ignoring outrage from the UK’s Financial Conduct Authority, and the chair of the Treasury select committee.
The saga lingered on when in July Link Fund Solutions (the official holder of the Woodford Equity Income Fund) said investors would be thwarted from redemptions, sales or other transactions for an additional 28 days. In the first days of suspension, Woodford’s team sold at least £300 million in assets in attempt to shift away from private companies toward more liquid stocks.
Meanwhile, Woodford’s other funds also suffered. Hargreaves Lansdown, which has in the past sold and promoted the Woodford funds via its retail investment platform, withdrew £45 million — its entire position — from the investment manager’s Income Focus Fund. The performance of the Woodford Patient Capital Trust also took a hit. Brexit uncertainty at the time did not help, with nervous investors withdrawing an eye-popping £15.3 billion out of UK Equity Income funds in general in the 16 months leading up to April 2019, according to data compiled by Morningstar.
By October, the disgraced Woodford was fired and his flagship Equity Income Fund was dismantled. “This was Link’s decision and one I cannot accept, nor believe is in the long-term interests [of investors],” he told Reuters.
The scandal has made life difficult for the companies Woodford once endorsed, which have since borne the brunt of his fall from grace. Several drugmakers, such as Arix Biosciences, Autolus, and Prothena have either become a prime target for short attacks or seen exaggerated reactions to setbacks.