Under siege, investment manager Woodford faces another investment shock
Embattled UK fund manager Neil Woodford — who has controversially blocked investors from pulling out from his flagship fund to stem the bloodletting, after a slew of disappointed investors fled following a series of sour bets — is now paying the price for his actions via an investor exodus on another fund.
Hargreaves Lansdown, which has in the past sold and promoted the Woodford funds via its retail investment platform, has reportedly withdrawn £45 million — its entire position — from the investment manager’s Income Focus Fund.
“(W)e have closed our position in Woodford Income Focus in the Hargreaves Lansdown Multi-Manager High Income fund this week. We have no other exposure to the Woodford Income Focus fund across our MM (Multi-Manager) portfolio range. Last week, we communicated to clients why we were removing the fund from the Wealth 50 list of our favourite funds, as we no longer had conviction in the fund,” a Hargreaves Lansdown spokesperson told Endpoints News.
Hargreaves’s customers accounted for roughly £2 billion of £10.6 billion under Woodford’s management at the end of March, The Guardian reported. Morningstar research shows the Income Focus Fund was worth £480 million on June 3, and the British newspaper estimates it was worth £353 million on Wednesday, June 12.
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 have culminated in the longest period of weak returns. Woodford originally anchored his reputation as a blue-chip investor in companies like GSK. Last year, Woodford paid himself and his business partner £36.5 million.
Frustrated by a flood of investor redemptions, earlier this month, without warning Woodford suspended investors from moving their money for at least 28 days from his main £3.5 billion Equity Income Fund, days after being downgraded by Morningstar. Adding fuel to the fire, Woodford has 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.
Hargreaves Lansdown, whose clients last year accounted for more than 30% of Woodford’s now frozen fund, has said it would waive its fee for affected clients as long as the fund was suspended, media reports have suggested.
Meanwhile, if investors trapped in the suspended Equity Income Fund choose to sell when it reopens, they will likely face additional punitive charges or “escape penalties”, the Telegraph reported on Friday.
Brexit uncertainty has triggered nervous investors to withdraw 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.
Endpoints News has contacted Woodford for comment.
Once considered the UK’s most prominent stock picker, Woodford in March speculated about his comeback into the big leagues in the next two years, by preserving his “valuation-focused” approach to stock selection that has served as his armor through previous periods of underperformance.