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Abu Dhabi, UAEThursday 4 March 2021

Pressure mounts to block tarnished fund manager Neil Woodford’s comeback bid

Former star investor plans new investment company 20 months after 'spectacular' collapse of venture

The return of Neil Woodfood caused concern in London's City finance district over the weekend. Alamy
The return of Neil Woodfood caused concern in London's City finance district over the weekend. Alamy

Pressure is building to bar tarnished British fund manager Neil Woodford from setting up a new investment firm after campaigners called for an investigation into the collapse of his previous venture.

Mr Woodford’s firm, UK-based Woodford Investment Management, collapsed in 2019 after its main fund froze leaving thousands of small savers unable to retrieve their deposits.

What I was responsible for was two years of underperformance.

Neil Woodford

The former star investor announced earlier this week that he would be chief investment officer of the newly formed Woodford Capital Management, which would be based in Jersey and in Buckinghamshire, England.

When unveiling the new venture Mr Woodford, 60, said he was “sorry” for what he did.

"What I was responsible for was two years of underperformance. I was the fund manager, the investment strategy was mine, I owned it and it delivered a period of underperformance,” Mr Woodford told the Sunday Telegraph.

However, both the UK’s Financial Conduct Authority and the Jersey Financial Services Commission expressed alarm at the possibility of Mr Woodford’s return to the sector.

Mark Steward, FCA director of enforcement and market oversight, said that the new business would need to apply for “appropriate permissions” before undertaking any regulated activity in the UK.

“There are reports that Mr Woodford’s future business proposal may operate out of Jersey. We are in contact with the JFSC and agreed with them that we will both share information on any application made in our respective jurisdictions (for both a fund or entity),” Mr Steward said.

Meanwhile, the JFSC said that it was “disappointed” to find the trading name WCM Partners reserved in the Jersey Registry before the regulator received or processed an application from the company for authorisation to conduct activity as an investment firm.

"It would be normal practice when making such an announcement to make it clear that it is ‘subject to regulatory approval’,” the JFSC said.

The re-emergence of Mr Woodford caused immediate concern in London's financial district.

Woodford Investment Management, once the darling of the fund management industry with billions of pounds in assets under management, collapsed in 2019 having taken on too much risk, leaving pension funds, retail investors and other fund managers with large losses.

Worth a reported £10.2 billion ($14.2bn) in May 2017, the fund struggled to plug holes when investors pulled out about £10m a day. By the time it was suspended, it was worth just £3.7bn.

In response to Mr Woodford’s proposed new venture, activist investment group the True and Fair Campaign – which promotes greater transparency in the finance sector – called for an independent investigation into the “Woodford scandal”.

The initiative, founded by Brexit campaigner Gina Miller, who runs her own investment firm called SCM Direct, and her husband Alan, raised alarm over Mr Woodford returning to the financial sector just 20 months after the “spectacular collapse”.

"It is high time there was an independent investigation into the Woodford scandal," the campaign wrote in a letter to the UK Parliament's Treasury Select Committee.

"We believe it ought to be a very serious source of public policy concern that high profile individuals such as Mr Woodford can be allowed to recommence trading when over 300,000 people ... are scrabbling to make ends meet after seeing their life savings decimated."

The FCA said that it was investigating the circumstances behind the suspension of Mr Woodford's flagship LF Woodford Equity Income Fund, but that it had encountered difficulties in accessing documents and witnesses during the pandemic.

“I recognise the time taken to investigate causes of frustration among those affected by a firm or fund failure and who are, understandably, looking for answers. They rightly look to us to provide those answers,” Mr Steward said.

“As a result, it is vital we investigate thoroughly and investigations are not limited at their outset. Instead, we look at what all the evidence tells us before we make conclusions about what, if any, misconduct has taken place and who is responsible, if it has. It is only then that we can assess what, if any, sanction we should put in place.”

However, the True and Fair Campaign criticised the FCA investigation for failing “to consider the role of Hargreaves, the major investment platform that was a major promoter of the Woodford funds, or to assess the FCA’s own conduct in the affair”.

Mr Woodford’s new approach will see WCM Partners advise Acacia Research on a portfolio of life science stocks previously owned by Woodford Investment Management and sold to Acacia in June 2020 as part of the liquidation of the firm’s main fund.

WCM said that the assets would "form the cornerstone" of a new biotech-focused strategy to rebuild the Woodford investment operation with plans to open it up to other institutional investors, rather than retail investors.

Ryan Hughes, head of active portfolios at stockbroker AJ Bell, said that Mr Woodford’s potential comeback is "a surprise to many, especially those thousands of embattled investors who are still waiting to get the last of their money back”.

Mr Woodford enjoyed a 30-year career in asset management as a stockpicker before setting up Woodford Investment Management in 2014.

Updated: February 18, 2021 04:58 PM

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