Following a star player in the stock market is not paying off for investors as the fall-out from former FTSE darling Neil Woodford plays out.
In little more than five years, his fall from grace has seen him go from a celebrated fund manager at Invesco Perpetual, leaving to set up his own business which would have billions of pounds under management to the final ignominy of being sacked from his own flagship fund.
Now, Woodford has given up the ghost and announced the closure of his remaining funds.
The administrators of his £3.1 billion Equity Income Fund sacked him on Tuesday, announcing the fund would be wound-up and any cash remaining would go back to investors – after fees for managing the fund and liquidating stocks were deducted.
An angry Woodford’s riposte was the decision was unacceptable and not in the interest of investors.
Painful decision
Then he told investors that he was stepping down as manager of Woodford Patient Capital and his Income Focus fund would also close. The move came as he realised so he would have to throw in the towel as he would be a manager without any funds.
“We have taken the highly painful decision to close Woodford Investment Management. We will fulfil our fund management responsibilities to WPCT and the LF Woodford Income Focus Fund and once completed will close the company in an orderly fashion,” said Woodford.
“I personally deeply regret the impact events have had on individuals who placed their faith in Woodford Investment Management and invested in our funds.”
Woodford’s problems started when leading companies performed poorly, undermining his big investments.
Lesson for investors
Then, he countered by staking millions against high-risk unlisted technology and healthcare businesses, banking on their potential for growth. But the strategy backfired and investors flooded the fund with redemption claims.
Woodford could not sell the shares quick enough to repay investors, and the fund was suspended in June, blocking withdrawals by investors. The fund is still closed and administrators say the redemption process won’t start until January.
The lesson for investors is few are likely to get their full amount of money back.
Stock pickers can make money if you take a balanced view, but only as part of a diversified portfolio because past performance is no guarantee of future profits.
