Woodford Investment Management  

Woodford and partner bag £20m dividend

Woodford and partner bag £20m dividend

Neil Woodford and his chief executive Craig Newman split a hefty £20m in dividends in the year to March 2019 despite Woodford Investment Management’s poor performance, according to reports.

Analysis from FTAdviser’s sister paper the Financial Times arrived at the figure by assuming an average management fee of 0.5 per cent on the £12bn of assets the soon to be closed fund house managed during the last financial year.

The firm will not confirm or deny the figures.

Woodford IM’s accounts for the previous year (to end of March 2018) showed a dividend of £36.5m paid out to its parent company Woodford Capital, of which Mr Woodford and Mr Newman own 65 and 35 per cent respectively.

At the time the company warned the funds had experienced significant outflows since the 2017/18 financial year and predicted a drop in profits for the year to March 2019 — a forecast backed up by the 45 per cent drop estimated by the Financial Times.

The pair set up Woodford IM together in 2014 after leaving Invesco Perpetual. Mr Woodford had made a name for himself as a ‘star manager’ after defying the dot com crash by resisting pressure to buy tech shares and dodging the financial crash by selling his bank shares in 2005.

But by July 2017 Mr Woodford’s flagship Equity Income fund started underperforming the UK Equity Income Sector’s average as well as the FTSE All-Share.

The fund was also hit by stock-specific issues the following summer. Share price collapses for favoured holdings like doorstep lender Provident Financial saw Mr Woodford's fund return just 0.5 per cent in the 12 months to October 2017 — compared with a sector average of 11.4 per cent.

In the final two years of the fund's life, as further share price falls left the manager wrestling to ensure that his unlisted holdings did not exceed a 10 per cent regulatory limit, Mr Woodford lost 12.1 per cent and 27.5 per cent respectively.

Mr Woodford’s second fund, named Income Focus and launched in April 2017, told a similar tale from July 2017 onwards, losing 12.8 per cent in the year to October 2018 while the share price of his investment trust, Woodford Patient Capital Trust, also fell steadily from July 2017.

Outflows from Mr Woodford’s Equity Income fund triggered his flagship product to be suspended on June 3. Since then, he had been scrambling to sell shares to improve the fund's liquidity in an effort to preempt a wave of redemptions when the fund reopened.

But on October 15 it was announced Mr Woodford's suspended Equity Income fund, initially touted to reopen in December, would be wound down and the former star manager fired from the fund.

He then walked from his remaining two investment vehicles before confirming he had taken the decision to close Woodford Investment Management later that day.

FTAdviser understands the company will be wound down gradually over the next two months.

The saga has impacted faith in fund managers across the UK as well as platforms such as Hargreaves Lansdown and the UK regulator.