At 4pm on October 14, shock engulfed the offices of Woodford Investment Management as they realised it was all over.
It was at that time of day, just as the UK markets closed, that Link, the fund’s authorised corporate director, fired WIM as manager of the Equity Income fund.
The key executives at WIM, Mr Woodford and chief executive Craig Newman, had not expected to lose the mandate, but when the news arrived, they knew the business was gone.
Mr Woodford held 65 per cent of the shares, and Mr Newman 35 per cent.
Key Points
- The curtain came down on Mr Woodford’s business in October last year.
- He had been trying to sell the illiquid investments that caused the problems.
- Mr Woodford is now talking about getting a consortium together to buy back the illiquid stocks.
That exit brought to a close months of turmoil, as outflows had forced the suspension of the flagship Equity Income Fund in June 2019.
With the income from that fund lost, and the company earning no regular fee for managing the Patient Capital trust, the only revenue the business could expect was the fee from the tiny Woodford Income Focus fund.
The decision was made straight away to close the business, and the next morning, Mr Woodford and Mr Newman told almost all of the staff gathered at the company’s office that their positions were being made redundant, with three months’ notice.
They had resigned as managers of the Woodford Income Focus fund and Patient Capital trust, but on all three mandates there were notice periods to be served, taking the company up to Christmas, with all staff working intensely.
The notice periods for the bulk of the staff ended in January.
In December, shorn of most of its staff and all of its clients, WIM formally exited its headquarters in Oxford and moved to a serviced premises.
Mr Woodford and Mr Newman are still working there, along with a couple of operations people and none of the sales people who had brought the business to assets under management of more than £10bn.
Although no sales people remain at the company, Mr Newman remains as chief executive and his background is in sales, having met Mr Woodford initially at Invesco Perpetual, where Mr Newman had risen to become head of sales.
Since the effective closure of the company, former star fund manager Mr Woodford has been doing what most financial services professionals do when they are out of a job: meeting up for coffee with old contacts, some of them contacting him, he contacting them, but with few firm plans.
One of the trips, in early December, was to China, to catch up with investors in that country with whom he had worked in the past on early stage investments. That meeting came following a previous encounter earlier in 2019 with investors based in the Middle East.
On the personal front, a house in Salcombe, Devon, that Mr Woodford owns was undergoing extensive renovation, while his children are still relatively young.
On the night he launched the first fund, in May 2014, the former fund manager spoke of the poignancy of seeing his children set off for school for the first time.
He became a father in his 50s and spoke of the impact of long days on the road to the provincial towns and cities to promote his new venture.
The manager remains convinced that many of the early stage companies he invested in and which suffered sharp share price falls are undervalued, and continues to be passionate about investing in early stage companies.
When the Equity Income fund was performing poorly, and many were blaming the unquoted holdings, he insisted it was this segment of the portfolio that was the best performing, beating the quoted companies.
That view was largely academic, and the conversations and catch-ups with which he filled his day were mostly the result of his own interest in markets and investing.
But that all changed in February.
A group of investors known as WG Group had been in exclusive discussions to buy the stakes in 15 of the illiquid companies that are still in the shut Equity Income fund.
In February, that period of exclusivity ended, and then some of the calls and chats that filled Mr Woodford’s day took a different turn.
Individuals and groups of investors began to call him, to get his opinion on the portfolio of illiquid assets that investment bank PJT Partners were back on the road marketing, having been appointed by Link.
Mr Woodford knew PJT well; they were originally brought in by WIM to sell the stakes in illiquid assets last year when trouble hit and WIM had first committed to selling all of the unquoted investments in the Equity Income fund.
They are still trying to sell the stakes, at the request of Link, and now these stakes are back on the market; the informal conversations with Mr Woodford have become became slightly more formal.
It is a small group, and there are no retail investors involved.
Different conversations between the former fund manager and those associated with him have focused on different areas, and different structures for any deal, and any collective vehicle that might be created.
There is no guarantee that any transaction will happen, though if it does, it is likely to provide relief for investors trapped in the rump of the fund.
The most liquid holdings have been sold, and clients received a payment in January.
If a group associated with Mr Woodford, and others do buy the stakes, it would mean the rump of the fund would be wound up more quickly and cash returned to investors.
WIM made a profit of £16.2m for the year to the end of March 2019, less than half of the previous year’s total as outflows were already beginning to mount.
Mr Woodford received more than £30m in dividends in those final two years, though at the time the results were announced, a representative of the company said Mr Woodford received no income from the business during the period of the suspension of the Equity Income fund.
If catching up for coffee with old contacts is something Mr Woodford does that is typical of many of his peers, his other hobbies and interests are less so.
He does not play golf, or enjoy the holidays in the sun that many others of his status and wealth do.
But equestrian sports are a significant part of his life now.
With a Financial Conduct Authority investigation into the suspension and collapse ongoing, there is no certainty as to what happens next, and the saga has plenty of time to run.
Link declined to comment.
David Thorpe is special projects editor of Financial Adviser and FTAdviser
