James Coney  

Woodford recovery still has a way to go

James Coney

James Coney

We are getting a little bit closer to knowing the answer to the Woodford question that has been on my mind for the best part of a year now.

That is: Was the fund that the fallen star manager was running actually like the kind of fund he really wanted to run or was it the type of fund forced on him by poor performance and redemptions

With the publication of the Woodford Equity Income fund half-yearly report it seems we have the answer.

And that is, as I had long suspected, no.

In fact, the sprawling selection of illiquid and unlisted stocks that the Equity Income fund held in the weeks before it was gated was a long way from being the type of investment vehicle Neil Woodford had imagined and promised he would be running when he set out to go it alone in 2014.

We know this by looking at the transactions that Mr Woodford has made since the fund was gated – which are revealed for the first time in the Equity Income fund’s interim report to June 30.

The fund has now shrunk to £3.1bn, the accounts reveal, from £10.2bn at its peak in 2017.

Since the gating he has been steadily moving away from riskier holdings, and picking up more dividend paying FTSE 100 giants. 

That is exactly what Mr Woodford said he would do, indeed he was taking measures to do exactly this before the gating occurred. But since the fund’s closure we have all been left in the dark as to what exactly will crop up in his fund holdings the next time he reveals them.

Well, now we know: BT, International Airlines Group and British American Tobacco. How very Woodford. 

And that may be a relief for any of those investors still stuck in the fund. These are the kind of stocks that they had invested in him for in the first place, not the highly volatile biotech bets that ended up in there and should have been in his Patient Capital Trust.

The Equity Income report also lays bare Mr Woodford’s continued frustration with the world’s momentum driven market. You can almost hear him seethe as he describes the “narrow fixation” on businesses that benefit from reflationary global growth “that we simply did not (and do not) believe in”.

And his bet on Brexit is taking much longer to pay off than he hoped.

What is clear is that the hubris is gone. What we have now is a fund manager scrabbling to restore his reputation, not just among clients, but among advisers and the rest of his profession too.

That only stands a chance of happening once the fund really does look like the one he wanted to run all along – and we are a long way off that.