Woodford back just one year on; millions of pounds still trapped in illiquid assets

Former rock-star fund manager Neil Woodford is understood to have returned to the world of asset management just a year after his firm’s collapse sent shockwaves through the City; he is acting as an adviser on the same type of illiquid assets which ultimately led to his downfall.

Sky News has learnt that Neil Woodford has quietly begun working with former colleague Craig Newman for Juno Capital, to build a portfolio of unquoted healthcare investments.

Woodford and Newman received less than favourable press when it emerged in January that they had shared £13.8m in dividends during the financial year prior to Woodford Equity Income Fund’s suspension, deepening the outcry over the firm’s implosion; they also continued to charge customers its management fees during the funds’ suspension.

Although his role does not entail managing money for Juno clients, Woodford’s return could anger thousands of savers who lost substantial chunks of their investments; £220m remains ‘stuck’ in the illiquid assets that were at the heart of the scandal, and those that were invested in the funds when it was gated last June have lost roughly half of their money.

Juno describes itself as ‘an innovative specialist asset manager to a network of wealthy individuals and family offices’; it holds positions in start-ups and scale-ups across a range of sectors, including Destiny Pharma and Sky Medical Technology in the healthcare sector.

Woodford is no stranger to unlisted health stocks, and the liquidity issues at the crux of his demise were partly caused by a propensity to invest in them; he placed big bets on biotech companies such as Oxford Nanopore, with many of his former holdings in the sector recently sold at a knock-down £224m to Acacia Research.

His reappearance in a branch of the asset management industry comes after months of talks with prospective backers in Asia and the UK.

Sky News revealed earlier this year that Woodford was pitching the creation of a vehicle to buy some of the unquoted Woodford Investment Management stakes in biotech companies such as drug discovery start-up BenevolentAI; he was seeking backing from family offices other wealthy investors in the UK and Asia to create a new fund to manage dozens of new holdings in London-listed companies.

Woodford made his name during a stellar period at fund manager Invesco, where he attracted a cult-like following; in his pomp he managed more than £15bn on behalf of hundreds of thousands of ordinary savers – he was once described as ‘the man that made Middle England rich’.
 

‘The Man Who Made Middle England Rich’

However, a string of poorly timed bets on public companies such as the construction group Kier, haulier Eddie Stobart Logistics, and Capita, the outsourcer, along with major bets on illiquid stocks, helped to plunge Mr Woodford’s firm into crisis.

Woodford’s flagship Equity Income Fund had been running with daily outflows of £9m in May last year on fears of the fund’s liquidity; the manager played these down saying that he remained confident in his strategy.

However when Kent County Council asked to pull all of the £260m it had invested in the portfolio through its workplace pension, the fund did not have enough liquidity to meet the redemptions and it was suspended on June 3^rd; investors had £3.7bn trapped in the fund and Woodford was stripped of his responsibility for running his eponymous funds by Link Financial, their administrator

Mr Woodford is not thought to want to manage money on behalf of retail investors again but his return comes despite uncertainty about whether the implosion of Woodford Investment Management will incur any regulatory repercussions.

Various funds have either been placed into run-off or handed to big City institutions such as Aberdeen Standard Investments and Schroders; Blackrock, the world’s biggest asset manager, was handed part of the portfolio to sell, including online estate agent Purplebricks.

The demise of Woodford Investment Management was the fund management sector’s most dramatic since New Star collapsed during the financial crisis, and sparked fury among savers and politicians.

Speaking late last year, Mr Woodford said: ‘I personally deeply regret the impact events have had on individuals who placed their faith in Woodford Investment Management and invested in our funds.’

Mr Woodford’s Invesco protege, Mark Barnett, also left recently following a run of weak performance; the manager previously dubbed ‘the man who could not stop making money’ had lost his mojo.