Woodford cut down as fund chopped and burned

Neil Woodford
Neil Woodford (Woodford Funds)

After being hailed as a near mystic when it came to stock picks, Britain’s once great oak has been cut down to a sapling as Neil Woodford gets the ax and his eponymous fund is cut up.

Things have been sliding for years, with an ill-timed investment in Circassia being a pivotal moment. Once the jewel in the crown of British biotech, the company served up a major trial bust in 2016, wiping more than half off its value.

This was bad news for Woodford: Back in 2015, he had pulled out of French Big Pharma Sanofi and doubled down on Circassia, snapping up a 13.5% stake in the biotech, a 150% increase on his original ownership.

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Then, in 2016, Woodford quietly bought up another big chunk of Circassia shares, moving his stake in the company past the 20% mark. The very next business day, Circassia posted the phase 3 trial results of its cat allergy immunotherapy that caused its stock price to crash after it failed to beat out placebo.

This hit the biotech, but also sharpened questions over Woodford’s ability to pick and invest in biotech stock.

Another biotech he backed, namely Prothena, also saw a major flop last year, leading it to dump its lead asset, an AL amyloidosis drug, after it missed its primary and secondary endpoints in a midstage test with a poor prognosis for phase 3.

This led to it slashing 57% of its workforce in a reorganization aimed at refocusing its resources to advance what remains in its neuroscience pipeline.

Setbacks in Allied Minds and Provident Financial also further damaged Woodford personally, and his funds, with major and long-term backer Jupiter Asset Management pulling out around £300 million from his flagship fund not long after a rot seemed to be setting in.

The fund has always backed unquoted biotechs—Woodford helped Immunocore to its $320 million series A in 2015—but the proportion held in private companies increased as investors pulled money out. Across 23 consecutive months of net outflows, the assets held by the fund have shrunk from £10.2 billion to £3.7 billion.

Sales of stocks funded the outflow requests, causing the proportion of the fund held in private companies to rise toward 10% last year.

All of this, and more besides, came to a head this year, and back in the summer trading in Woodford’s flagship fund was halted and set to continue that way until December. News of the suspension extension emerged shorty after Woodford Patient Capital Trust said it was considering a change of management.

Woodford suspended trading in the Woodford Equity Income Fund after investors pulled more and more cash out of the underperforming investment vehicle. With investors withdrawing up to £10 million ($12 million) a day and the prospect of a £250 million withdrawal looming, Woodford stopped trading in the fund to buy time to shift the portfolio away from illiquid biotech holdings.

Woodford had planned to use the extra time to sell holdings in privately held companies and invest the proceeds in larger businesses that trade on the London Stock Exchange. Woodford’s private holdings include BenevolentAI and Oxford Nanopore.

But now, after months of wrangling, Woodford has been fired. This will also see the fund's assets liquidated with no current attempt to try and relaunch it.

Adrian Lowcock, head of personal investing at Willis Owen, the investment platform, said to the Financial Times: “We have seen the complete demise of the most famous fund manager the U.K. has seen for years. Investors knew the scenario was bad, but the indication from Woodford thus far had been that the fund would reopen.

“This collapse is on a par with the implosion of New Star at the height of the financial crisis, and it will shake the funds industry to its core.”

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