JEFF PRESTRIDGE: Neil Woodford is crying, but only for himself

If hubris could be bottled, Neil Woodford’s latest video appearance would keep a bottling company busy for years. During a 90-minute interview on his own Woodford Views online vlog, the ex-fund manager – once heralded as a genius in UK stock investing – displayed the same sense of self-worth that arguably fueled the collapse of his once-mighty empire in caused for more than five years. past.

Its flagship fund, Woodford Equity Income (WEI), launched in 2014, reached £10 billion before falling to £3.7 billion prior to its suspension in June 2019. The subsequent split months later left hundreds of thousands of fund investors cashless. – even after an inadequate £230 million financial recovery program was organized by the City’s regulator, the Financial Conduct Authority.

In the video, shot in Dubai, 64-year-old Woodford looked as fit as a butcher’s dog, firing shot after shot at those he blamed for the collapse of his investment fund.

He blamed the regulators, the media, Link Fund Solutions (WEI’s regulator) and even Brexit during his tearful account of the events that led to WEI’s suspension.

The story lacked any meaningful acknowledgment of his own key role in the tragedy – and most striking was his decision to invest a significant portion of the fund in highly illiquid companies.

This deviation was contrary to the mandate of a UK equity fund, which traditionally prioritizes stable, dividend-paying stocks. Investing in such ‘boring’ stocks was how Woodford achieved great success at Invesco, his previous employer, and how he was able to go on and create his own investment brand.

Alan Miller, co-founder of the investment house SCM Direct, has long helped me analyze problems with Woodford’s funds – in addition to WEI, there was Patient Capital (PC) and Woodford Income Focus (WIF). Miller believes that the sheer size of WEI’s illiquid investments made it virtually impossible for Woodford to weather a prolonged period of underperformance.

Last week he told me: ‘If he had managed Woodford Equity Income with a similar liquidity profile to his former funds at Invesco, Woodford would probably still be managing money today.’

A symphony of self-pity

Listening to the video on Friday, there was not an ounce of regret from Woodford and the word “sorry” was not used – except when he burst into tears as he recounted the moment he told staff at his Oxford investment operation that the show was over and he had to fire them.

Nice and sincere, but it would have been nice if he had also shed a few tears for investors.

The title of his video, The Darkest Five And A Half Years Of My Life, aptly summed up the tone: poor Neil, wronged by the world.

But what about those who lost everything, including retirees who depended on his promise of stable investment returns? A simple apology might have gone a long way.

Instead, Woodford stuck to the script of victimhood, pointing his fingers in every direction but his own. Misleading? Maybe.

The barrage of guilt

Instead, Woodford went on the offensive, launching a scathing attack on several parties he believed were responsible for the end of WEI and the loss of WIF and PC to rival investment groups. In the interview Woodford says:

• Accused the regulator of forcing it on Link when WEI was launched;
• Stated that Link’s decision to suspend the fund in June 2019 was made without consultation (“It was a shock”);
• Described Link’s subsequent move to liquidate Woodford Equity Income in September 2019 as a ‘disaster for our investors’ and the ‘worst outcome’;
• Criticized the regulator for ignoring his plea to stop Link from closing the fund and for refusing to participate;
• Complained about the unfairness of the subsequent investigation into both his conduct and that of his wider investment company. If an appeal is filed, the results of this regulatory work may not be known for three years. “Painful,” he described it. “We have done nothing wrong.” Real? I’m sure most WEI investors would dispute this comment.

As for the media, Woodford accused it of “demonizing people (like him)” and “making up a lot of things.” He also claimed that by portraying him as someone who had lost his investment sense during the fund’s poor performance (2017-2019), the press had influenced institutional investors, such as Kent County Council, to redeem their investments – an action which forced Link to suspend the fund. , indicating its collapse.

Yet there was a glaring lack of explanation for his decision to invest substantial portions of the fund in illiquid stocks, which were virtually impossible to sell during WEI’s underperformance. This move turned the fund into a slow-motion car crash.

The flawed bid for a comeback

The interview also offered insight into Woodford’s desire for a comeback, drawing comparisons to investment titans like the legendary Warren Buffett. He claimed that the lessons of the past five years had made him a better investor, ready to rebuild his legacy.

But as one comment on YouTube succinctly put it: ‘No amount of post-hoc explanation can wipe away the mess you’ve made and the damage you’ve caused while making tens of millions (of pounds) for yourself.’

Woodford’s hubris during the fund’s heyday, coupled with his inability to recognize his own fallibility, remains central to its downfall. If he had managed liquidity risk and portfolio structure more carefully, he would still be able to manage money today even if his performance had slumped.

Instead, by entering speculative territory, he created a fund that could not withstand external shocks.

A missed opportunity for answers

The sycophantic nature of the interview, which was organized by Dubai financial mogul Spencer Lodge, left many glaring questions unanswered.

Why didn’t the interviewer press Woodford about the illiquid investments in his fund? Or challenge him about the fees charged to investors while the fund was suspended?

Why did Lodge not demand accountability or even simple acknowledgment from Woodford for the harm caused to ordinary investors in his fund?

As Woodford continues to avoid responsibility for the demise of his investment empire, I return to the comments from viewers of his video. They strike a resounding chord.

“Neil, you’re not getting your old reputation back,” one wrote. “A bit ridiculous, you can’t pass the blame,” said another.

For those who lost money in the Woodford debacle, the interview offered little solace – just a reminder of the hubris that brought down one of Britain’s most celebrated fund managers.

Woodford’s story is a cautionary tale of what happens when unchecked self-confidence is paired with poor decision-making.

As Alan Miller aptly noted on Friday: ‘It’s not just about financial management – ​​it’s a study of psychology. Unless Woodford finds true humility, his bottles of hubris will accompany him to his investment grave.”

Finally, if you’ve watched the video or plan to do so in the coming days, tell me what you think. Don’t hold back even though you think Woodford is right to feel deeply affected? Please contact me at jeff.prestridge@mailonsunday.co.uk

Ps: Merry Christmas to all dear readers. I love you even if you reject me for criticizing the unions or our current inept government.

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