Neil Woodford, the crisis-hit fund manager, was not one for haste. He once told a government review how he deplored the “increased trading activity”, “interactions with intermediaries” and “short timescales” that so obsessed his rivals. Not any more. Since his flagship Equity Income Fund was suspended, after being overwhelmed by redemption requests, he has adopted all three practices. And, in doing so, he appears to be indicating where he sees his future.
In the past month, Mr Woodford’s trading activity has increased markedly — it has had to, as it is only by selling his liquid shareholdings that he can repay fund investors seeking to escape his illiquid, unquoted stocks. A quick search of London Stock Exchange TR-1 forms brings up a list of almost-frantic looking sell trades: Stobart Group, Provident Financial, IP Group, Allied Minds, Non-Standard Finance, Topps Tiles, Circassia, ReNeuron, Kier . . . and that is just a sample from the past four days.
Mr Woodford’s interactions with intermediaries have also been stepped up. In consultation with his authorised corporate director, Link, he has told Hargreaves Lansdown — the platform through which 130,000 people bought into his fund — that “trapped” clients may now transfer to other intermediary firms. He has also been travelling up and down the country to meet financial advisers who supported him in the past.
But Mr Woodford’s most striking adoption of a short timescale, over a long-term view, has been in the management of his own stakeholders. He has already told some support staff they are being let go, as he seeks flexibility over costs ahead of a likely exodus of investors. Now, though, he has parted company with his head of institutional sales, Will Deer, and his unquoted stock analyst, Saku Saha — both of whom worked with him previously at Invesco Perpetual. For a long-termist like Mr Woodford, whose career has been notable for a stubborn loyalty to individuals — brokers at Cenkos, and entrepreneur Anton Bilton, for example — these look like significant decisions.
Mr Deer’s departure might seem inevitable after billions of pounds of institutional money was withdrawn by St James’s Place and Kent county council — the latter triggering the Equity Income fund’s suspension — but it also suggests no more will be sought in future. Similarly, Mr Saha’s departure indicates that unquoted holdings will not be needed for whatever remains of the Woodford fund range.
So what does that leave, once the dust settles and the suspension lifts? Potentially, a much smaller, almost boutique fund house, run by a manager who can take a long-term, contrarian approach to picking undervalued but liquid FTSE 350 stocks. Not unlike a certain Neil Woodford when he started out managing just £14m for Invesco in 1988. That’s a certain Neil Woodford whose old-fashioned value-investing approach protected investors from the dotcom bust and financial crisis, and led to him managing £24bn by 2014.
Will anyone give him a second chance? Regulators might not be so forgiving, if it turns out the Equity Income fund breached liquidity rules. But one industry insider notes that Mr Woodford’s recent busy schedule included meeting an intermediary firm that backed him in the past, and favours this kind of back-to-basics approach with a cleaned-up portfolio. It only has £1bn of client assets under management — but even a fraction of that would be enough to support the ultimate recovery play . . . slowly.
Noel’s Landsec finale
Landsec boss Rob Noel says that when he announced he was building the Walkie Talkie skyscraper, back in 2010, “the room went silent”. But he should have filled the awkward pause by belting out the Broadway show tune “It’s not where you start it’s where you finish!” This was pretty much his response to the chorus of doubters for the next four years. Except that he preferred the real estate version: “It’s not when you start, it’s when you deliver”. And he couldn’t use the pay-off line “ . . . and I’m gonna finish on top!” because British Land went and built the taller Cheesegrater next door.
Still, now that he has announced he will retire in 2020, Mr Noel can expect a more rousing reception. Because, on any measure, he has finished a lot nearer the top than where he started. After Landsec had been forced into asset sales post-financial crisis, he won support for speculative London office developments by focusing on market conditions when they would be delivered, not when work began. He also sold off secondary shopping centres to finance the development — keeping debt unchanged, loan-to-value falling and retail exposure low.
Liberum analysts reckon Landsec’s transformed portfolio deserves a higher price to net asset value ratio than 0.65, given the wider sector trades on 0.90. But, as the producers of the musical Seesaw found in 1973, everyone’s a critic . . . until someone recognises that you’ve penned a hit.