Neil Woodford, the one-time star stockpicker who fell from grace. Screenshot / Woodford Investment Management
Neil Woodford, the one-time star stockpicker who fell from grace. Screenshot / Woodford Investment Management
With his rugby-player's build and penchant for black sweaters and jeans, Neil Woodford never looked much like the archetypal City of London fund manager. Based in a dreary Oxfordshire industrial park, he might have passed as a dressed-down entrepreneur, or a fitness coach.
But for years Woodford, 59, was oneof the City's most powerful investors in the otherwise staid world of retail savings — a man on a mission "to make Middle England rich".
He made his name nervelessly promising ordinary savers high returns from putting their cash into long-term equity holdings, while simultaneously offering them the security of instantly being able to get it back.
For more than two decades Woodford delivered, attracting a rock star-like following from savers and the "independent financial advisers" who are the gatekeepers to the fund investing world. But his Midas touch deserted him — perhaps terminally.
This week Woodford was obliged to close his largest fund to redemptions after its poor investment performance led many investors to ask for their money back. At its peak it held more than £10 billion ($19.1b) under management. When it "gated", it was down to its last £3.7b.
The remaining holders now face weeks of anxiety as Woodford restructures his holdings to meet any further demands for cash. Meanwhile regulators are circling, concerned about the large proportion of unquoted stocks in the portfolio.
There are questions about the way financial advisers pushed the fund even as its value was collapsing. Erstwhile admirers now wonder whether the self-styled industry disrupter may have come to believe in his own propaganda a little too much.
If too much self-belief is indeed his downfall, Woodford certainly never lacked it. He emerged from the ambitious, meritocratic intake that came of age with the UK's deregulatory Big Bang in 1986.
Remaining holders now face weeks of anxiety as Woodford restructures his holdings to meet any further demands for cash. Photo / Getty Images
He grew up in Berkshire as the son of a postcard printer, whose lack of ambition he lamented. His first choice of career was a Royal Air Force pilot, but he didn't pass the aptitude test. "My reaction speeds were just not fast enough," Woodford later recalled.
Armed with a degree in economics and agricultural economics from Exeter university, he found his way into the City.
After a brief sojourn as a clerk in a commodities broker's office, he landed in fund management just as the industry was commencing its great expansion.
He ended up at Perpetual (later Invesco), then an "upstart" retail fund manager based in Henley-on-Thames, where in 1988 he seized his big break.
Woodford's style of investment was to take an approach to valuing companies that ignored the siren "noise" of market fashion.
"Businesses are not islands, they live and breathe in the macro economy," he observed. "I make the same decision [to buy or sell] whether a business is [floating] or if it is one that was created centuries ago."
It is a style that takes guts, and rivals readily concede he had the courage to hold on to his convictions. Woodford sat out the dotcom mania in the late 1990s and sold down his bank holdings prior to the crisis of 2008.
He not only called for other investors to hold stocks for the long term, he actually did it himself, even scrapping bonuses for his staff to get rid of short-term incentives and campaigning against takeovers he disagreed with, notably BAE Systems' abortive merger with Airbus in 2012 and Pfizer's failed takeover of AstraZeneca two years later.
Wowed by his returns, investors readily backed him. When Woodford started out, he was given £14 million to manage. When he left Invesco Perpetual in 2014, he was running £24.1b.
Woodford's problems came after he set up his own business, seeking to cash in on his enthusiastic retail following. Unlike Invesco, where he had built his funds slowly, he raised a large amount of money in a short space of time.
Some think this was the point when Woodford's confidence may have morphed into hubris.
Woodford left Invesco Perpetual in 2014. Photo / Getty Images
"He was always very keen to prove himself and everything he did seemed carefully thought through," recalls one fund manager.
"But then when he set up on his own, Neil's head was turned a bit by all the flattery."
He changed his investment style, starting to put large sums into unquoted stocks, a move that ultimately contributed to last week's downfall.
Many star fund managers have come unstuck over such "mission creep", most notably Woodford's predecessor as paragon in the pantheon of investors, Anthony Bolton, whose stellar career as a stockpicker came to a sad end when he swapped the UK market for punts on Chinese stocks.
"It's a bit like someone who is a very good cricketer deciding to switch to baseball, and selling themselves on the basis of their cricketing average," says Paul Myners, a former City minister.
Woodford now faces a backlash from those people who were once his most committed fans. They point to income he received from Woodford Investment Management, worth up to £65m, and his extensive property holdings.
In recent years Woodford has acquired a large estate in the Cotswolds, and a £6m beach house at the fashionable resort of Salcombe in Devon. A second marriage to the amateur show jumper Madelaine White brought not only two children, but an expensive hobby in the shape of equestrianism.
As for Woodford's former votaries, the savers of Middle England, all they care about now is how much of their money he can give them back.
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