City investors outraged at return of former stockpicking star Neil Woodford and call on Financial Conduct Authority to ban him
City fund managers today expressed dismay and astonishment that disgraced investor Neil Woodford was planning a comeback, with some saying he should be barred by financial regulators.
Yet at the weekend, he declared he was back, planning to raise money from institutional investors to back biotech projects.
He is still being investigated by the Financial Conduct Authority over the collapse of Woodford Investment Management, and fund managers today were incredulous that he could start up in business again while that was ongoing.
Alan Miller, the former Jupiter and New Star fund manager now running his own investment firm SCM Direct, described Woodford’s return as “astonishing”.
“Investors in his Equity Income Fund are estimated to have lost more than a billion pounds. Yet the FCA has not completed its 18 month old investigation and Mr Woodford remains an authorised person.”
He added: “It is now time for the Treasury Select Committee to put an end to this farce, demand an independent investigation that covers the role of the FCA and its hapless CEO at the time, Andrew Bailey, in this scandal."
Bailey is now governor of the Bank of England.
Miller added: “Until such time as an inquiry’s findings are published, Mr Woodford should be barred from managing money.”
The painful collapse of Woodford’s fund was seen as inevitable long before it happened, given his decision to make investments in small companies that were hard to sell out of - known as “illiquid” investments.
It meant that, as investors in the fund sought to get their money out when its performance worsened, he could only raise cash to pay them out by selling his liquid shares, meaning the percentage of illiquid stocks in the portfolio kept rising ever higher.
One major fund manager said of Woodford’s return: “It is jawdropping. The arrogance is just staggering.
“There are still thousands of people waiting to get their money back and yet he’s up and running again. Just extraordinary.”
Another said he was “utterly bewildered” by the move.
Miller was not alone in being highly critical of the FCA.
“They were incredibly slow to deal with Woodford,” said one fund manager. “It was clear what was going to happen with this fund 18 months before it imploded, with outflows rising and a greater and greater percentage of the investments being illiquid.”
He worried that Woodford’s return to the City, on top of the London Capital & Finance scandal, would make retail investors distrust the investment world ever more.
He said this would inevitably push them into making dangerous investments such as those seen in the Robinhood-Reddit saga, where retail investors have lost heavily by backing shares pushed artificially high by social media activists.
“I’m sure the [US regulator] Securities and Exchange Commission would have acted sooner both on Woodford and LCF,” said the fund manager.
He added that, while the FCA was failing to prevent scandals, the levy for compensating victims being paid by investment companies was rising every year.
Woodford insisted his fault was only in having two years of underperformance, blaming the whole collapse on the fund's administrator Link's decision to close it, forcing firesales of its assets.
He told the Telegraph newspaper he was confident he would not be barred by the FCA and said he had not done anything outside the regulator's rules.
Another fund manager expressing incredulity at Woodford setting up a new fund asked sarcastically: "Is Andrew Bailey going to be a director?"
