Neil Woodford is at risk of being kicked off the listed investment trust that bears his name in a humiliating setback for the former star fund manager, who is clinging to the relics of an investment empire that boasted assets of more than £15bn two years ago.
The board of Woodford Patient Capital Trust, which raised £800m in what was the UK’s biggest investment trust launch in 2015, has held discussions with its broker Winterflood Securities about terminating its contract with Mr Woodford, according to two people close to the situation.
The value of assets managed by Mr Woodford peaked at more than £15bn two years ago. Weak fund performance and investor redemptions reduced that figure to about £5bn this month, when wealth manager St James’s Place Capital withdrew its £3.5bn mandate. The value falls to less than £400m after stripping out the £820m of assets held in WPCT and his stricken £3.7bn Equity Income fund, which he has frozen and which may never reopen to investors.
The assets held in the remaining Woodford fund, Income Focus, have tumbled to a fresh low of £397m, down 20 per cent in June alone, according to an FT analysis of Morningstar data. Investors have yanked £79m since Mr Woodford halted redemptions from Equity Income last week.
WPCT’s board, led by Susan Searle, has discussed the “ramifications” of removing Mr Woodford, including the renegotiation of a fully drawn £150m overdraft facility with Northern Trust, the US bank, and a new “fee model” that would need to be agreed with an incoming fund manager, according to a person briefed on the board discussions. Terminating Mr Woodford’s contract, which requires a three-month notice period, was an option under consideration, another person said.
However, replacing Mr Woodford could be expensive. He does not charge WPCT a management fee and is entitled to a performance fee that has never been paid since WPCT launched in April 2015 because of the trust’s poor returns.
Apart from its debt burden, WPCT is facing relegation from the FTSE 250 unless its share price recovers.
Close to three-quarters of the investments held in WPCT are also held in the Equity Income fund, which is in the midst of a big reorganisation as it attempts to raise cash to repay fleeing investors.
WPCT’s shares have been highly volatile, dropping to a fresh intra day low of 58.20p on Tuesday before closing 7 per cent higher at 63.4p. WPCT shares peaked at 119p in August 2015.
In an unusual move, Winterflood has removed WPCT from its list of recommended investment trusts. In a note to clients, the broker said WPCT’s net asset value and share price had been hit by the troubles in the gated Equity Income fund.
“We believe that it is not possible . . . to describe Woodford Patient Capital as a value opportunity due to the uncertainty surrounding its common holdings with the [equity income] fund and the potential impact of any sale process on its NAV,” the company said.
Philip Yarrow, chief executive of Winterflood Securities, declined to comment on any discussions to replace Mr Woodford.
WPCT, Northern Trust and a spokesman for Mr Woodford declined to comment.
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