Neil Woodford’s stock-market-listed fund has announced its first major investment since the shuttering of its flagship sister vehicle last month.
Woodford Patient Capital Trust confirmed on Monday that it was pumping £10m into Atom Bank, keeping its stake at 18%. It is part of a wider £50m fundraising by Atom Bank that also drew investment from the Spanish banking group BBVA and investment funds Perscitus and Toscafund.
But Woodford’s involvement in the funding round failed to excite investors. Instead, shares in the FTSE-250-listed fund tumbled 4.4% to a record low of 51.6p in early morning trading.
It is the first major investment decision made by Patient Capital since 3 June, when Woodford made the shock decision to suspend his flagship Equity Income Fund after being overwhelmed by customer withdrawals. It followed a string of bad investments that caused the fund’s performance to nosedive. Woodford was forced to block investors from withdrawing their money to give himself time to sell off stakes in quoted stocks and unlisted companies that can be more difficult to sell.
Neil Woodford was once the UK’s biggest star fund manager, personally managing a £25bn mountain of money on behalf of pension funds and other investors at Invesco Perpetual. When he decided to quit Invesco and go it alone in 2013 it was a huge shock for the fund management industry. Invesco shares slumped by 7% on the day he announced his departure.
At Invesco Woodford held control of huge stakes in some of the UK’s biggest firms, and his opinions mattered. His criticism of AstraZeneca chief executive David Brennan in the 2012 shareholder spring was widely regarded to have cost him his job, and his critique of BAE’s attempted £28bn merger with Airbus is acknowledged as one of the reasons the deal collapsed.
Woodford, who was widely referred to in the media as an investment “hero” and fund management “star”, had done exceedingly well over his quarter century there. A £1,000 investment placed when he started at the firm in 1988 would have risen to £23,000 by the time he left.
Woodford accidentally fell into fund management and hadn’t heard of the term until he rocked up in the City in the 1980s sleeping on his brother’s floor while looking for a job. He got his first break in insurance, before drifting into fund management. He had left school wanting to fly fighter jets but couldn’t pass the RAF’s aptitude test, and instead read economics and agricultural economics at the University of Exeter.
Feeling he had outgrown Invesco Perpetual, he set up his own firm Woodford Investment Management in 2014, on an industrial estate near Oxford. Within two weeks of launching, he had raised £1.6bn, a UK record, and it quickly grew to £16bn. In its first full year his flagship fund returned 16% and Woodford, a devotee of veteran US investor Warren Buffett, was dubbed the “Oracle of Oxford”.
Asked if he ever doubted his judgment, Woodford once said: “Daily. You must never, as a fund manager, stick your head in the sand saying ‘everybody go away, I’m right, I’m right, I’m right’. You’ve always got to expose yourself to criticism and the analysis that you may be wrong.”
Woodford went on to say that the secret of successful fund management was a balance of arrogance and humility. “You have to have a sufficiently strong arrogant gene to back your judgment, back your conviction. If you didn’t, you would end up with a portfolio that looks very much like the index. But, equally, you must have the humility to accept that you will get things wrong.”
The move trapped more than 290,000 retail clients and their billions of pounds of investments behind the gated fund. The suspension was recently extended by another 28 days to 29 July.
While Woodford Patient Capital Trust is not directly affected by the suspension, the move by its sister fund caused a sell-off in its shares and resulted in closer scrutiny of its investments. Its shares have tumbled 32% since the Equity Income Fund was gated.
Woodford Patient Capital Trust declined to comment on the new investment.
Patient Capital last month followed through on a commitment to hand £20m in funding to Proton Partners, a Hereford-based company focused on cancer treatments using proton beams. However, that funding announcement was originally made in February, before Woodford’s Equity Income Fund was suspended.
Atom Bank said it planned to use its fresh funding to fuel growth and investment in technology. Atom, which offers savings accounts, business loans and mortgages, was founded by the former Metro Bank boss Anthony Thomson in 2014.