Shares tumble in companies linked to Woodford

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Woodford’s crisis sends shockwaves through markets: Shares tumble in companies linked to manager – and Hargreaves Lansdown comes under fire

By Hugo Duncan for the Daily Mail

Published: | Updated:

The downfall of Neil Woodford sent shock waves through the stock market as shares tumbled in companies linked to the once-feted fund manager.

The 59-year-old stunned ordinary savers and the City by blocking withdrawals from his flagship Woodford Equity Income fund after the market closed on Monday.

The move triggered a brutal reaction yesterday as regulators faced calls to step in and industry experts said Woodford was having ‘a dark and terrible moment’.

Neil Woodford stunned ordinary savers and the City by blocking withdrawals from his flagship Woodford Equity Income fund after the market closed on Monday

Shares in another of his funds, the listed Patient Capital Trust, plunged as much as 20 per cent as investors lost faith in the fallen star. It closed 7.2 per cent down at an all-time low of 71p.

Fund supermarket Hargreaves Lansdown and wealth manager St James’s Place, which have billions of pounds of their clients’ money invested with Woodford, also saw their shares slam into reverse.

Hargreaves fell 4.6 per cent but St James’s Place reversed early losses to end slightly higher. 

A host of companies held in the Equity Income fund fell as investors braced for Woodford to sell shares to free up cash for savers seeking to withdraw money.

Among those worst-hit were drugs company Circassia, where Woodford has a 28 per cent stake.

Technology investor Allied Minds, where he holds 27.4 per cent, also took a battering as did online mattress seller Eve Sleep, where he owns 46.8 per cent of the stock. 

Circassia closed down 8 per cent, Allied Minds was 6 per cent lower and Eve Sleep fell 5.5 per cent.

Hargreaves Lansdown under fire for cosy relationship with Woodford

Hargreaves Lansdown has come under fire for its cosy relationship with Neil Woodford.

The online fund supermarket continued to recommend the Woodford Equity Income fund to its clients, despite the fund losing 17.5 per cent of savers’ money over the last three years.

It only removed the fund from its closely watched Wealth 50 best-buy list on Monday, after savers were blocked from withdrawing their cash.

Hargreaves’ clients have invested £1.1billion directly in the Equity Income fund.

And the Multi-Manager funds which Hargreaves runs – where its own managers choose where to put savers’ money – have ploughed a further £620million into the embattled Woodford fund. 

Woodford makes £5.5million per year in management fees from Hargreaves’ clients and charges investors in Hargreaves’ Multi-Manager funds a further undisclosed sum.

Justin Modray, of finance guide Candid Money, said: ‘I think the many Hargreaves customers invested in Woodford will be seriously questioning Hargreaves’ motives and judgement for continuing to back the fund up until the point it was suspended. 

‘The relationship between Woodford and Hargreaves became far too cosy, to the point neither could afford for Hargreaves to withdraw support for the fund for fear it would trigger a downward spiral.

‘I think the Financial Conduct Authority needs to wake up and prompt change, as customers continue to be let down by the financial services industry seemingly putting its own interests ahead of its customers.’

Hargreaves was the only broker to gain access to cheaper shares in the Equity Income fund when it launched in 2014, by promising Woodford £500million of savers’ money. 

Few other investment platforms can rival Hargreaves by size, and no other firm was able to stump up the £500million Woodford was asking for.

This meant Hargreaves paid Woodford less in management fees than any other investment platform, as they could access more expensive share classes.

While this is good for Hargreaves’ customers, as they paid lower fees to Woodford, it meant Hargreaves had a vested interest in pushing the Equity Income fund. 

If it was able to persuade customers to commit £500million to Woodford, it would have a huge advantage in attracting new clients, as it would be able to offer the fund much more cheaply than rivals.

Neil Wilson, analyst for Markets, said Woodford’s investments in firms such as construction firm Kier and doorstep lender Provident Financial had been a disaster, adding: ‘Things look like they will get worse. He has clearly made a series of poor investment decisions.’

Investment expert Daniel Godfrey said Woodford was ‘one of the finest fund managers that Britain’s ever produced, although clearly he is having a dark and terrible moment’.

The Equity Income fund looked after £10.2billion at its peak in May 2017 but now holds just £3.77billion of savers’ cash following withdrawals and a slump in the value of investments held.

Woodford has banned savers from withdrawing cash for at least 28 days ‘in the best interests of all investors’, giving him time to reorganise the fund. 

The Pensions and Lifetime Savings Association urged regulators to step in, with its expert Joe Dabrowski saying: ‘The concern is that pressure builds and matters escalate further or uncontrollably, which would not be helpful for anyone.’

The Financial Conduct Authority, the City watchdog, said it was ‘in contact with the firms involved to ensure actions undertaken are in the best interests of all investors.’

Blow as Provvy takeover is blocked 

Neil Woodford was dealt another blow last night after the proposed takeover of Provident Financial collapsed.

The embattled fund manager owns nearly a quarter of the doorstep lender’s shares and was one of the most prominent backers of a hostile bid by Non-Standard Finance (NSF).

But NSF has abandoned its pursuit of the Provvy after months of wrangling.

It is understood that the Prudential Regulation Authority (PRA) effectively killed the deal by raising concerns about the financial structure of the proposed business.

The collapse of the plan represented another blow to Woodford, 59, as he grapples with a crisis at his flagship fund. As well as owning 24.7 per cent of the Provvy, Woodford has a 25.7 per cent stake in NSF.

NSF said: ‘Following discussions with the regulatory authorities, NSF understands the regulatory condition for the offer will not be satisfied by midnight on June 5. Accordingly, NSF has decided to lapse the offer.’

Woodford was one of the high-profile backers of NSF’s takeover of the Provvy, along with money managers Invesco and Marathon. 

Together, they owned 49 per cent of Provvy and had stakes in NSF, led by 70-year-old John van Kuffeler.

But NSF failed to convince many other Provvy shareholders to back the deal. It said the proportion of the minority shareholders opposing the deal meant that – in the eyes of regulators – the business would not have enough capital at its disposal when it completed. The PRA declined to comment.

 

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