While on the social media site X this week I was confronted with an image that surprised me: a big picture of Neil Woodford.
It wasn’t an article explaining how the disgraced former star fund manager had been fined by the Financial Conduct Authority (FCA) for his conduct when running the eponymous Woodford Equity Income fund, as we wrote on Trustnet, however.
Instead, it was an advert for his new venture, an invest-alongside opportunity for investors to track his portfolios and implement trades called W4.0.
"Ever wondered what Neil Woodford is focused on right now? His strategies are now visible – only on W4.0,” it read.
The new venture will see Woodford design three initial portfolios (one income, one growth and one a combination of the two) that investors can copy and customise by removing any stocks they don’t want. It is as yet unclear how this would work with more platforms, however.
The timing of the advert was interesting, to say the least. Clearly the algorithm knows I am interested in reading Woodford content, but not perhaps in the way that it understands yet.
It comes after the City watchdog revealed it had imposed a £40m fine on his former company Woodford Investment Management (WIM) and a personal £5.9m penalty on the former fund manager himself.
Woodford has also been barred from managing funds for retail investors or holding senior management roles – something that his new venture works around.
It continues a sorry saga that started back in 2019, a full (and rather depressing) timeline of which you can read here.
Woodford Investment Management said it plans to appeal the decision at the Upper Tribunal, meaning these fines will not come into effect until the result of this hearing.
The defence appears to place the blame firmly at the feet of former authorised corporate directors (ACD) Link Fund Solutions, stating the fund operated within guidelines set out by Link.
In a statement by the firm, it said: “The FCA, at a senior level, was fully sighted on the Fund’s liquidity: Link provided regular reports and stress tests and was fully transparent about how the Fund’s liquidity risk was being managed. There was never an indication that the FCA considered the management of the Fund’s liquidity to be inappropriate or unreasonable.
“Furthermore, as acknowledged in Link’s Final Notice, Link was responsible for supervising WIM and ensuring that the Fund’s liquidity risk was managed appropriately.”
It highlighted comments made by then chief executive of the FCA Andrew Bailey (now the governor of the Bank of England), who said during a Treasury Select Committee the rules that were broken “apply squarely with Link”.
“They do not apply to Woodford. If we don’t like that framework, we should change it,” said Bailey.
Whether the firm (and Woodford himself) will win the appeal is up for debate. Although it is difficult to believe that the fund manager did nothing wrong – as ultimately he was in control of the portfolio and should have ultimate accountability for what happened – clearly his defence is to shift the blame to Link, the firm that was supposed to provide risk oversight.
If this can be done successfully will be the big question, but at the very least I am sure his team will make a strong defence.
Regardless of the verdict, it is safe to say I will not be investing alongside Woodford. Even for his most ardent supporters, the risks are just too much. I would suggest that those who are considering it use this as a reminder of the risk they may be taking too if they choose to do so.