(Bloomberg) — Neil Woodford, seated, leaning forward and speaking somberly, offered a video apology to clients in his flagship investment fund for abruptly suspending redemptions this week, a move that has reverberated across U.K. markets.
“I am extremely sorry that we’ve had to take this decision,” Woodford, wearing a dark pullover, said in a video posted to YouTube overnight in London. “We understand our investors’ frustration. All I can say in response to that, of course, is that this decision was motivated by your interests, our investors.”
Public apologies in the fund management industry are rare. Even so, Woodford finds himself in good company. Former bond king Bill Gross, who enjoyed decades of success, issued a letter to investors in 2011 titled “Mea Culpa” after his fund lagged peers. Warren Buffett famously said at the 2017 annual meeting of his Berkshire Hathaway Inc. that he “blew it” by not being an early investor in Google.
Woodford locked up shares in his LF Woodford Equity Income Fund with immediate effect and until further notice. A statement announcing the move said it will give him time to offload “unquoted and less liquid stocks” and shift into more readily traded investments.
Talking directly to the camera, Woodford reiterated his plan to shift holdings and promised to keep clients informed of the progress. “We will use this time to reposition the fund in the way that we said,” he said. “When it is appropriate we will open the fund so you can buy and sell as normal.”
Read more: Investors price in Woodford risk as client withdrawals blocked
The decision to freeze redemptions is a shocking reversal for the money manager, who had built up a reputation over many decades as a stellar stock picker.
By 2013, when Woodford announced he was striking out on his own after two decades at Invesco Perpetual, he had accumulated an almost cult-like status among investors, and their money followed him. In his first full year on his own, Woodford’s flagship fund returned 16%, beating all 50 of its peers tracked by Bloomberg. That has all changed, with the fund down 7% this year through May 31 and down 18% in the past 12 months.
“No one fund manager has the secret sauce to outperform forever no matter how big the reputation or how good of a track record,” said Ryan Hughes, head of active portfolios at AJ Bell. “What’s different here is the fact Woodford suspended the fund. That takes it to another level.”
(Updates with Bill Gross and Warren Buffett apologies in third paragraph.)
–With assistance from Dan Reichl.
To contact the reporters on this story: David Scheer in Seattle at [email protected];Suzy Waite in London at [email protected]
To contact the editors responsible for this story: Shelley Robinson at [email protected], ;Michael J. Moore at [email protected], Patrick Henry
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