Neil Woodford’s return to investment management advising a family office firm on start-ups in the healthcare space has been deemed “a big step down” for the former star manager and “astonishing” considering the sector is one where he has had some of his biggest failures.
British news website Sky News reported that Woodford and right-hand man Craig Newman have been appointed by asset management company Juno Capital in an advisory capacity to build a portfolio of unquoted healthcare investments less than a year after the implosion of Woodford Investment Management.
Our sister publication Portfolio Adviser understands that Woodford has not been given a permanent role at the firm and will not be managing money for clients. It is unclear how long the pair will be advising the firm.
Juno bills itself as “an innovative specialist alternative asset manager” that services a network of wealthy individuals and family offices and targets assets that are “overlooked by mainstream asset managers and private banks” like venture capital, asset-backed fixed income and niche property.
City titan Nigel Rudd, former chairman of BAA and Invensys, sits on the company’s board alongside Malcolm Le May, the current boss of Provident Financial, which once counted Woodford among its biggest backers.
‘Big step down’
Willis Owen head of personal investing Adrian Lowcock said Juno’s choice to enlist Woodford so shortly after the implosion of his fund empire is surprising, given “family offices usually don’t want to be in the limelight”.
“The role itself is a big step down for someone who, at his peak, was managing over £35bn ($44bn, €39bn),” Lowcock noted, “but it is a step back into the industry and as suspected it is for a completely different set of customers.”
Woodford had been trying to dip his toes back into fund management since his fund boutique shut up shop last October and had been in talks with prospective backers in China and the UK. In March he pitched an investment venture to a handful of UK institutional investors and wealth managers that would see him buy back a bundle of his unquoted biotech stakes.
“It was only a matter of time before Neil Woodford resurfaced in another job,” said fees campaigner Robin Powell. “Such was the hagiography surrounding Woodford for much of his career that there are bound to be investors out there who still think he’s worth a gamble.”
Ability ‘completely unproven’
But what is surprising is that Juno is paying Woodford for his expertise in an area “where he’s had his biggest failures,” Powell said. “His ability to pick potential winners ‘off the beaten track’, particularly unquoted companies, is completely unproven.”
SCM Direct co-founder Gina Miller agreed Juno’s decision is “astonishing” given the performance of many of Woodford’s healthcare stocks.
Several of Woodford’s big bets on biotech firms have blown up in his face.
Benevolent AI and Oxford Nanopore are among a handful of stocks that suffered write-downs in the last year, dealing another blow to investors trapped in the former Woodford Equity Income fund, already sitting on double-digit losses, and shareholders in Woodford’s former Patient Capital trust, which was handed over to Schroders in December.
Miller added that the Woodford Equity Income fund took an estimated 50% write-down to sell a chunk of its remaining healthcare assets to Acacia Research. So far 80% of Woodford’s flagship fund, renamed LF Equity Income, has been liquidated with cash returned to investors.
“I’d like to see how they sell that to their clients,” Red Circle financial planner Darren Cooke said, commenting on Woodford’s recent track record in the unquoted healthcare space.
“It’s not exactly like it’s a secret how he fell from grace,” he continued. “If I was a client, I’d certainly be asking some pretty serious questions.”
Useful healthcare contacts
But Lowcock said Woodford’s knowledge of start-ups in the life sciences sector and relationships in this area could still prove useful to Juno.
“While his performance in managing unquoted stocks was tarnished, it was less about the stock selection itself and more about risk management and portfolio construction that brought the Woodford empire down,” he said.
So far Juno has built up stakes in four biotech firms, including Sky Medical, which manufactures devices to increase blood circulation, and anti-infective drug maker Destiny Pharma.
Woodford’s former fund was the second worst performer across the entire IA universe over the first six months of the year, racking up losses of 42.4%, more than two and a half times higher than the IA UK All Companies sector’s losses of 16.5%.
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