Woodford faces scrutiny from St James's Place on £3.5bn funds


‘We are always reviewing our managers but we have got the microscope more intently focused on what’s going on in Woodford at the moment,’ he told the paper.

‘We think his understanding and knowledge of what are good companies to be including in the portfolio is as good as it’s always been,’ he added, ‘but there are obviously some issues’.

Woodford runs £3.5 billion of funds for the national financial advice group, including the £1.4 billion St James’s Place UK High Income fund, £1.5 billion Income Distribution and the UK Equity fund.

As with Woodford’s flagship Woodford Equity Income fund, performance of the manager’s St James’s Place funds has deteriorated markedly over the last two years.

His UK High Income fund is down 17% over the last 24 months. Although the fund sits outside the Investment Association sectors, that performance would place it in the lower reaches of the UK All Companies sector.

Only the Woodford Equity Income, Legal & General UK Alpha and Standard Life Investments UK Equity Recovery funds have fared worse over that period.

Investors have withdrawn around £200 million from Woodford’s St James’s Place funds over the last 18 months, the financial advice group told the Financial Times. Those outflows are much less acute than those Woodford has suffered on his flagship fund, which has fallen from a peak of £10.2 billion in March 2017 to £4.3 billion at the end of last month.

Woodford has run funds for St James’s Place since 2001. The financial advice group followed the manager when he left Invesco to set up his own fund group in 2014.

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Woodford’s St James’s Place mandate has grown in importance for his fund group as his flagship fund has shrunk and now accounts for around a third of the assets he manages.

It is rivalled only by the manager’s relationship with Hargreaves Lansdown (HRGV), which held £1.8 billion in his Woodford Equity Income and Woodford Income Focus funds at the end of last year.

While Woodford’s St James’s Place funds have endured a similar torrid run of performance as the manager’s own funds, there are significant differences between the portfolios.

His Woodford Equity Income fund features a sizeable allocation to unquoted companies, prompting the manager to list some of his stakes in these start-ups on Guernsey’s International Stock Exchange to remain below the City regulator’s 10% limit. Without those listings, his exposure to unquoted companies would stand at 18.4% of the fund.

Those sorts of companies do not feature in the funds he runs for St James’s Place, which in 2014 limited the UK companies he could buy to FTSE 100 and FTSE 250 stocks.

Unquoted companies have complicated Woodford’s challenge in funding withdrawals from his flagship fund, with their relative size in the portfolio rising as investors have pulled money.

The manager has pledged that unquoted and less liquid holdings, like his stakes listed in Guernsey, will fall to 10% by the end of the year and ultimately to zero, as the manager swaps direct stakes in unquoted companies for shares in his Woodford Patient Capital (WPCT) investment trust.

The fund manager has reportedly taken a further step towards that in selling his £55 million stake in early stage investor Oxford Sciences Innovation, according to The Times.

The stake accounted for 0.34% of his Woodford Equity Income fund and 4% of his Woodford Patient Capital trust at the end of last month.

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