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56 Legal & Finance<br />
Is past performance a<br />
guarantee to<br />
future returns?<br />
At the time of writing<br />
this article (7th June) the<br />
big news in the financial<br />
press is that ‘Star fund<br />
manager’, Neil Woodford,<br />
stopped investors<br />
withdrawing money out<br />
of his Woodford Equity<br />
Income Fund on 4th<br />
June, after the sum total<br />
of investment withdrawn<br />
from the fund reached a<br />
staggering £560m in less<br />
than four weeks. Kent<br />
County Council wanted to<br />
withdraw a further £263m but were unable to do so<br />
before trading halted.<br />
It was reported yesterday in FT.com that two of<br />
the UKs largest wealth managers, Hargreaves<br />
Lansdown and St James Place were exposed to these<br />
developments. According to the FT, Mr Woodford<br />
was managing £3.5 billion of funds on behalf of<br />
St James Place and that Hargreaves Lansdown<br />
had directed £3 billion worth of their clients into<br />
his funds. As a result of the fall out, St James Place<br />
have now parted ways with Woodford, removing<br />
his investment mandate and Hargreaves Lansdown<br />
have now removed the fund from their Wealth 50<br />
selection.<br />
So why has it all gone wrong?<br />
Investment analysts have attributed this action to<br />
the significant poor performance of the fund over<br />
recent months. During his time at Invesco Perpetual,<br />
Woodford could do no wrong and Prosper Wealth<br />
Management were big advocates; we held circa<br />
£10m on behalf of our clients in his flagship UK<br />
Income and High-Income funds and both delivered<br />
outstanding returns for our clients.<br />
Mr Woodford then left Invesco Perpetual to set<br />
up his own company, Woodford Investment<br />
Management Ltd and many investors followed him,<br />
believing that past performance would be a guide to<br />
future returns. At the time of launch our investment<br />
committee considered Woodford’s new business but<br />
decided NOT to jump on board, instead preferring<br />
to adopt a let’s wait and see strategy. A decision was<br />
later taken not to expose any of our model portfolio<br />
clients to his funds.<br />
The fallout from all this has very sadly hit a lot of<br />
investors. His recent public apology probably hasn’t<br />
gone far enough in the minds of many investors
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