Time will prove me right, claims Neil Woodford: Beleaguered fund manager says shares WILL soar after Brexit deal is done
Published: 16:51 EDT, 3 May 2019 | Updated: 17:53 EDT, 3 May 2019
Veteran fund manager Neil Woodford believes British companies are ‘profoundly undervalued’
Veteran fund manager Neil Woodford has said the stock market will boom after Brexit – even as he ditched part of his investment strategy.
British businesses are currently ‘profoundly undervalued’, he argued, and are set for an exuberant post-Brexit rally if the UK maintains a close relationship with the EU after leaving.
But in an admission that his performance had let savers down, the 59-year-old stock-picker said his flagship Woodford Equity Income Fund would no longer invest in firms which are not listed on the stock market.
Woodford said: ‘Undoubtedly, the past three years have been difficult for our clients. Ultimately, the criticism I receive is driven by performance.’
The Equity Income Fund has lost savers 7.6pc of their investment in the last three years, while the average fund in the Investment Association’s UK All Companies sector has returned 30 per cent.
Yet Woodford, who has ploughed savers’ money into UK stocks like housebuilder Barratt Developments and doorstep lender Provident Financial, is confident performance will pick up.
He said: ‘If Brexit pans out as I believe, we will see a long overdue and significant rally in sterling, and this will have a meaningful impact on the UK stock market.
‘It should liberate investors to start to acknowledge the underlying robust performance of the UK economy and the profound undervaluation of companies exposed to the UK economy.’
Official figures show a record number of people are in work in the UK, while unemployment is at its lowest since 1975.
Woodford thinks a No Deal Brexit is highly unlikely, and is banking on a ‘softer’ outcome involving a long-term relationship between the UK and EU.
He is adamant a focus on undervalued stocks such as housebuilders and banks, neglected as investors shun the UK following the 2016 referendum, will succeed.
But despite the encouraging economic signs, Woodford’s gamble on a post-Brexit boom has yet to pay off. The fund manager said in March that he needed to curb outflows or he would go ‘out of business’. A spokesperson later said this was a flippant remark.
But the move to stop investing money from his Equity Income Fund in privately owned firms is a sign he is still under pressure.
It is a dramatic U-turn for someone who banked millions of pounds of savers’ money on unquoted companies such as biotech ventures which were often smaller, younger and riskier.
Woodford shifted after investors withdrew more than £2billion from the Equity Income Fund last year, meaning it had to sell easily traded shares in listed companies to give savers their money back.
This left the privately owned companies accounting for a larger proportion of the fund, but industry-wide rules state that only 10 per cent of a fund’s value may be invested in unquoted firms.
Woodford has begun to sell stakes in these firms to his Patient Capital Trust. In return the Woodford Equity Income will hold shares in that listed trust.
Craig Newman, the chief executive of Woodford Investment Management, said: ‘Having listened to feedback from clients we believe that moving the exposure to the asset class via a collective fund rather than individual unquoted stocks makes sense.’