Top money manager Neil Woodford has issued an apology for his fund’s disastrous performance – admitting it had been an ‘incredibly painful’ few months.
In an extraordinary video, the one-time City darling said he was sorry returns had been so woeful but insisted the future was bright.
Woodford, 57, blamed irrational markets, traders’ herd mentality and a ‘dangerous’ bubble in Chinese credit for his dramatic fall from grace.
His almost unrivalled track record of stellar returns over decades has won him backing from tens of thousands of investors and his business £17billion of assets.
But his star has dropped sharply and bets that turned bad were compounded when his gamble on doorstep lender Provident Financial turned spectacularly sour, suffering one of the steepest one-day falls in FTSE 100 history after a huge profit warning. In a day, Woodford lost £326million.
In the video for investors, Woodford said it had been a ‘really difficult two months’, and that his own backers had told him they were disappointed.
‘It’s an incredibly painful and difficult thing to have to navigate,’ he said. ‘I’m very disappointed with the short-term performance and have been criticised for it. And I think it’s right I’m criticised.
‘It’s been a difficult period, and I’m very sorry for the poor performance that we’ve delivered.’
The fund manager said Provident’s stock had ‘fallen a hell of a long way’ – costing him around £580million according to Mail calculations – but insisted the drop was disproportionate. ‘I think the stock market, yet again, has become hysterical,’ he said.
Although the doorstep lender’s crisis was responsible for around half of his fund’s underperformance, Woodford laid the blame on the wider financial market.
The manager’s equity income fund has delivered paltry gains of 0.6 per cent so far this year, against the backdrop of a bull run which has lifted the FTSE All-Share index by 8.2 per cent.
It means that investors who put their cash in a low-cost tracker fund have done far better than those paying much higher fees for Woodford to look after their money. He put this down to a surging Chinese credit bubble which is sucking cash away from the manager’s favoured industries such as healthcare.
He suggested it was bound to end in tears when China eventually hit a bump. He said: ‘I worry that the story that the market is chasing at the moment is dangerous, and that’s why I haven’t wanted to play that story.’
Despite his dismal summer, Woodford is renowned for sticking to his guns – selling out of banks to avoid the financial crisis way before rivals, and famously predicting the dotcom bubble.
And he is certain the market is making another major error now. ‘The temptation is to take the easy option, to sort of hide in the strategy that everybody else is pursuing,’ he said.
‘That would be a betrayal of my investment principles.’ Woodford insisted that there was ‘huge potential’ in his portfolio, and that backers would reap rewards in the short and long term.
Long a keen rugby player, Woodford compared his latest bruising performance to the training for a big game.
He said: ‘You put the hard yards in, because you knew it was the right thing to do. It would have been easy to back off a bit.
‘But of course, that would mean that when the season comes, the tough season, the tough games you’re going to have ahead, you wouldn’t be fit enough.’