High governance scrutiny expected for Woodford comeback

With greater interest in ESG, is disgraced manager Neil Woodford returning to the same industry he left?

Governance questions may hang over Neil Woodford’s head as he prepares to return to the investment industry, and will an industry that’s seen an explosion of ESG interest recently welcome his return?

Woodford is planning a dramatic return to the investment industry, with the launch of a Jersey investment company before the Financial Conduct Authority has concluded its investigation into the collapse of his retail business just 16 months ago.

The disgraced manager told the Telegraph over the weekend he plans to “rebuild” his investment empire under a new brand called Woodford Capital Management Partners (WCMP) alongside business partner and right-hand man Craig Newman.

The pair have also roped in Acacia Research, the US investor that riled investors after it snapped up a handful of biotech stocks in Woodford Equity Income at a steep discount only to flip several stakes for a profit days later.

The Jersey-based fund will see Woodford return to his former stomping ground of biotech and healthcare, investing in companies that are reminiscent of the unquoted holdings in his defunct fund, now rebranded LF Equity Income, like Immunocore, Kymab, Synairgen and Oxford Nanopore. Unlike his former fund, the new venture will be targeted at institutional and professional investors as opposed to smaller retail shareholders.

But the environment Woodford is returning to may not be the same as the one he left. City Hive founder and ESG Clarity editorial panellist Bev Shah said the investment industry’s shift towards ESG and responsible investing makes Woodford’s latest venture look even less appealing.

“I would be curious to know how this new entity would pass due diligence of any institutional investor or asset owner,” Shah said.

“With so much more focus on company culture, diversity, ESG and responsible investing, the investment world has changed even since Woodford Investment Management launched.

“Woodford will always be a major red flag on all these fronts and this highly publicised comeback bid only highlights his arrogance further. Any institution investing would really need to justify to their clients why they are taking such an astronomical risk.”

Ryan Hughes, head of active portfolios at AJ Bell, added: “Investment governance is a key part of any fund management process and some may feel that the level of oversight at Woodford was found wanting given what ultimately happened to the funds.

“As a result, I’m sure any professional investor likely to consider a potential future investment with Woodford would place a very high bar on the level of internal oversight and controls in place in order to gain confidence that a similar situation couldn’t happen again.”