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Peer2Peer Finance News | July 21, 2019

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Neil Woodford: It’s not us, it’s you

Neil Woodford: It’s not us, it’s you
Kathryn Gaw

FALLEN STAR fund manager Neil Woodford has given up his stake in VPC Specialty Lending and P2P Global Investments – but it has nothing to do with the health of UK P2P

WHEN peer-to-peer lending first entered the alternative finance space, it was met with a certain amount of trepidation. By 2014, there were just a handful of P2P platforms and P2P investment trusts on the market, with short track records and no regulation. So when influential fund manager Neil Woodford started allocating tens of millions of pounds to P2P-facing trusts and platforms, it was seen as a stamp of approval for the fledgling sector.

So when it was announced earlier this week that Woodford had fully divested from P2P Global Investments (P2PGI) and VPC Specialty Lending (VPC), it was seen as a damning rejection of P2P.
At the end of April, Woodford Investment Management sold the entirety of its 13 per cent stake in P2PGI to rival fund management firm Quilter. Just days later, Woodford sold its 16.6 per cent share of VPC to “a mix of existing and new shareholders”.

The new shareholders were revealed to be Weiss Asset Management, which purchased a 5.44 per cent of VPC’s shares on behalf of its Brookdale Global Opportunity Fund and Brookdale International Partners subsidiaries.

This leaves Woodford Investment management with just one remaining investment in UK P2P: a 21 per cent share in Honeycomb Investment Trust. Neil Woodford’s Patient Capital investment trust continues to hold a stake in RateSetter.

Peer2Peer Finance News understands that Woodford’s Honeycomb and RateSetter investments are still intact, and the firms have been given no indication that a withdrawal may be imminent.

This raises the question of why Woodford is withdrawing funds from his one-time passion project, P2P. And it seems to be a classic case of ‘it’s not them, it’s him’.

Woodford Investment Management has been struggling for some time now, after a series of bad stock picks saw its flagship Equity Income Fund underperforming the FTSE All-Share Index over the past three years. As a result, investors have been withdrawing their money from the open-ended fund at a rapid pace.

In 2017, Woodford’s Equity Income Fund was worth a massive £10.2bn, but by April 2019 its value had fallen to just £4.4bn.

To add insult to injury, on 1 May 2019, Woodford was named as one of the worst value brands in the investment market due to its relatively high management fees and negative returns.

As a result, investors have been pulling their money from the fund for 22 consecutive months, leaving the fund manager struggling to pay back the rising cost of these redemptions.

Read more: RateSetter snaps up £13m from Woodford and Artemis

In March, Neil Woodford was able to release £72.6m by transferring some of the unlisted holdings from the Equity Income Fund into the closed-end Woodford Patient Capital. This allowed him to free up cash from some of the less liquid elements of his portfolio. Around the same time, he sold off his £42m stake in NewRiver Reit to a former colleague at Invesco.

However, this was merely a drop in the bucket compared with the £300m that was withdrawn from the fund between February and April 2019. As a result, Woodford was forced to sell off some of his more liquid assets, such as those held within VPC and P2PGI. He raised £86m from the P2PGI sale, and £40m from VPC.

Woodford has long been a proud champion of UK P2P lending and its potential for growth. There has been no indication that he has changed his mind on this; he has simply been forced to raid his portfolio to cover redemptions.

While Woodford’s P2P divestments may be evidence of his own poor judgement, they should not be seen as a verdict on the long-term viability of P2P.

Read more: VPC Specialty Lending’s NAV hits six-month high