FUND manager Neil Woodford’s fall from grace may have left investors out of pocket and facing a long wait to get their cash back, but his departure may leave some optimism for the alternative assets he has previously backed.
Woodford, once hailed as a star fund manager, was sacked from his flagship Equity Income fund this week, four months after it closed to withdrawals to give him time to reposition and raise cash to meet redemptions.
He has also announced the closure of his self-named investment management business, which will mean new management will take over his Patient Capital investment trust (WPCT).
The experience will have left a bad taste for investors in his Equity Income fund, who will now have to wait until next year to get all their money out, but analysts say the consequences are more positive for firms such as the Honeycomb Investment trust and RateSetter who have previously been backed by Woodford.
He was one of the early backers of investment trusts P2P Global Investments and VPC Specialty Lending but sold his stakes in both earlier this year amid a rush to generate cash to meet investor redemptions.
This has left him with holdings in RateSetter and Honeycomb.
RateSetter is displayed among the top 10 holdings in the WPCT. It was moved from his Equity Income fund earlier this year.
Woodford doesn’t hold a significant or controlling stake in RateSetter so a new shareholder won’t make much difference other than to separate the association of the two brands.
Having the backing of Woodford may have been seen as a positive thing for relatively new businesses such as RateSetter a few years ago, but nowadays there is no such positive connotation and the appointment of a new manager will result in a new shareholder for the P2P lender.
“Woodford’s problems have been well-documented for some time so I don’t believe the news is negative in this context,” John Cronin, financials analyst at Goodbody, said.
RateSetter declined to comment.
Similarly, Woodford is believed to hold a stake of around 25 per cent in Honeycomb and analysts at Numis warned during the summer that its premium could come under threat if he has to reduce or sell his stake to raise cash.
A new manager rather than sell-off may end up being more positive for Honeycomb.
“We expect many management groups would be interested in a mandate with assets of circa £580m, but given the nature of assets it would need a specialist manager with the ability to carry out due diligence on the portfolio,” a note from Numis said on Wednesday morning.
“We would expect a new manager to have significant private equity experience, although the ability to influence the portfolio will be limited by WPCT typically being a minority shareholder.”
Cronin added that securing a new manager was the “ideal path forward” for Honeycomb.
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