171: From Triumph to Trauma: The Dramatic Investment Arc of Neil Woodford, Founder of Woodford Investment Management
Apr 10, 2025
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Neil Woodford, a renowned British fund manager often dubbed 'Britain’s Warren Buffett', shares his rollercoaster investment journey. He discusses his triumphs during his years at Invesco Perpetual and the lessons learned from managing £15bn. Delving into the pivotal moments that led to his fund's suspension, he reflects on the pitfalls of shifting to illiquid assets. Woodford also tackles the complexities of regulatory pressures and the innovative yet challenging landscape for UK small to mid-sized companies, while remaining optimistic about future investment opportunities.
The podcast highlights the emotional burden of financial losses and the importance of accountability in managing clients' investments.
Neil Woodford recounts his unconventional journey into fund management and the critical skills he developed that shaped his investment philosophy.
The discussion analyzes the significance of flexible investment strategies and optimism for future growth in sectors like housing and banking as market conditions evolve.
Deep dives
The Burden of Investment Returns
The host expresses a deep sense of responsibility and remorse regarding the poor investment returns endured by his investors. This weight is felt daily, signifying the emotional impact such financial losses have had on him. The acknowledgment highlights the importance of accountability in the finance industry and the personal stakes involved in managing other people's money. Such introspection reflects a commitment to learning from past experiences and moving forward.
Journey into Fund Management
The guest shares his journey into the fund management industry, detailing an unorthodox start marked by a lack of ambition during his university days. He recalls the value of various roles in different firms that shaped his expertise, with significant lessons learned from experiences at TSB and other financial institutions. These formative years provided him with skills in analytical processes and an appreciation for strategic investment. Despite early challenges, he found a passion for fund management that drove his future success.
Investment Philosophy and Discipline
Central to the guest's investment strategy is a focus on valuation, inspired by the principles of Warren Buffett. He emphasizes the significance of thorough company analysis and understanding management qualities, along with macroeconomic factors affecting investments. This multifaceted approach ensures a comprehensive assessment of potential opportunities rather than relying solely on rudimentary metrics. The guest notes that flexibility in investment styles is crucial as market conditions evolve.
Challenges and Performances in Investing
The conversation highlights critical challenges faced during major economic downturns, such as the technology bubble and the financial crisis. The guest refrained from investing in high-risk sectors, prioritizing a conservative approach that protected his clients' interests and preserved capital. However, he notes the pressure from within the industry to conform to trends despite misgivings. Ultimately, his decision to avoid certain sectors during these turbulent times solidified his reputation and performance as a fund manager.
Reflections on the Future of Investment
As the discussion turns to future prospects, the guest expresses optimism about the UK economy and potential sectors for investment growth. He identifies specific industries like housing, banking, and building materials as areas ripe for opportunity, especially as interest rates may decline. The importance of government support for innovation and the tech sector is also acknowledged, highlighting a need for sustained capital flow. This forward-looking perspective reinforces the belief that understanding market cycles and positioning accordingly can lead to successful outcomes.
Some of our conversations are deliberately different, and the man I interview here has cost me a lot of money! I also consider him a friend and somebody whose perspective I have valued.
It could be said that Neil Woodford, CBE, has had a career of two halves, the first of which encompassed extraordinary investment success at Invesco Perpetual and then at Woodford Investment Management (2014-2019).
At its peak, Woodford’s business managed £15bn and was backed by Hargreaves Lansdowne and St. James’s Place. Its clients included Kent County Council’s pension fund, a range of wealth management firms and 300,000+ retail investors.
Yet in 2019 the fund was suspended and then liquidated, following a shift in asset allocation from blue-chip public equities to illiquid, unlisted companies (he denies this was the cause of the collapse in this discussion). In the run up to the collapse, he experienced approximately £7bn of outflows.
Using an investment lens, here we try to examine and understand what went right, what went wrong and now what may lie ahead.
Neil remains under investigation by the UK Financial Conduct Authority at the time of this interview (March 2025).
