Former employees at Neil Woodford’s investment boutique have described a “boorish and macho” company culture that was soft on compliance and rife with smutty jokes.
The testimonies form part of an eye-opening expose published by the Financial Times last Friday which charts the meteoric rise and dramatic collapse of Woodford’s investment empire.
Woodford announced last week he would be closing his investment boutique following a tumultuous 24-hour period that saw him fired from his flagship equity income mandate.
The following day his second Oeic, Woodford Income Focus, suspended trading.
Rife with smutty jokes
Female staffers at Woodford Investment Management were few and far between as the number of employees hit 40-strong and there were none in the company’s top ranks. One past employee told the FT she avoided staying late at social occasions because of their tendency to turn boisterous and boozy.
In this environment “smutty jokes were rife,” sources told the paper.
One senior investment team member was reportedly fond of saying: “If trading was easy, birds would do it”.
Another manager was flagged for having pornography on his work computer and the staff member who reported the incident was sacked, according to two former employees.
Woodford has rejected the notion there was a “macho” culture at the firm and has denied the allegations printed in the FT story.
Due diligence lacking
There were also signs that due diligence at the company was sorely lacking, according to past employees.
One person described how Woodford would use the same techniques for selecting private companies as public companies, despite these businesses being funding intensive and having unpredictable rates of success.
“Every company that came in, he wanted to invest in,” they told the FT.
Woodford and Invesco’s former head of retail sales Craig Newman, who was instrumental in convincing Woodford he needed to leave the asset manager, set up his eponymous boutique in May 2014.
Newman, who had a lack of senior management experience, installed himself as the company’s chief executive and enlisted Nick Hamilton, head of global equity product at Invesco, and Gray Smith, a lawyer from London firm Mischon de Reya to become partners in the new business.
But as time went on Hamilton and Smith began challenging the way Woodford and his team of junior analysts were valuing small unlisted companies, which relied heavily on data and assurances from the businesses themselves and tried to impose a limit on the fund’s investments in private companies below the 10% limit set by Ucits rules.
The pair were pushed out and long-term replacements were never found.
The Woodford saga kicked off in early June after Woodford Equity Income’s authorised corporate director Link froze the fund after it could not liquidate the fund fast enough to meet redemptions.
The blowback from the thousands of investors trapped in the fund, a good chunk of them Hargreaves Lansdown clients, sparked a monthslong discussion around the practice of owning illiquid investments in daily dealing funds with many blaming the Financial Conduct Authority for not stepping in sooner.
