Woodford investors' £185m loss to power former manager's new venture

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Investors in Neil Woodford’s failed fund missed out on gains of £185m when shares were sold to a company that is now seeking the disgraced stock-picker’s advice, prompting fury from investors.

Woodford Capital Management Partners, Mr Woodford’s new business, will advise on American investor Acacia Research’s “portfolio of life sciences companies”, bought from the Woodford Equity Income fund at knock-down prices.

WCM Partners would not comment on the make-up of the portfolio, but Acacia’s latest financial results showed the business retained stakes in at least eight companies bought from the fund.

Four of them have delivered explosive gains since Acacia swooped on Mr Woodford’s former fund in a discounted £224m deal, described as “opportunistic” by the American investor, that wiped £91m off the value of the remaining portfolio.

Oxford Nanopore, the unquoted biotechnology company which last year signed a contract with the Government to deliver Covid-19 testing equipment, is now valued by Acacia at around $127m (£97.9m).

That’s nearly five times the £20.8m paid for the stock, disclosed in accounts for Mr Woodford’s former fund. Acacia’s stake in Immunocore, which is developing a cancer treatment, is now worth an estimated $79.8m, after shares in the company soared following its flotation this month, nearly 12 times the £4.9m paid. 

Stakes in London-listed companies from the fund have also delivered significant gains. 

Acacia’s stake in Arix Bioscience is now worth £51.8m, up from £16.1m at the time the deal was struck, after a 222pc share price rally powered in part by a swoop from American pharmaceutical giant Merck on one of the biotech investor’s portfolio companies.

A holding in Sensyne Health, worth £6.8m at the time of the deal, is now valued at £26m, with the shares up 282pc. The healthcare company has agreed a number of tie-ups, including a partnership with American drugmaker Bristol Myers Squibb and the University of Oxford.

Investors in the former Woodford Equity Income fund face a wait until late this year before they receive the last of their money back, and have suffered heavy losses since the £3.7bn fund was suspended in June 2019. 

They have received £2.5bn in payments since then, with the remainder of the fund valued at less than £200m. 

Fred Hiscock, a 71-year-old Devon investor in the former Woodford fund, said Acacia’s gains at the fund’s expense were “unbelievable”. “It made me sick when I read he was starting a fund again,” he added.

Richard Gaunt, 74, from Somerset, said: “The whole thing is unfair to innocent investors. You invest in good faith. I expected the pros to act decently.”

But Simon de Laat, 60, from Suffolk, defended Mr Woodford, saying the manager “would have been against selling” the stocks and blamed the fund’s administrator. “Link sold them and he has always been against the fund winding up. If Link sold them it wasn’t Mr Woodford’s fault.”

Ryan Hughes, of fund shop AJ Bell, said: “Thousand of retail investors will still be smarting over the losses they have incurred from the Woodford funds so to see some of those assets now make millions of pounds for Acacia will be a very bitter pill to swallow. 

“You could see it as an endorsement of the conviction Mr Woodford had in those assets all along but the fact he is now involved with those businesses again will raise more than a few eyebrows.”