Woodford Saga Will Have 'ramifications For Active Management Industry'

Woodford, previously touted as a 'star' manager, took the decision alongside authorised corporate director (ACD) Link Fund Solutions to suspend all trading in LF Woodford Equity Income at the start of the month, following mass outflows and liquidity issues.

Since the suspension, national media coverage has been extensive, with further developments regarding Hargreaves Lansdown's removal of the fund from its Wealth 50 list, wealth management firm St. James's Place's decision to drop Woodford as manager of a £3.5bn mandate, and increasing industry pressure on Woodford to waive the fund's fees, taking centre stage.

Fidelity blocks investors from buying Woodford Income Focus fund

As the world of active fund management has been thrust under the spotlight for the UK public - for the wrong reasons - many key industry players believe this will have serious ramifications for the industry.

James Anderson, who runs Baillie Gifford's £7.5bn Scottish Mortgage Investment Trust, said the saga will "not just damage the industry's reputation but the actuality of active fund management, or fund management generally."

He said: "We have this terrible mismatch in much of the finance industry between the rewards for those operating the systems, and the rewards for those who invest in the products. I think in [Woodford's] circumstances there is a responsibility to lower fees.

"I am worried about the consequences of this. It's a real problem, if the most natural course of events occurs - which is that people do not invest in active funds and do not invest in unquoted companies."

Tom Becket, chief investment officer at Psigma Investment Management, agreed the Woodford fallout could spark a turn against active investing, describing the events as "perhaps the clearest indication of an industry in decline, in that the only well-known fund manager in the UK left is Neil Woodford".

Woodford says 'no' to waiving fee on suspended Equity Income fund

"The fact he and his strategy are now coming in for such criticism has to be yet another big blow to the active fund management industry, already ailing after a decade of structural underperformance and repeated successful attacks from the passive industry," he said.

"Clearly, there will be ramifications felt across the active management industry and more stringent rules will be imposed

over illiquid assets in supposedly liquid strategies."