Britain’s best-known fund manager has criticised short-term speculators who use the stock market as a ‘casino’, accusing them of ‘crippling the economy’.
Neil Woodford, founder and head of investment at Woodford Investment Management, has suffered a rocky 18 months as the value of his flagship fund has plummeted.
But in an interview with leading City research firm Square Mile, he told how speculators were causing wild swings in stock prices that were destroying faith in the stock market.
Fallen star? Neil Woodford, founder and head of investment at Woodford Investment Management, has suffered a rocky 18 months as the value of his flagship fund has plummeted
And he blamed a cultural obsession with short-termism that has forced investors to expect big returns overnight.
Woodford said: ‘The short-term obsessions of our culture, our corporate sector and indeed the stock market cripple our economy in many ways. They are almost an illness that we have to be conscious of and fight.
‘Lots of investors struggle to understand what the stock market is there to do because it has been hijacked by these short-term players who see it as a venue for playing out some sort of betting game.
‘The more that the regulatory environment and practitioners focus on this casino environment the less effective the stock market will be.
‘This short-termism is a poisonous and unhealthy characteristic that is destructive to long-term saving.’
‘People think I’ve lost it’
Neil Woodford described the past 18 months as the worst he has ever been through.
The fund manager, whose previous period of underperformance came in the run-up to the financial crisis, has seen a number of big bets turn sour since 2017.
He said: ‘When you go through a period of underperformance, everyone thinks you’re an idiot and you’ve lost it.’ Bets that went bad included troubled outsourcer Capita, which saw its share price drop almost 50pc one day in January after issuing a profit warning.
At the beginning of this year, the Woodford Equity Income Fund saw around £1bn wiped off its value as a number of its picks hit the rocks and investors began pulling out their cash.
Concern has been growing among traditional fund managers about the influence of hedge funds and so-called day traders on stock prices.
New technology means traders can buy and sell stock in an instant to cash in on share price movements minute by minute.
In the most high-profile case recently, short-term speculators ended up holding 20 per cent of the stock of engineer GKN hoping to cash in on its takeover.
Woodford, 58, said that many of his rivals needed reminding that the purpose of the stock market is to take risks on behalf of the economy and to connect savings with businesses that need cash.
The father of two became a star stockpicker while at Invesco Perpetual when he refused to support soaring banks before the financial crisis hit, and delivered two decades of stellar returns for savers.
However, he has faced intense criticism after starting his own firm in 2014. His flagship income fund has lagged, while his pioneering Patient Capital Trust fund, which is designed to pump cash into bio-tech and innovative businesses, has suffered a series of setbacks.
In the interview with Square Mile managing director Richard Romer-Lee, Woodford told how other would-be stockpickers had been put off adopting a truly ‘active’ style of investing because of the flak he had received.
Woodford credited a mixture of ‘arrogance and humility’ for propelling him to success, but added that the controversial investment decisions he has made put him in ‘an intensely uncomfortable and very difficult place’ when their share price suffers short-term setbacks.
Yesterday, Woodford received a boost when Autolus, a London-based cancer-drug maker, made him £26million after listing in New York.
After the market closed in London, Autolus began trading on Nasdaq at the increased price of $27.
This pumped up its value by a further $61.5million, meaning Patient Capital Trust could rise even further on Monday.
Laith Khalaf, an analyst at investment platform Hargreaves Lansdown, said: ‘Woodford is the UK’s best-known fund manager so he’s naturally going to be in the spotlight, particularly if he’s having a tough spell.’