Built on a Lie: The Rise and Fall of Neil Woodford and the Fate of Middle England’s Money

by Owen Walker

He was the most celebrated and successful British investor of his generation - but it was all built on a lie. Neil Woodford spent years beating the market; betting against the dot com bubble and the banks before the financial crash in 2008, making blockbuster returns for investors and earning himself a reputation of 'the man who made Middle England rich'.But, in 2019, Woodford's asset management company collapsed, trapping hundreds of thousands of rainy-day savers in his flagship fund and hanging £3.6 billion in the balance.In Built on a Lie, Financial Times reporter Owen Walker reveals the disastrous failings of Woodford, the greed at the heart of his operation and the full, jaw-dropping story of Europe's biggest investment scandal in a decade.'Vital financial journalism with heart' Emma Barnett, broadcaster'This is a must read!' Vince Cable, former leader of the Liberal Democrats'Reads like a rip roaring tale of a corporate high wire act' John McDonnell, former Shadow Chancellor'Should be sold with a bottle of blood-pressure pills' Edward Lucas, The Time

Genres: Business, Finance, Nonfiction, Biography, Politics, Personal Finance

208 pages, Kindle Edition

First published March 4, 2021

Reviews

[Ben · Rating 4 out of 5]

Much more in depth look at the Woodford scandal with useful snippets on the inner workings and regulations (or lack of!) in the investment fund industry.

Dangers of liquidity traps are eye opening. Forces you to sell your liquid holdings which leads to you have more illiquids which are harder to sell.

[Jeff Kaye · Rating 4 out of 5]

Having been an investor in two of Neil Woodford's funds, selling out in early 2019 for a small loss, and having read with much interest the ups and very hefty downs of Woodford's career, this book was an obvious read.

Owen Walker, the author, is a writer at the Financial Times and one whose articles on Woodford were always important reads. He has written a book that properly dissects Woodford's rise as the UK's answer to Warren Buffet (some would say) and his downfall. Downfall relates, of course, to just his business dealings which collapsed in 2019. It does not refer to his own wealth as, like many in similar situations, Woodford and his co-conspirator, Newman, extracted tens of millions of £'s from these ventures throughout the good and bad periods.

The story of a man who became prized amongst the investment community and seen as magical by the retail investors that invested in his companies is compelling and well-told. It is written in the style of a very good journalist who understands the need of a reader to be engaged, able to learn from the story and also to understand the environment in which Woodford became so wealthy while, at the same time, he dealt a financial death-blow to thousands.

This is, perhaps, an area of real interest to me: how those who are real entrepreneurs, who build businesses but create nothing, are able to extract wealth from willing investors that know little about what the investment is about and who know little of the risk that they are so undertaking. This interest extends to the many organisations and laws that are set up to oversee these businesses but prove how poor they have been in their task.

I wonder if there has been a case where the authorities have stymied such disasters rather than being reactive, coming on the scene long after the damage has been done and then promising to learn lessons from the disaster. The lessons are always out of date by the time of the next disaster as the professionals engaged in these businesses are far more capable than those carrying out the oversight.

'Built on a Lie' is a title that could extend to much of the financial services industry. Honesty, integrity and reliabilty are mere words to much of it as the downfall of mortgage-backed securitisation firms showed in the USA in 2008. The lure of returns is short-term and Woodford's 'patient capital' stance - aimed at backing hi-tech businesses through the long-term - cme to nothing (a) because he became too entranced by the companies and did poor due diligence on them and (b) meanwhile pillaging the businesses he had set up.

It is not merely unedifying to view how individuals behave so badly but also quite revolting to see how the organisations such as the Financial Conduct Authority (FCA) missed so many obvious signs to intervene early because (a) a paucity of systems and capabilities (b) a perceived desire to 'engage' with individuals that clearly took them in.

Caveat emptor - buyer beware - is not something we now have to apply to most goods we buy. Specifications demanded by law suffice, usually, to provide the buyer with enough certainty that what they are sold will be what is received. It is not true for financial services. Caveat emptor remains the only truth attainable in the shadowy world of finance.

[Ian Fraser · Rating 4 out of 5]

Built on a Lie by the Financial Times journalist Owen Walker thoroughly explores the rise and fall of erstwhile "star" find manager Neil Woodford, including how adulation from the gatekeepers of the investment industry and from besotted financial journalists went to his head turned him into a bit of a narcissistic bully. Walker is strong on the sweeping economic forces that shaped Woodford’s career: how "Big Bang" transformed the City of London, normalising a ‘greed is good’ culture; how Nigel Lawson’s introduction of tax-efficient wrappers called PEPs fuelled topsy-like growth of the investment market; how flawed incentives made it possible for fund managers such as Woodford to make fortunes, even as clients were impoverished; and how financial regulators often turned a blind eye when customers were fleeced. ‘This “heads I win, tails you lose” model is embedded in the industry,’ writes Walker. He also highlights the urgent need for reform. (excerpted from a review I wrote for Literary Review, published April 2021).

[Henry Fosdike · Rating 4 out of 5]

The rise and fall of Neil Woodford is a fascinating story no matter which way the story is told. Was he ever anything but lucky? It's hard to know considering his brazen approach to investing in small biotech companies in his latter years, but perhaps that's what happens when you start believing in your own hype. The way that his fund fell apart is spectacular, the greed from himself and Craig Newman (Woodford's business partner) is beyond comprehension - a few million each every six months or so - and the failure of the FCA and Link to do their jobs is just terrible.

...In fact, by the end you find yourself wondering if it was the governing body's fault just as much as Woodford's that the fund lost so much value. A terrible venture for all concerned but interestingly told. Worth a read if you like investing/finance books.

[Mihir Choughule · Rating 4 out of 5]

3.5/5 rounded up to 4.

Walker writes a breezy, well-edited book to document the rise and fall of Neil Woodford, often touted as the UK’s ‘Warren Buffett.’ However, the story itself is no different to the books that have come out recently about despots, corporate patriarchs and other strongmen.

The writer does a good job giving a neutral opinion of Woodford, with praise afforded to his rise and also contempt for his fall. The story is essentially of a man who developed a god complex and thought he was untouchable, enabled by his lackeys, yes-men and an impotent regulator. A timely take in this era of excess greed.

[Ugh · Rating 4 out of 5]

A solid and thorough-seeming telling of what was for many people a devastating and devious investment scandal. It was also a pretty simple situation, though, making this a fairly short and simple book. Woodford got cocky, didn't care enough about his investors and feathered his own bed at the expense of others. Meanwhile, regulators and go-betweens also failed to keep a proper eye on him. Interestingly, Woodford said a lot of sensible things about investment trust fees and the lack of patient UK investment in developing companies. Sadly, and unforgiveably, he neglected to turn that critical eye on his own deeds. A cautionary tale.

[Constantinos Hadjioannou · Rating 5 out of 5]

Excellent story and explanation of the rise and fall of England's most famous fund manager and how he ,professionals and amateurs were trapped in a losing investment ,living in denial as the fund strategy fell to pieces.
A must read for all people investing in funds,especially the ones with the best performance.
Hopefully retail and professional investors alike will learn from the mistakes of all the key players in this drama.

[Thomas · Rating 4 out of 5]

I probably wouldn't have read this, if it hadn't been for Woodford's tone-deaf, car-crash of an interview he gave to the telegraph about his return to the fund management scene. I'm glad I did. Its a story of a bully who bet on red and won many times over and mistook this luck for genuine investing skill.

[David Goldie · Rating 3 out of 5]

Didn't learn much I hadn't already read in the press.

[Demi Ogunwusi · Rating 4 out of 5]

Built on a Lie is a well-written and highly engaging recount of Neil Woodford’s rise and fall. It is very well researched, more so than other books that I’ve read on Woodford’s story. For me, the book receives 3.5* - losing a star due to what I feel is an inappropriate title for the story. Hardly ‘built on a lie’ if you can point to a decade of stellar returns which were earned from his hard work & research. The title almost implies that the foundations of his career are fraudulent, which brushed me the wrong way. While Walker is more than entitled to give his opinion on the matter, I will say I didn’t particularly enjoy the tone through the book, which clearly took some joy from Woodford’s downfall.

[Ryan · Rating 5 out of 5]

I thought this was a sharp, easy to read analysis of how one man can be so easily raised onto a pedestal. It's also a story of how quickly it can all come crashing down.

People claimed Woodford was a British Buffett, but in fact he was an investor who had managed to come through two crashes unscathed and then was held up as a genius. He wasn't a genius, he was lucky, and then his bets went bad.

[Alan · Rating 4 out of 5]

Fascinating insight

This reads like a fictional novel although if that were fictional you would think some parts of it were unrealistic! I’ve got some financial services for over 30 years I know the impact that Woodford has made both positive and unfortunately significantly negative. Well written, fast paced and well worth a read

[Emma · Rating 4 out of 5]

The book itself is boilerplate in structure and content without much in the way of the kind of insider information that takes these books to the next level. Still an interesting and thorough retelling of the story with the publicly available information hammered into a solid narrative. I enjoyed it but just lacks the wow factor for a 5 star review.

[Gareth Evans · Rating 3 out of 5]

Does ‘competent’ sound like feint praise for a book? Well this is a competent book. Most of my reading on stock market finance has been Michael Lewis’s books and Walker is no Lewis. Nevertheless, Lewis tells an interesting story very competently and I certainly learned a lot about how investment funds work.

[Julian Manieson · Rating 5 out of 5]

Writing fantastic, pacing fantastic. At times reads a little like an FT long read (which is not necessarily a bad thing!)

Compares favourably to “When Genius Failed”, which I’d consider to be the gold standard for books like this.

[Paul Burton · Rating 4 out of 5]

I suspect that most of the people who read this book, like me lost some money through Woodford and wanted to get an understanding of what happened. It is a very well put together book that clearly explains the characters, the background and tells a complex story very well.

[Jack Taylor · Rating 5 out of 5]

Neil Woodford was the most celebrated British investor of his generation. For more than three decades, the savers of Middle England had entrusted him with their hard-earned nest eggs and he had made them rich with years of blockbuster returns. Until he didn’t, this is the full story…

[Mohit · Rating 3 out of 5]

Alright. Could have been a long article, which is what I presume it was in the FT's columns.

[Holly Smith · Rating 4 out of 5]

Well written but doesn’t have the level of chaos and drama of other financial scandals like Enron, Theranos or WeWork

[Rosie McKerr · Rating 4 out of 5]

A good investigate account of the Woodford debacle.

[Ryan · Rating 4 out of 5]

Solid book with some lessons

Book was pretty entertaining although bogged down at times with arguably too much detail. Lessons to be learnt on keeping your ego in check

[Aga · Rating 4 out of 5]

This book gave me chills and made me angry too. I have this unhealthy infatuation with the asset management industry. Its complexity is intellectually interesting and challenging, behaviourally it is fascinating (not always in a good way) and otherwise it puzzles me that the same things are going on over and over again. Anyway, I like non-fiction books which read like page-turners and this one was like that. It had the right amount of detail although reviewers criticised it for not bringing much more than what was in the newspapers at the time. For me, it kept me interested and I wasn’t using it for educating myself on the markets and running the funds. The conclusion for me is that we can have extensive regulation of the financial industry, strict compliance requirements and the failure will still come down to humans and their behaviour, their ego, their subjectivity and hunger for more. And we will always try to outwit the legislation/regulations.

[Halina · Rating 4 out of 5]

I work in financial advice and read this having seen the fall of the UK's most famous fund manager, Neil Woodford, play out in front of me on a daily basis. I knew othing about his rise, though, or the finer details of his company's implosion. This book lays them out bare and, WOAH.

Incredibly well-written, full of detailed research, and will frequently make you bare your teeth at the arrogance and the stupidity of this most stubborn of men. It does, however, assume a degree of knowledge in the area, so isn't the best for those who have no experience in investments or finance.