The decision by Neil Woodford to announce the closure of Woodford Investment Management was "inevitable", as investors await news of what will happen to his two remaining investment vehicles.
Link Fund Solutions on Tuesday morning sacked Woodford from managing the LF Woodford Equity Income fund and said it would be wound down. Woodford responded by saying that was a decision "I cannot accept" before quitting both Woodford Income Focus and Woodford Patient Capital (WPCT) and shutting his business down hours later.
Woodford will remain manager of both funds for a three-month notice period.
A very sad day for both [Woodford's] investors and his employees"
Darius McDermott, managing director of Chelsea Financial Services, said it was "a very sad day for both [Woodford's] investors and his employees", though McDermott and Ryan Hughes, head of active portfolios at AJ Bell, described the news as "inevitable".
"Without the fees from the equity income fund and with no [management or] performance fee coming from the Patient Capital Trust, it was difficult to see how the business could survive," said Hughes.
Adrian Lowcock, head of personal investing at investment platform Willis Owen, said it was the right decision for Woodford to make "as it will put a stop to the inevitable speculation". It was also right to step down from WPCT, Lowcock added, "given Woodford's presence had become a distraction to the trust".
Indeed, investment company analysts had speculated WPCT would see a similar fate to the equity income fund - with Woodford being removed as manager and the fund being wound down.
For investors that still hold both WPCT and Income Focus, Hughes said "this creates further uncertainty". "The key now is that they are given information about what is going to happen to their investments as soon as possible," he said.
"The board of the trust has clearly been considering its options already and I'd expect to see an announcement very soon from them. I'd also expect to see an announcement [today] from Woodford or Link about the future of the Income Focus fund."
Lowcock pointed out, however, that "investors' money is ring-fenced and will remain invested in the respective funds and in the underlying investments".
For McDermott, it has wider implications for the investment industry: "At a time when people should be saving more, not less, and when UK equities are so out of favour, it is worrying that so much trust has been lost. We now need to work hard to get that trust back."
He added that Woodford had "achieved some excellent returns for many investors over a very long period of time" before the recent liquidity crisis. "That is why his new business was so popular," McDermott said.
"In all of this mess, I think it is important that we remember this. The last few years have been bad - there is no getting away from that.
"But this situation has come about from a very specific issue with one manager - the worst possible outcome would be that investors think all investments end this way and stop saving for their futures."
This article was first published by Investment Week, a sister title to International Investment.