Woodford Equity Income - I really don't get today's drop?

Reed_Richards

Kendall80 wrote: »

I've finally decided to cut my losses after my March review. Watch it go and surge 20% now.

But you will have re-invested in something else that surges 40% so it won't matter.

Linton

Kendall80 wrote: »

We don't often hear about individual investing mistakes so i'll offer up one. Unlike Johnnyboy11 I decided to sick with my allocation to Woodford in my ISA, boys 2 JISAs and my SIPP. It has been the biggest loser in each one by some margin. Fortunately, almost all accompanying funds are up but overall portfolio performance has certainly been impacted. I've finally decided to cut my losses after my March review. Watch it go and surge 20% now.

I am not having a go at you in particular but I think your situation shows where lessons can be learnt....


Perhaps the real mistake was not buying Woodford but rather holding such a high % that its poor performance makes a worrying impact to your portfolio. I would be uneasy at holding much more than about 10% in any focussed conviction fund especially one that mostly invests in a niche market - UK Small Companies, perhaps 1% of the world econnomy. Woodford is classified in the UK All Companies sector but is about 90% invested in medium/small companies. When you sold Woodford did you buy another UK Small Companies fund? If not why buy Woodford in the first place?



The second mistake is to sell out in a panic. If you buy popular funds and sell at a loss when things get difficult you are likely to seriously lose out in the long term. Much better to set your allocations and keep to them.

schiff

redux wrote: »

As for Woodford or Smith, I looked at both for an investment about 4 years ago, bought Fundsmith on its own website. No regret, but I still pay enough attention to be a bit bemused at Woodford's recent outbursts, as if he is partly blaming the audience.

This must be a new trend. Even Teresa May is at it

Linton

I have just checked - as a UK Small Company fund Woodford has been pretty average over the past somewhat difficult year. Pity it didnt perform as well as most other UK SC funds in previous years, possibly due to his dislike of Tech.

Kendall80

Linton wrote: »

I am not having a go at you in particular but I think your situation shows where lessons can be learnt....


Perhaps the real mistake was not buying Woodford but rather holding such a high % that its poor performance makes a worrying impact to your portfolio. I would be uneasy at holding much more than about 10% in any focussed conviction fund especially one that mostly invests in a niche market - UK Small Companies, perhaps 1% of the world econnomy. Woodford is classified in the UK All Companies sector but is about 90% invested in medium/small companies. When you sold Woodford did you buy another UK Small Companies fund? If not why buy Woodford in the first place?



The second mistake is to sell out in a panic. If you buy popular funds and sell at a loss when things get difficult you are likely to seriously lose out in the long term. Much better to set your allocations and keep to them.

Hi Linton. I bought Woodford when he setup the fund which was 4/5 years ago now based on his previous performance. Originally i gave it a 10% allocation but this dropped slightly with its significant underperformance (roughly 18% down in my ISA) So not a huge impact to my overall performance but obviously detrimental. I would not say I made a mistake buying it so much as a 'choice' based on the information at the time. Nick trains UK equity was my other option - obviously a different fund style (even more so at this stage). We're not going to select winners all the time though.


My decision to withdraw from the fund was not based on panic as you suggest - in fact my procrastination likely led to more loss than was necessary. My decision was based on his increasing bias towards smaller companies of late and obviously the magnitude of his underperformance - although admittedly the fund is difficult to compare. I am also slowly tweaking strategy towards a cheaper, passive portfolio so the decision fits with my long term aims.


I do hope he manages to turn it around for those still invested but I obviously cannot let such hopes form part of my strategy. I could've talked about my holdings/funds which are 50% up over the past few years but I often find there is more to learn from the negatives.

Wildsound

I'm sure I've mentioned it here before, and i've said it to many other people before, but when a successful manager jumps ship to set up his own thing, I won't touch it for a considerable amount of time.

When it came down to it a few years ago when he set up his own fund, I couldn't go along with it. The guy is just one face amongst an entire team of back office support and infrastructure (i.e. when he was at Invesco). A lot of resource was backing his success, so to abandon that and start from scratch was too much of a risk to me to consider following him. Had he just moved to another big player like a Blackrock or a Henderson, then I would have reconsidered.

Since then, the way he has directed the funds is not something I could invest in at this time, so unless that changes I will remain away. As for the company, I would be more comfortable investing at this point as I imagine his infrastructure and support is far more matured.

If someone like a Nick Train or a Terry Smith (to be more familiar to readers here) decided to abandon their current ship and start fresh independently, I would do exactly the same. Not because I don't have faith in the manager, but because I want to have evidence that the new machine is running properly.

Johnnyboy11

Kendall80 wrote: »

...I am also slowly tweaking strategy towards a cheaper, passive portfolio so the decision fits with my long term aims...

This is my strategy too. I certainly don't have the skill or inclination to try and pick the next star fund manager(s).


I held Woodford's fund for the best part of 5 years, and it made up about 13% of my portfolio. Not sure why I bought it, but all the hype at the time was probably the main factor. Live and learn.


Whilst his fund is nominally up 10% in its near 5 years of existence, you need to factor in say 13% for inflation and 22% depreciation of the GBP in that time, and arguably he has destroyed a quarter of his investors wealth. For a £5Bn fund, that is a serious loss to UK savers.

masonic

It could be argued that any change can precipitate a reversal of fortune, whether that's a change of manager in a formerly outperforming fund, a manager taking on a slightly different remit, or a change in the economic headwinds. All suggesting skill isn't sufficient, you need luck too.

talexuser

Here's an irony about defensive. The vast majority of my 20 funds were red yesterday, the Vanguard trackers between 2 and 3.5% down on the day. Capital protection Ruffer was at 0, Newton Global stood out a tiny fraction positive. Fundsmith was 0.65% up! A day means nothing but still interesting.

londoninvestor

Johnnyboy11 wrote: »

This is my strategy too. I certainly don't have the skill or inclination to try and pick the next star fund manager(s).

Not necessarily the same for everyone, but psychologically going mostly passive has worked pretty well for me. I just haven't really found myself feeling the regret of "if only I'd chosen this active fund I could have beaten the market!", in the same way that I regretted poorly performimg active fund picks in the past.