Woodford Concerns

Sailtheworld

bowlhead99 wrote: »

You are quite the conspiracy theorist.

It's not clear quite where your scepticism and distaste for Fundsmith's practices are rooted, perhaps you wish you had picked it over your preferred tracker when he launched it as we emerged from recession /global financial crisis. Politics of envy?

Not a conspiracy theorist but a cynic. There's a whole industry set up persuading people they're an investment genius or can pick someone who is.

I don't have an issue with Fundsmith but am suggesting that the chances are it'll be a fund that's more likely than not to underperform the index over 15 years. Why? Because that's what most funds do.

See Woodford as an example. But, oh no, that's under-performed because of x, y or z rather than the fact that it's difficult to consistently pick winners ahead of time.

I used to have an edge and made a ton of money in single shares as we exited the GFC but that edge has lessened. It's made me reflect on whether I really had an edge to start with or just luck. It's also made me think a lot more about whether I was taking more risk and thus should've expected a better return.

I'm just trying to help people. If I'm not as clever as I think I doubt they are either.

Prism

Sailtheworld wrote: »

No, if 92% of funds under-perform the markets over 15 years but you can consistently pick those in the 8% then you're very special - stop being so modest.

I have picked several funds which have underperformed at different times and hold a few that are underperforming right now. Its probably about 50/50 over the years. However the funds that have done well (some of which are sector passives) have done very well and I have much more invested in them. So the number or percentage of funds that underperform is not that relevant. I do agree that most funds are pretty terrible but I think many are obviously pretty terrible too.

Alexland

bowlhead99 wrote: »

It's not clear quite where your scepticism and distaste for Fundsmith's practices are rooted, perhaps you wish you had picked it over your preferred tracker when he launched it as we emerged from recession /global financial crisis. Politics of envy?

While I have no particular criticism of Terry Smith (and still keep his 1992 'book they tried to ban' despite rising eBay valuations) the average P/E of Fundsmith holdings has increased from 20 to 25 in recent months which suggests that some of the recent gains have been driven by demand and we might be starting to see a defensive bubble. I know his argument that if you look at the cash flow potential it doesn't matter to the long term investor if they initially overpay but the opportunity to get in now looks reduced.

Alex

SonOf

Sailtheworld wrote: »

No, if 92% of funds under-perform the markets over 15 years but you can consistently pick those in the 8% then you're very special - stop being so modest.

Many funds work best in certain periods of the economic cycle. People using single sector active funds are likely to be changing them more regularly during that period.

It is not actually that difficult to pick decent managed funds in some sectors. The filtering you do leaves you a very small sample to select from.

You will find lots of investors that manage to pick more outperformers than underperformers but you will always get one or two that let you down.

If you expect the opposite and can pick outperforming funds ahead of time and dump them before they under-perform then you should feel good as you have a valuable skill. You're in a very small minority but congratulations.

A number of the IFA fund research/due diligence providers removed Woodford from their lists in 2017 due to concerns over liquidity. So, Prism may be a special person but in this respect, nothing special or unusual occurred.

AnotherJoe

Sailtheworld wrote: »

Not a conspiracy theorist but a cynic. There's a whole industry set up persuading people they're an investment genius or can pick someone who is.

I don't have an issue with Fundsmith

"though you suggest he's up to no good because he has different domain names"

but am suggesting that the chances are it'll be a fund that's more likely than not to underperform the index over 15 years. Why? Because that's what most funds do.
Yes... and .... so what ? If you want to compare over 15 years since founding odds are in Ts's favour now.

See Woodford as an example.
Why woudl you treat Woodford as an example. You should treat a "ordinary" fund underperforming the index manager as an example. Woodword is an extreme outlier that needs a closer examination.

But, oh no, that's under-performed because of x, y or z rather than the fact that it's difficult to consistently pick winners ahead of time.
Where X, y, z is that Woodford has underperformed due to a raft of idiotic decisions that were plain to see at the time, or that should have been visible to him if no one else. Many others made better decisions than him. Indeed everyone else made better decisions than he did. Literally everyone (if you refer to his fund management peers)

He's not just underperformed a bit, he's not just underperformed due to management charges dragging down compared to an index, he's underperformed due to spectacular bad judgement much of which was immediately visible at the time, such as buying IH, moving funds to Guernsey, swaps between funds, building up a huge illiquid % in an open ended fund, or issues that should have been picked up by his analyst team, such as dodgy accounting and dodgy management decisions. (all of which were missed by HL as well it has to be said... but not by many private investors )


I used to have an edge and made a ton of money in single shares as we exited the GFC but that edge has lessened. It's made me reflect on whether I really had an edge to start with or just luck. It's also made me think a lot more about whether I was taking more risk and thus should've expected a better return.

I'm just trying to help people. If I'm not as clever as I think I doubt they are either.

I think you give Woodford far too much credit by treating him as if he's just another underperforming mediocre fund manager.
There are many such.

Woodford has made them look like superstars.
Its not just that one of his funds is bad. Its not like Terry Smith where one fund made not as good returns as could have done but the others are great. Heck Woodford would probably eat one of his horses if he could say "sorry i only made 23%".
Every single one of Woodfords funds is at the bottom of its peer ranking and by a fair margin. Thats not random chance or management charges.

itwasntme001

I think it should be pretty clear by now that Woodford was not just a fund manage that under-performed, he seriously under-performed and very recklessly at that. Given he knew that he ran an open ended fund, he should have had liquidity risk at the forefront of all his investment decisions. So to Bowlhead's comment about Woodford still doing ok from Purplebricks - Bowlhead said so himself that Woodford could not sell as it would cause the share price to drop significantly. Clearly this is a liquidity risk when Woodford bought at IPO and clearly he should have realized at some point he will have to sell in his OPEN-ENDED FUND!! Its more then a mistake - its complete and utter stupidity.


I did hold Woodford income but sold last year due to underperformance. Granted i should have realised earlier his "income" fund was anything but, and that was entirely my fault due to laziness. However i did invest most of this cash in a fund that has outperformed and also some in a single stock that has more then trebled since so i have more then made up for the losses and lost opportunity from investing in Woodford in the first place.


As for the debate about active managers vs passive - 10 years of outperformance is great and not to be looked down upon but i suspect many (like me - i am in my mid-30s) have invested for much longer time horizon and i still do worry if the likes of Fundsmith will end up under-performing. It is a risk that is always present - fund manager risk. A lot of things have gone right for Fundsmith to have outperformed - crash in sterling, flight to defensive stocks, US outperforming. The true test is over many market cycles and economic conditions. So i would not like to be "all-in" with one manager, nor would i want everything in active funds. This is why i have a mix of about 50% passive and the rest active (including some single stocks i own as well).

Sailtheworld

AnotherJoe wrote: »

I think you give Woodford far too much credit by treating him as if he's just another underperforming mediocre fund manager.
There are many such.

Woodford has made them look like superstars.
Its not just that one of his funds is bad. Its not like Terry Smith where one fund made not as good returns as could have done but the others are great. Heck Woodford would probably eat one of his horses if he could say "sorry i only made 23%".
Every single one of Woodfords funds is at the bottom of its peer ranking and by a fair margin. Thats not random chance or management charges.

It's as if an article of faith is being challenged if it's suggested that picking a star manager ahead of time is anything but a doddle. Woodford proves it in spades but it simply must not be accepted. The disciples rally around 'yes you can still pick star managers, you always could - Neil just went rogue - it's not your fault'.

Prism

Sailtheworld wrote: »

It's as if an article of faith is being challenged if it's suggested that picking a star manager ahead of time is anything but a doddle. Woodford proves it in spades but it simply must not be accepted. The disciples rally around 'yes you can still pick star managers, you always could - Neil just went rogue - it's not your fault'.

I am of the opinion that most who lost money through Woodfords funds would accept full responsibility for it. Some won't of course but they are wrong. For one thing, Woodford published every single holding in every fund on the website. It was completely transparent. Nobody can really complain that they thought they had some sort of 'safe hands' reliable income fund rather than the nuts small cap, unquoted illiquid fund that they actually had.

iglad

Prism wrote: »

I am of the opinion that most who lost money through Woodfords funds would accept full responsibility for it. Some won't of course but they are wrong. For one thing, Woodford published every single holding in every fund on the website. It was completely transparent. Nobody can really complain that they thought they had some sort of 'safe hands' reliable income fund rather than the nuts small cap, unquoted illiquid fund that they actually had.

You know that some won't accept any responsibility as they didn't know what they were actually putting their money onto. A quick look at the Daily Mail money pages will have the sad eyed pensioners who's 'savings' are trapped in Wooford's funds as they can no longer access their 'savings' to pay for a 2 week holiday in Benidorm!!

AnotherJoe

Sailtheworld wrote: »

It's as if an article of faith is being challenged if it's suggested that picking a star manager ahead of time is anything but a doddle. Woodford proves it in spades but it simply must not be accepted. The disciples rally around 'yes you can still pick star managers, you always could - Neil just went rogue - it's not your fault'.

Strawman arguments seem to be your specialty

Who here said that picking star fund managers was a doddle??
Picking rubbish fund managers, yes that is closer to a doddle. If they have a good track record, then look at if they move away from what they used to do, when they were a star, to something else entirely.

I wont reiterate the points but its clear thats what Woodford did, and in spades, and he did indeed "go rogue".
There are two entirely different points here i think you've conflated into one.
Q1. Can you pick great fund managers or even, is there such a thing as a great fund manager or is it just luck?
Q2. Did NW become a bad fund manager or was he just unlucky because no one can be a great fund manager (that seems to be your argument, maybe its not though if it isnt I"m not sure what it is)

It seems clear to me that even if you cannot be a great fund manager, you can certainly be a terrible one.

And thats what NW seems to have turned into after being a great one. It may even have been that he's always been an awful fund manager but this was masked when he was at Invesco since the managers there wouldn't let him buy companies that were too risky or were out and out scams.