Woodford Concerns

Sailtheworld

Prism wrote: »

Its not really a case of dumping funds before they under-perform. Its more choosing ones that don't actually under-perform for long or by much. I rarely sell a fund unless it changes style or I find one I think is a better fit.

Quite a skill. Only around 8% of funds beat their index over 15 years.

Prism wrote: »

How do you know I am in a minority? There are no obvious stats on how successful individuals are with their fund selection.

It's fairly basic maths. The market is the average. You outperform it so therefore someone else must under-perform. Then you need to take off fees which puts the out performers in the minority.

Prism

Sailtheworld wrote: »

Quite a skill. Only around 8% of funds beat their index over 15 years.

Not really, most people don't even try. To be fair I haven't been doing it 15 years (myself) but I am happy so far

It's fairly basic maths. The market is the average. You outperform it so therefore someone else must under-perform. Then you need to take off fees which puts the out performers in the minority.

What you say is only true if everyone invests the same amount. 1 person can underperform for every 1000 that outperform if that 1 person invests 1000x more. Nobody has stats on that. There is a lot of lazy money in underperforming pension funds dragging down the averages.

bowlhead99

Sailtheworld wrote: »

Prism wrote: »

Sailtheworld wrote: »

The 'usual' way of doing this is that if someone wanted to buy, say, a Scottish Widows fund they'd head to Scottish Widows in the first instance. Smith doesn't do that - he has separate domain names. I know why.

Yeah he is hiding the other funds from people so they don't find them. Classic marketing trick that one.

Not so they don't find them but so that one doesn't contaminate the other if/ when things go t**ts up. Very important when you're selling a brand that has your name in it. It's a long road back.

You are quite the conspiracy theorist.

However, the majority of investment trusts have their own dedicated websites, - or partitioned-off, self-contained sub-sections of a management company's website. As they are independently listed on the public stock exchange, they need to have all the relevant disclosure and investor relations documentation available on a standalone basis to make it clear what you're investing in and with whom, meeting the regulatory disclosure rules.

So, no surprise that there is a dedicated site for the Smithson Investment Trust at https://www.smithson.co.uk/ and for Fundsmith Emerging Equities Trust at http://www.feetplc.co.uk/, meanwhile if you want info about the main Fundsmith equity fund you find it at https://www.fundsmith.co.uk/

If you don't know which one you want, you can go to their international corporate site at https://fundsmith.com/ which is a basic landing page showing the links to the individual products.

You might find that (e.g ) Scottish Widows presents their information differently because they are in the business of managing and distributing a very broad suite of open ended investment funds which (unlike Smithson and FEET) are not independently listed on the stock exchange.

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?

AnotherJoe wrote: »

Its a long list of sorry financial results.
Provident Financial, Kier, Purplebricks, The AA, Eddy Stobart, Allied Minds, Imperial Brands. All down 60-80% or more. Probably more, thats what i can recall.

I'm not counting Prothena because that was dependent upon a drug trial and could have gone either way. The ones I've listed had bad structural issues and management problems, these are the sort of things a top financial guru with a team of analysts should be able to spot. If not, what value do they bring to the table?

As an aside, He bought into Purplebricks pre IPO, i.e. for less than the current price. He will have had his views on whether the management team and structure / international expansion was wise or not, but after its initial successes may have not had a clear practical exit route at higher headline market prices - or simply not seen the need for it at that stage in the company's lifecycle - given he was a major backer and any disclosure of partial sale by him would move the price downwards.

Clearly not selling when the market was more favourable had negative consequences for the fund, but it's not like he bought in at the very top and lost a huge percentage of his stake. It was arguably the correct call to buy in and support the then management team when he did, and there would have been some analysis of the potential. If it didn't fail, it would have been a massive return; as it is, it's just a moderate return, because it just didn't work out the way it could have.

Moe_The_Bartender

I would bet against Purplebricks still being around in a couple of years.

Sailtheworld

Prism wrote: »

What you say is only true if everyone invests the same amount. 1 person can underperform for every 1000 that outperform if that 1 person invests 1000x more. Nobody has stats on that. There is a lot of lazy money in underperforming pension funds dragging down the averages.

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.

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.