Woodford Concerns

AnotherJoe

Looks like WPCT is starting to become an excellent share for daytrading, up and down 4-5% a day. Not that i daytrade any more but I suspect the daytraders are in on this now, its not moving up or down on fundamentals at the moment thats for sure.

bowlhead99

talexuser wrote: »

However it did not stop the superannuation fund discussing the investment in secret, when council business default should be open to the public.

I haven't worked for a council for any significant length of time but assume it's not 'default' to invite members of the public to each meeting at which strategic investment or financial transactions etc are being considered.

It would seem impractical to transcript and publish every conversation or calculation shared between members of a pension fund trustee or advisory board, notwithstanding the fact that periodic reports or minutes are made available. Without going beyond the paywall to read the article in full, the investment value was obtained by the journalist presumably without needing to engage a spy or private detective?

If people are interested they could make a freedom of information request to obtain information held by public bodies that isn't routinely published, not that most members of the public area in a position to competently evaluate the fine detail of a DB fund's investment operations.

Malthusian

talexuser wrote: »

Councillors now complain about The "quality of financial advice" and "pension funds should not be a gamble" of "capital casinos" !! (my aside: how else pensions fund increases is not explained).

Also presumably not explained is why they were gambling on star managers like Woodford if they didn't think pension funds should be a gamble.

As pension funds are underwritten by the taxpayer, it's a risk-free bet anyway.

If the council's pension fund had gone to the moon they could pay themselves large discretionary increases. Or failing that reduce the amount that the council has to pay into the pension fund, leaving more available for pork and salaries / allowances. If they'd managed to lose every penny they lose nothing, within the constraint of not doing something that would forfeit their pension due to misconduct in public office.

MaxiRobriguez

Council managed pension funds need some sort of control though. Ultimately it's provision is to meet expensive DB pensions. If that can't be met by bonds and gilts given current low interest rate environment then allocations of high quality dividend companies should have been bought until that balance is met.

What on earth is a highly speculative Woodford growth fund doing in a council pension fund? It's insane and inappropriate.

Moe_The_Bartender

And another one. From Citywire:

Long-suffering investors in the suspended Woodford Equity Income have taken a further hit to the value of their holdings after Link, administrator of all of Neil Woodford's funds, slashed the valuation of one of his major unquoted stocks.

Woodford Patient Capital (WPCT) yesterday evening reported a heavy writedown to the investment trust's net asset value (NAV) warning that Link Fund Solutions 'intends to reduce the valuation of one of the company's holdings'.

The markdown will knock around 4p off the NAV, which stood at 72.85p yesterday. That equates to a 5.5% fall, lopping around £42.5 million off the trust's gross assets.

Patient Capital would not disclose the identity of the stock subject to the writedown. 'The board is unable to comment further on this revaluation at this time due to confidentiality obligations, but it will provide a further update to the market when able to do so,' it said.

My money's on Benevolent AI.

AnotherJoe

IH. They've got to get it to zero, and it must be done in steps as it would be far too embarrassing to admit it was worthless from day one let alone when they revalued it 3.5x that cost

bowlhead99

MaxiRobriguez wrote: »

Council managed pension funds need some sort of control though. Ultimately it's provision is to meet expensive DB pensions. If that can't be met by bonds and gilts given current low interest rate environment then allocations of high quality dividend companies should have been bought until that balance is met.

Some of the payment obligations may be seventy years in the future. There is no way you would run an institutional pension fund to try to grow assets for that purpose by investing exclusively in 'bonds and gilts', even if such assets currently offered better inflation-beating returns.

And the idea that if gilts are not good enough you should only use dividend paying companies shows similar naivety. To provide for their future obligations, Institutional pension funds will typically take exposure to global public and private equities, bonds, infrastructure projects, land /real estate and other real assets together with cash and other liquid instruments.

What on earth is a highly speculative Woodford growth fund doing in a council pension fund? It's insane and inappropriate.

Without comment on whether with or without the benefit of hindsight they should have picked Woodford over some other active fund manager in the growth or income space, it seems to me "insane and inappropriate" to plan to only fund future retirement benefits with cash and bonds with a zero allocation to growth asset classes; if a prospective pension fund trustee suggested that to me I would fire him on the spot.

The largest US DB public pension plans such as CalPERS, CalSTRS, NY State Common CRF have 7-10% allocated to private equity. As an example, of a $380bn+ market value, California Public Employees Retirement System has $28bn in private equity, $180bn in global public equities, $40bn of real estate, infrastructure and forestland, etc.

It is clear that Kent decided they did not like the way that Woodford was performing or how he was choosing to develop the portfolio, so they sought an exit from his product. I agree of course he should not have put the illiquid holdings in an open ended vehicle, for which he is quite reasonably being berated by all and sundry. But the idea that these sort of groups with extremely long term investment timelines are 'insane' or 'inappropriate' for using growth assets seems to be well off the mark.

Sailtheworld

talexuser wrote: »

The Sunday Borisgraph reports Kent Council have lost £36 million from their investment, the cashing in of which prompted the gating, based on latest valuations.

Kent Council also had a load of money in Icelandic banks.

I suppose when the taxpayer is standing by you don't need to be shy about being bitten for a second time or overly worry about whether something that sounds too good to be true really is.

Sailtheworld

bowlhead99 wrote: »

But the idea that these sort of groups with extremely long term investment timelines are 'insane' or 'inappropriate' for using growth assets seems to be well off the mark.

92% of funds lag their index after 15 years. The insane idea is that over the really long term, say 70 years, any fund will beat the market.

Woodford in a Council pension fund looks distinctly like flavour of the month investing

Sailtheworld

Thrugelmir wrote: »

Who buys on historic data alone? Other than to provide reassurance for ones own decision. Buffett has underperformed for the past 10 years. No one slates him. Having a "good idea" is fine until everyone else copies it. Then envitably underperformance will follow.

Last 10 years Berkshire Hathaway +224% / S&P +191%.