Woodford Concerns

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%.

Aretnap

Moe_The_Bartender wrote: »

My money's on Benevolent AI.

Coincidentally (or not)

https://www.cityam.com/benevolent-ais-valuation-halves-to-1bn-in-further-blow-for-neil-woodford/

JohnRo

It really gets my goat when reading news reports stating 'Woodford loses this billion, Woodford loses that billion..'

He's coining it in, it's his unfortunate investors that are incurring losses, discounting his shredded reputation.

bowlhead99

JohnRo wrote: »

It really gets my goat when reading news reports stating 'Woodford loses this billion, Woodford loses that billion..'

He's coining it in, it's his unfortunate investors that are incurring losses, discounting his shredded reputation.

If he was making the billions they would be saying that 'his' investments were making them. If losing them, they are saying that 'he' is losing them.

I get that you're just being flippant but he is not literally losing billions here and billions there and everywhere. The billions of drop in assets under management that he experienced was mostly people pulling their money out, rather than the investments falling in value. He hasn't actually lost a billion on any one investment he made.

Sure, losing any million is not a good thing. But I could equally say it gets my goat when people trivialise serious issues to make their point.

Sailtheworld wrote: »

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

Given his long term track record (delivering against income and growth objectives since the late 1980s), flavour of the 'month' seems a little short. Money in his funds would have given excellent returns between 1988 and 2016.

So the idea that Kent pension fund looked at him launching a new fund in 2014 and thought 'hmm, his fund went up a lot last month, let's get it' seems like you are trivialising the thought process somewhat. At the least, it would have been 'hmm, his fund went up a lot across two generations of human life and three or four economic cycles, let's get it'.

JohnRo

bowlhead99 wrote: »

Sure, losing any million is not a good thing. But I could equally say it gets my goat when people trivialise serious issues to make their point.

There's nothing trivial about my comment or the money he's making or the money he's lost his investors.

bowlhead99

JohnRo wrote: »

There's nothing trivial about my comment or the money he's making or the money he's lost his investors.

Contrarian investment managers lose money for their investors all the time, except when they don't and the investors praise them.