Woodford Concerns

Agile01

Just trying to understand why investors didn’t had any concerns after 2 years when fund was launched.
Was underlying holding was completely different than what is it now?

Brian65

Thrugelmir wrote: »

The TV programme Dragons Den is a consumer version of the real world that does exist.

.. and Lesson 1 is don't invest in things you don't understand.
How much does Woodford understand about Cold Fusion :doh:

Brian65

Agile01 wrote: »

Just trying to understand why investors didn’t had any concerns after 2 years when fund was launched.
Was underlying holding was completely different than what is it now?

A scientist who bought WPCT at launch said he would never have invested if he knew Woodford was going to invest in Cold Fusion. But he didn't look at the underlying investments because he assumed Woodford knew what he was doing.

Thrugelmir

Brian65 wrote: »

.. and Lesson 1 is don't invest in things you don't understand.
How much does Woodford understand about Cold Fusion :doh:

Buy a share and attend the AGM. You can then ask questions of the investment team. .

AnotherJoe

Agile01 wrote: »

Just trying to understand why investors didn’t had any concerns after 2 years when fund was launched.

Many simply wouldnt have had the capacity to understand, thats why you choose a manager with a name and a record to do it for you. If he and his team think that Circassia or Prothena are hot companies in biotech why woudl you disagree.If he thinks there's something in AI, again how qualified are most to even understand that. Its only in teh past couple of years, especially after some spectacular failures pumping money in just weeks before the company went bust that it became clear how inept they were ... and then came IH :eek:

Agile01 wrote: »

Was underlying holding was completely different than what is it now?

Not for WPCT. But it wasn't clear at the point how poor nearly all the startups he'd invested in were. And then came the £32M into IH, the jumping the shark moment for many with even a slight clue. BUt to be fair to the general public most wouldnt. I'm sure they woudl think his team of highly skilled analysts knew more than, say, yours truly, especially after his highly paid independent* valuers uprated it 3.5x on the basis of "good results"
Yes for Equity Income which started as a standard high income fund and then became stuffed with startups that didn't pay dividends (and in contrast needed capital putting in) not really a great fit for an income fund.




* :rotfl::rotfl::rotfl:

talexuser

Agile01 wrote: »

Just trying to understand why investors didn’t had any concerns after 2 years when fund was launched.
Was underlying holding was completely different than what is it now?

Which fund do you mean? For the Income fund I jumped after it lost 10% and pocketed a gain of 30% in 3 years, and at least another poster did the same earlier in the thread. Some big holdings were just turning into poor picks.

I cannot understand how HL continued to support it after it became clear it would never be able to recoup the losses to be in top quarter 5 year figures and other intermediaries were giving sell notices. HL were effectively saying ignore much better performing funds and hope that somehow a normal income fund will magically outperform better income funds by eventual huge stock price increases rather than the dividends all were getting anyway.

For the Patient Capital, that was too hairy for me and would need a really long term punt, expecting a lot even in the first five years would be unrealistic. We will never know now, a distressed fire sale is unlikely to be in existing investors interest, but the sharks picking the bones at rock bottom prices may well have a bit of luck eventually.

Agile01

Yes, I meant Woodford equity income fund

bowlhead99

talexuser wrote: »

I cannot understand how HL continued to support it after it became clear it would never be able to recoup the losses to be in top quarter 5 year figures

One can understand a rationale for a 'some of our best ideas' portfolio as including (a) funds that offer lower fees than their peers, and (b) funds that you think have the potential to give a good performance from here.

It is pretty strange logic to exclude a fund just because it won't appear in the top quartile five years until a previous loss has washed out of the back end of the chart. If you buy today, you are not buying the performance that already happened in the past, and that historic loss isn't yours. It's the 'from here' that counts.

This is not to say WEIF has been a good choice. Of course it hasn't, and we know the real driver of what goes into the promoted funds list is the discounts that the managers are willing to offer to platforms with the hope/expectation of receiving a certain level of business being put their way from the platform's customers.

But the idea of 'better not put this in the list because a recent loss will stop it topping the charts for a few years' is silly.

There are some posters here who do not like to see any red in their portfolio and will jump ship to get rid of such holdings, and always want to be able to say their holdings are in the top quartile of x-years performance so that people think they must be canny investors even though they've only held the fund for the last five minutes of that longer-term performance.

That attitude doesn't make sense to me. I don't want to buy something just because it made money before I bought it. I want to buy something that will make money while I own it. I would be happy to buy a fund that is (for example) somewhat cyclical and has been low in the league tables while its investing style is out of favour and will eventually come back into favour, such that when I look at the five year chart in five years forward from now, it is a good performance.

Again, not saying Woodford's holdings or strategy deserved recommendation. Merely noting that the fact it had lost money due to poor picks did not make it impossible to recommend, *if* the strategy was sound. For example, Woodford at Invesco significantly lagged its peers in the months ahead of the bursting of the dot com bubble and ahead of the global financial crisis when he shunned banks despite their high dividends. So the reason to not recommend it was the liquidity risk of his strategy, which ultimately became its downfall.

talexuser

With that logic you should always recommend a falling fund, because from here it could get better, just too bad about the people you recommended to buy when it was a higher price, they can wait while it continues to fall.

Never mind the alternatives doing better in the same sector, when the problems are not sector relevant to all funds, just specific bad picks in the falling fund.

AnotherJoe

talexuser wrote: »

Which fund do you mean? For the Income fund I jumped after it lost 10% and pocketed a gain of 30% in 3 years, and at least another poster did the same earlier in the thread. Some big holdings were just turning into poor picks.

I cannot understand how HL continued to support it after it became clear it would never be able to recoup the losses to be in top quarter 5 year figures and other intermediaries were giving sell notices. HL were effectively saying ignore much better performing funds and hope that somehow a normal income fund will magically outperform better income funds by eventual huge stock price increases rather than the dividends all were getting anyway.

For the Patient Capital, that was too hairy for me and would need a really long term punt, expecting a lot even in the first five years would be unrealistic. We will never know now, a distressed fire sale is unlikely to be in existing investors interest, but the sharks picking the bones at rock bottom prices may well have a bit of luck eventually.

Yes, there's some serious questions needing to be answered (but never will be) how they screwed up so very badly whilst at the exact same time saying that Terry Smith didn't have a long enough track record !

Even at best they look like a right bunch of chumps not putting their customers first.
And of course they get themselves into a tough position because imagine fi say 2 years ago HL had removed Woodfords funds from their W50, then there would likely have been a sell out that made kent Council look trivial and Woodford woudl have blamed the crisis on HL being nervous. Its a bit of a poisoned chalice that list I think.