Woodford Concerns

oxocubes

Aylesbury_Duck wrote: »

I'm a relatively new investor (not in Woodford) and even I can see the nonsense in your post. So those people who invested with Woodford for "around 30 years" and did very well in that period have no common sense? Right....

Amazing how my simple comment could be so misinterpreted.

aroominyork

KiKi wrote: »

Naive investor here, please be kind!

I have money in another WF fund (not this one) which has also done badly and HL have taken off their Wealth list.

Is it likely that the issues with the fund discussed here will impact his other funds? Ie, investors will get out altogether? I'm thinking of getting it off those today. I have the LF WF Income Focus.

Thank you.

Re the impact on Woodford Income Focus, the average market cap of its top ten holdings is £3.43bn, and if you take out Imperial Brands the average is £1.76bn. On average Woodford Income Focus holds 3.26% of the market cap of those companies – 3.61% without Imperial Brands. So your question is how much a rush of sales orders – or anticipation of a rush of sales orders – could affected the prices of the underlying shares. There are three companies where the fund owns over 6.5% of the shares so I could imagine them suffering a bit – two of those three are currently down over 5% this morning.

A question for the better informed on here: the largest holding is a REIT. Could it stop redemptions and if so how would that affect this Woodford OEIC?

Drp8713

It does teach a lesson to always review your investments if choosing an active manager.

I moved from Woodford to Finsbury Growth in May 2017, because a. Nick Train's performance was almost double Woodford's in the prior year and b. my ISA with HL was over £10k so holding ITs capped fees at £45pa.

A huge difference in returns since then for two investments with similar objectives.

Discrete calendar year performance
Key Investment 03/06/17 - 03/06/18 03/06/18 - 03/06/19
FINSBURY GTH. 11.05% 11.41%
Woodford Equity Income --12.16% -17.75%

Dear Mr Train, if you could maintain the 10% a year returns for next decade or so it would be appreciated!

eskbanker

Lokolo wrote: »

oxocubes wrote: »

I know nothing about financial technicalities, but I have common sense.

I don't believe a single word I've heard about this golden boy and his failing fund. For around 30 years everything he touched turned to gold,but now the exact opposite is happening.

Now what was that other blokes name??? ponsy or was it madeoff

Congratulations on making no relevant discussion to this thread.

....and at the risk of doing likewise, you'd think someone like that would have had something useful to say about stocks.

*gets coat*

Reaper

One interesting lesson to learn from this is open-ended funds have a problem which Investment Trusts (normally thought of as more risky) do not.

Woodford invested in unquoted shares but is only allowed to do that with 10% of the fund. They are hard to sell and the big outflows have caused him a headache trying to stay within the rules as they unintentionally become a bigger proportion of the fund.

Closed ended funds are better for investments that are hard to trade such as property or unquoted firms. Being compelled to offload hard to sell assets at any price is never a good idea.

Aylesbury_Duck

oxocubes wrote: »

Amazing how my simple comment could be so misinterpreted.

Perhaps you could be a little clearer in your comments then. We can all chuck in a load of hyperbole, toss in some extraneous punctuation then disown it when questioned and blame it on misinterpretation. Much easier than offering something intelligent and constructive.

[Deleted User]

Drp8713 wrote: »

It does teach a lesson to always review your investments if choosing an active manager.

I moved from Woodford to Finsbury Growth in May 2017, because a. Nick Train's performance was almost double Woodford's in the prior year and b. my ISA with HL was over £10k so holding ITs capped fees at £45pa.

A huge difference in returns since then for two investments with similar objectives.

Discrete calendar year performance
Key Investment 03/06/17 - 03/06/18 03/06/18 - 03/06/19
FINSBURY GTH. 11.05% 11.41%
Woodford Equity Income --12.16% -17.75%

Dear Mr Train, if you could maintain the 10% a year returns for next decade or so it would be appreciated!

That fund has a 7.5% investment in HL

Malthusian

antrobus wrote: »

Trading at a discount of 14.98% it seems.
https://www.hl.co.uk/shares/shares-search-results/w/woodford-patient-capital-trust-ord-gbp0.01

Remember that the concept of a "discount of 14.98%" relies entirely on the NAV not being hallucinogenic. Patient Capital is full of unlisted stuff (and to be fair, unlike Woodford Incoming that's its raison d'etre). If it's full of 20 Therani then there's no discount.

I am not saying that all of Woodford Patient Capital's investments are going to turn out like Theranos, but I am saying that if Elizabeth Holmes had been born five years later, in 2014 she would have been putting on her best Wonderbra and her reddest lipstick and heading straight for Oxford to secure a few hundred million simoleons.

oxocubes wrote: »

I know nothing about financial technicalities, but I have common sense.

I don't believe a single word I've heard about this golden boy and his failing fund. For around 30 years everything he touched turned to gold,but now the exact opposite is happening.

Now what was that other blokes name??? ponsy or was it madeoff

Your confusion between a Ponzi scheme (Madoff's was the same) and Woodford's collapsed fund is understandable, despite other forum members jumping down your throat, because both involve supposed financial geniuses whose funds then collapse like a house of cards.

However a Ponzi scheme is a fraud, whereas Woodford's was just incompetent. In a Ponzi scheme there are no investments. Or to be more accurate there are, but they are irrelevant window dressing. Investors' returns are fictitious and any payments come from other investors' money. In Woodford's fund all the investments were genuine, they just turned out to be genuinely crap.

There is another similarity in that in both a Ponzi scheme and Woodford's fund, those who get out early enough profit at the expense of those who sell too late. However in Woodford's case, again there was no fraud. It is not a fraud to take advantage of market mispricing. In a Ponzi scheme, those who get out early take other investors' share of the money. In a failed fund like Woodford's, those who get out early enough only take their share, not other investors' share. When the early leavers exit, their share is valued by the market more highly than when the later investors cash out their share.

The line is blurred here because the early exiters from Woodford's fund cashed out their share of a partly liquid / partly illiquid investment from the liquid side of the fund, leaving bagholders with a larger share of illiquid stuff with potentially fictitious values. At this point people start talking about Arch Cru. A bit like the darker side of P2P where punters trade worthless loans at fictitious par values between each other, and those who cash out too late are left with the inevitable defaults. But although the unlisted element of Woodford's fund is attracting the most attention, it was still a minority of the fund (but far too big a minority). Most of the money was being valued constantly by the market and can't be disputed. Sadly for the bagholders, this is just the risk you take when you invest in an open-ended fund holding unlisted securities up to the legal limit and beyond.

People thought Madoff was a genius because of the fraudulent success of his Ponzi scheme. People thought Woodford was a success because of the genuine success of his Invesco Perpetual Income Fund.

And Woodford's reputation was built when the reputation of another load of financial geniuses collapsed - those who claimed dot-com shares would make free money for everyone forever.

The lesson here is not that Woodford is a fraud but that you should never trust a financial genius whether they are a fraud or not. Here endeth the lesson.

Filo25

Scarpacci wrote: »

How fitting this happens on a day when Kier Group, a company that Woodford owns 20% of(!), fell by 40%. It was yet another sign, if one was needed, that the problem isn't what he's not been buying, it's what he has bought (usually by the bucket load).

It's been fascinating to hear following one corporate disaster after another, that Neil Woodford believes the problem is simply that Mr. Market is overvaluing the likes of Unilever or Diageo and that he will one day be proved right. It has nothing to do, apparently, with what that he has bought instead. And typically bought with large stakes in the companies.

He has repeatedly ignored the fact that companies he own have suspended dividends, been forced to make rights issues, etc. That's not just because Mr. Market prefers the shiny FAANG stocks or the consumer staples. Some of his holdings have been failing at the corporate level.

People often mentioned that he was criticized in the late '90s and early 2000s for relative underperformance from ignoring frothy elements of the market. But were the companies he was buying at that time failing, as so often his holdings seem to have done, or merely lowly-rated? Following the corporate news in this country lately, anytime I saw a headline about a rights issue or a 40/50% fall in one day, I knew to look and see whether Woodford owned it. And he usually did.

Too many people seemed to accept his notion that this was just a question of relative performance. He was avoiding things that have been going up and up, which hurts in the short-term, but he could one day be proved right. I'm sure at some point in the future Reckitt or Nestle, Microsoft or PayPal will indeed fall in price and/or be valued less highly. But that will be no help if what he has bought has gone to zero or lost most of its value.

I don't know if he always considered himself a "value investor" in the old sense of the word, but he seems to have believed that the margin of safety comes from the price you pay, not the qualities of the underlying the business. To hear him speak, the biggest danger to investors right now is people might wake up tomorrow and decide (rightly in his view) that Unilever should trade at 10x cash flow and not 20x. Alas, I think he overlooked the more imminent risk that the businesses he was buying might not make money or even be around next year. What are the chances the Procter & Gambles of this world won't make money next year?

Now, mathematically, it's right to say what you don't own can hurt you as much as what you do own when it comes to relative performance. But I would take the view that what you do own and how it can hurt you is more important. It's one thing to be hurt by not owning something that's going up, it's a whole other thing to be hurt by the things you do own blowing up in your face.

Yep, this wasn't a case of him being ahead of the curve in the next market crash and getting punished for it, it was just rank awful stockpicking.

Malthusian

Deleted_User wrote: »

That fund has a 7.5% investment in HL

Which has made oodles of money from the rise and fall of Woodford Equity Income and that money isn't going anywhere, wild claims about misselling notwithstanding. I'm not seeing the problem.

Most HL customers end up in their expensive multi-manager funds (which result in them paying more to DIY than they would for full bespoke advice), not putting all their money into one of their Wealth 50. (And yes I know the HL MM funds are exposed to Woodford.) I agree that HL's reputation will take a hit but I can't see customers deserting them en masse for other buy lists.

There are three categories of HL investor. Those who put everything in their MM funds will be largely oblivious as they will still do OK even with the Woodford hit. Those who buy random funds from their buy list will be the most annoyed, but it's one fund in fifty. Those who are genuine DIY investors and ignore the buy list won't care as HL is still the big beast and the reassuringly expensive option. Unless there is a mass exodus it's still a licence to print money.

In terms of PR strategy HL should now be emphasising how terrifically most of the other Wealth 50 funds have performed. We're in a 10-year bull market, I'm sure most of them have.

If either Lindsell or Train fancy striking out on their own and launching a new fund, HL will still be there to raise hundreds of millions for them. "Forget Woodford, this guy's made 10%pa returns over the last ten years, millions of investors who followed our Wealth 50 recommendation got rich, now he's launching a new fund, get in at 100p..."