Woodford Concerns

EdSwippet

Thrugelmir wrote: »

The day will come when a Blackrock\Vanguard passive fund is going to produce a poor return. Simply because a fund tracks an index of some description doesn't make it immune.

Provided it tracks a broad and recognised index correctly it won't produce a relatively poor return compared to other funds with similar remits. By definition it will produce an average return within its peer group. That's different to the case with Woodford.

Are you suggesting that one of these funds might foul up on their tracking? It's certainly possible, but given the tight controls and automated quantitative methods they employ, it is far less likely than a foul up created by some seat-of-the-pants guesswork on the part of a single individual or a small group of like-minded individuals.

seacaitch

Prism wrote: »

Interesting article on liquidity by Lindsell Train
https://www.lindselltrain.com/~/media/Files/L/Lindsell-Train-V2/investment-insights/2019/Reflections%20on%20Liquidity%20and%20Capacity%20-%20May%202019.pdf

Extract:

"Looking again at the sixteen 5% or larger positions, it is true that most of them could take a significant time to liquidate. On the assumption that we only traded 20% of the previous six months average volume, ten of those positions would take more than six months to sell out of completely. "

Having read this my view is LT are complacent about the impact that fund, and thus position size, represents to the interests of investors.

The very small reductions in OCFs from LT's AUM growing further are not in my view (remotely) offset by the lack of nimbleness arising from holding such large positions.

It's true that long term, thoughtful, patient investors don't often need to be particularly nimble, but occasionally they do, and six months to exit a position (or potentially considerably longer if that exit coincided with a period of market stress when liquidity was impaired) in most definitely not nimble and could be impactful to performance.

As such, if I was a holder of the LT OEICs I'd be happier if they hard- or soft-closed. And, I think LT's internal guideline "not to own more than 15% of the votes of any company we own" is way too high for my liking.

masonic

Sterlingtimes wrote: »

One financial commentator said (without much explanation) something like, "they'll be lucky to get half of their money back". This leaves me very worried.

That would seem to be rubbish. The unquoted holdings make up less than 30% of the fund, so even if they were all sold off for £1, you'd get almost three quarters of your money back.

Thrugelmir

EdSwippet wrote: »

Provided it tracks a broad and recognised index correctly it won't produce a relatively poor return compared to other funds with similar remits. By definition it will produce an average return within its peer group. That's different to the case with Woodford.

Are you suggesting that one of these funds might foul up on their tracking? It's certainly possible, but given the tight controls and automated quantitative methods they employ, it is far less likely than a foul up created by some seat-of-the-pants guesswork on the part of a single individual or a small group of like-minded individuals.

You've edited my post somewhat. Tracking can become a numbers game. Somewhat different to actually investing for a reason.

Moe_The_Bartender

Load of bovine doodoo from HL.

https://www.hl.co.uk/news/articles/woodford-our-view

He did well when invested in FTSE100 stocks and HL idiotically assumed that he would do the same when investing in sectors that he knew nothing about. Cold Fusion, my rear end.

Johnnyboy11

Will Bestinvest have to create a new category for the likes of the Woodford Equity Income Fund, the Dog of Dogs, or similar? Or the Alpha Dog?

EdSwippet

Thrugelmir wrote: »

You've edited my post somewhat. Tracking can become a numbers game. Somewhat different to actually investing for a reason.

Well okay. But now I've lost track of your point. Aside from heinous tracking error, how would Vanguard or Blackrock tracker fund pull a "Woodford" here and produce a "poor return" relative to its peers?

I use tracker funds precisely because I want the thinnest and least disruptive layer possible between me and the underlying stocks, bonds or whatever that these things hold. It's about huge diversification providing returns that match the market in a completely average way. I'm not investing in an index, I'm investing in all of the stocks that index holds.

aroominyork

Filo25 wrote: »

To be fair unlike Woodford he has the recent track record to back that up

That's not the point. HL are being condemned from all angles but would Nick Train bite the hand that feeds him? As the link in Prism's post #364 shows, LT now owns over 11% of HL and I'm sure a huge chunk of the money he runs comes from HL, just as it did for Woodford. If Train hits a rough patch does he wants to have previously suggested to HL that they take him off the Wealth 50?

Beenie wrote: »

We attended a very interesting seminar at lunch time. It was billed as Hargreaves Lansdown Investment in Retirement, and we did indeed get an excellent presentation from one of their staffers. However, the beginning of the meeting was entirely taken up with Woodford questions. I think they are back-pedalling to cover their embarrassment as we were told that they knew Woodford was performing badly two years ago but couldn't take him off the Wealth 50 list as it would have spooked the market and we would have the situation we have now (with suspended dealing) but two years earlier.

I'm astonished by that. HL really said they knowingly gave new investors bad advice? If so, my guess is it was an off-message junior who tomorrow will be looking for a new job.

talexuser

fun4everyone wrote: »

His performance in 2016 was utterly awful as well. The fund only made about 3.2% that year when every single other one out there did miles better.

He had a really good June 2014-June 2015. A lot of investors joined after that period and were met with dire performance ever since.

Timing pedantry proves nothing. If you joined in June 15 and left in June 17 you'd have made another 20%. You can prove anything either way by carefully choosing the right dates.

fun4everyone

talexuser wrote: »

Timing pedantry proves nothing. If you joined in June 15 and left in June 17 you'd have made another 20%. You can prove anything either way by carefully choosing the right dates.

And in 2017 as a whole he returned only 0.8% approximately when everything else rocketed. That's after that completely awful 2016 where the same thing happened. The fact is over the whole lifetime of the fund the first year was good and the next 4 were tragic. This is not just a couple of years of poor performance it was woeful for a considerable time.