Woodford Concerns

redux

dividendhero wrote: »

Nicky Morgan is a former corporate lawyer, I imagine she already understands the stuff about suspending funds. I would suspect her line of enquiry with the FCA will cover

- How Woodford was allowed to stray away from the funds intended remit so much.

- Woodford flouting the rules by indulging in tactics such as listing unquoted companies on the Guernsey stock exchange and selling assets to his others funds

- Symbiotic relationship between HL and Woodford, why did they still keep "guiding" their clients into Woodford when they had a team of analysts who must have known what was going on

Besides that, the most surprising aspect I've seen on this thread is the fund allegedly having acquired shares in Patient Capital at full asset value, instead of at an open market (i.e. discounted to NAV) price.

If this is true, how exactly would it have happened? Were new WPCT shares issued, or was there some intermediary process, and if so where did the profits of this arbitrage end up?

Edit: cross-posted before I saw the immediately above IanManc post, now saving me finding and quoting the previous. And it may also answer my question.

dividendhero

Regarding some of Woodford's off piste investments, I can see the case for some of them - in the right fund of course, not a UK income fund by any stretch.

But I really can't get my head round "Industrial Heat", the cold fusion company. It's product called e-cat has been debunked by nuclear engineers. Apparently one demo of the product showed it producing electricity to a bunch of engineers. One of them spotted the trick and challenged the rep from Industrial Heat if he could check the earth wire! Obviously it should be at zero volts, but they were feeding power into it using the earth wire

While Woodford himself has no scientific training, some of his team hold PhD's in science - how on earth were they taken in and why does Industrial Heat still feature in their portfolio with a value of millions??:mad:

Beenie

To answer redux, the HL seminars are 2hr affairs. We got the impression that usually they go straight into the investment info, but because Woodford has or had been dominating the financial press, they felt obliged to answer HL investors/customers questions in full. I think it took about 20-25 minutes of the allotted time.

One thing HL emphasised was that they had meetings and tried to steer Woodford somewhat. That clearly didn't work, but their current take is that when the suspension is lifted, there will be cheap shares available and it could all come good in the end. There were lots of graphs showing how the market had fared over a few decades, and as no-one can predict the future, Woodford might not turn out to be so bad and that's why HL didn't take action earlier.

An example used was that of an independent investor who wanted to pick safe companies, such as banking, supermarkets and the petro-chemical industry. He might have picked RBS, Tesco and BP as his 'safe' bets and we all know what happened to them post 2008.

coyrls

Beenie wrote: »

but their current take is that when the suspension is lifted, there will be cheap shares available

That doesn't make sense. When the suspension is listed the unit price will reflect the price of the the underlying investments. It is not an Investment Trust; there can be no discount that makes the units "cheap".

Beenie wrote: »

An example used was that of an independent investor who wanted to pick safe companies, such as banking, supermarkets and the petro-chemical industry. He might have picked RBS, Tesco and BP as his 'safe' bets and we all know what happened to them post 2008.

Completely irrelevant, of course an independent investor could do someting stupid, hence the advice to invest in funds.

dividendhero

Beenie wrote: »

One thing HL emphasised was that they had meetings and tried to steer Woodford somewhat. That clearly didn't work, but their current take is that when the suspension is lifted, there will be cheap shares available and it could all come good in the end. There were lots of graphs showing how the market had fared over a few decades, and as no-one can predict the future, Woodford might not turn out to be so bad and that's why HL didn't take action earlier.

Shocking complacency from HL there!! If an official in Kent Council hadn't click on a "SELL" button this time last week then HL would still be recommending Woodford funds to widows & orphans :mad:

Issue with Woodford isn't so much some of his poor stock picks, it's the fact he's gone off piste in venturing way outside his remit and competence, then tried to cover it up with smoke and mirrors.

Oh and what's happened to Peter Hargreaves? He's often on the media talking up Brexit or Woodford - but not a word from him over this debacle

arnoldy

I think now parliament and the regulators are nvolved in this Woodford/Hargreaves Landsdown sordid mess they need to also include Link group. Australian Company Link group (paid by Woodford) was part of the Troika of Woodford/Hargreaves/Link which all had roles in this whole situation together with the 'regulators' (term used loosely). With thousands of ordinary investors caught up in this, it must never happen again. Where there was wrong doing, or malpractice, or just Incompetence lessons need to be learned. A full Government investigation is the only option now. Trust in these institutions and companies can not be restored by soothing PR alone.

dividendhero

arnoldy wrote: »

I think now parliament and the regulators are involved .

While I'm sure MP's and FCA officials would have steered clear of ostrich farms and penny shares, I'm sure some of them will have their own money locked up in Woodford

Brian65

arnoldy wrote: »

A full Government investigation is the only option now.

Since they usually turn out to be an extremely expensive and slow whitewash I'd rather see an investigastion into the way the Government investigates itself to justify the regulator being asleep again.
(The only one I have any respect for is Frank Field who refused to be intimidated by Sir Phillip Greens threats of personal legal action, and eventually forced Green to return at least some money to BHS pensioners)

green_man

Beenie wrote: »

To answer redux, the HL seminars are 2hr affairs. We got the impression that usually they go straight into the investment info, but because Woodford has or had been dominating the financial press, they felt obliged to answer HL investors/customers questions in full. I think it took about 20-25 minutes of the allotted time.

One thing HL emphasised was that they had meetings and tried to steer Woodford somewhat. That clearly didn't work, but their current take is that when the suspension is lifted, there will be cheap shares available and it could all come good in the end. There were lots of graphs showing how the market had fared over a few decades, and as no-one can predict the future, Woodford might not turn out to be so bad and that's why HL didn't take action earlier.

An example used was that of an independent investor who wanted to pick safe companies, such as banking, supermarkets and the petro-chemical industry. He might have picked RBS, Tesco and BP as his 'safe' bets and we all know what happened to them post 2008.

I attended one of these seminars a couple of months ago (before Woodford blew up) , and although Woodford was mentioned a few times it didn’t take a significant portion of the event. They did mention that one strategy for de-risking was picking funds with different management philosophies and Woodford was discussed within this context.

To be honest I was pleasantly surprised by the lack of hard sell by HL and it was focused much more on general strategies rather than ‘what can HL do for you’.

Brian65

redux wrote: »

Besides that, the most surprising aspect I've seen on this thread is the fund allegedly having acquired shares in Patient Capital at full asset value, instead of at an open market (i.e. discounted to NAV) price.

Why is that surprising?
If an Investment Trust management is perceived as expensive/incompetent etc, the IT will trade at a discount. Because the management is perceived as a liability. That does not mean the shares within the trust are worth less than market value when you are buying them without that liability attached.