Woodford Concerns

EdGasketTheSecond

The trouble is there is quite a lot of knowledge required to know the differences between open-ended funds and investment trusts, liquid and iliquid assets, quoted and non-quoted investments etc. Most people probably realise a fund is safer than individual shares but not much more; they are too busy earning a living. They would probably follow HL's recommended funds and a well-known name. I have no solution to offer but just saying I don't think telling people they are 'doing it wrong' (bowlhead99) is really fair as they don't have your experience and knowledge.

bowlhead99

EdGasketTheSecond wrote: »

I have no solution to offer but just saying I don't think telling people they are 'doing it wrong' (bowlhead99) is really fair as they don't have your experience and knowledge.

But factually, they are doing it wrong, and I don't have a solution for them either, other than having sympathy with them as mentioned and spending a few thousand hours on here over the years trying to help people do it less wrong.

Some people on here are quite vocal that all active fund managers are rogues and charlatans and so all you should do is invest in an appropriate index tracker, so you shouldn't have been in Woodford anyway. No doubt at the next major markets crash (the likes of which we haven't seen for a decade) there will be people crying to media that they thought all they needed to do was invest in a cheap index and didn't expect 50% paper losses etc so now they have sold it. I will have sympathy for them too, because it is easy to make mistakes or not research stuff yourself when you think people are telling you the right answers in your own best interests and the answers make sense.

jaybeetoo

bowlhead99 wrote: »

a 15-20%+ discount to NAV for unlisted holdings isn't out of whack with other investment trusts in recent years.

How accurate is the NAV? It is hard to value unlisted shares and, if Woodford is a forced seller, some of the listed and unlisted investments may be worth a lot less than their current valuation..

MaxiRobriguez

EdGasketTheSecond wrote: »

The trouble is there is quite a lot of knowledge required to know the differences between open-ended funds and investment trusts, liquid and iliquid assets, quoted and non-quoted investments etc. Most people probably realise a fund is safer than individual shares but not much more; they are too busy earning a living. They would probably follow HL's recommended funds and a well-known name. I have no solution to offer but just saying I don't think telling people they are 'doing it wrong' (bowlhead99) is really fair as they don't have your experience and knowledge.

Anyone who is putting a significant portion of their wealth into something should at least do some basic research such as the underlying components of what makes up the fund.

If you buy something because it's "a fund and therefore safer" then presumably no one can be held accountable if they purchase a tech fund rather than an (real) income fund? Or an emerging market fund over a developed market fund?

Everyone should be willing to spend an hour at least undestanding *a bit* about something they're about to sink thousands into.

MaxiRobriguez

jaybeetoo wrote: »

How accurate is the NAV? It is hard to value unlisted shares and, if Woodford is a forced seller, some of the listed and unlisted investments may be worth a lot less than their current valuation..

That is the game we're going to be playing. Currently trading a 32% discount on previously quoted NAV.

At some point people are going to take the plunge with a small amount of their capital.

EdGasketTheSecond

Just downloaded the KID document from HL's website:


https://www.hl.co.uk/shares/shares-search-results/w/woodford-patient-capital-trust-ord-gbp0.01


Looking at 'Performance Scenarios' section, the most likely outcome is a loss?? Why then would anyone want to invest based on the KID? Even under a 'favourable Scenario' it is only showing an expected gain after 5 years of 4.53% !


PS if I'm reading that incorrectly please advise what it is supposed to be saying

AnotherJoe

EdGasketTheSecond wrote: »

Just downloaded the KID document from HL's website:


https://www.hl.co.uk/shares/shares-search-results/w/woodford-patient-capital-trust-ord-gbp0.01


Looking at 'Performance Scenarios' section, the most likely outcome is a loss?? Why then would anyone want to invest based on the KID? Even under a 'favourable Scenario' it is only showing an expected gain after 5 years of 4.53% !


PS if I'm reading that incorrectly please advise what it is supposed to be saying

[STRIKE]5[/STRIKE] 4.53% EACH year after 5 years.

It doesn't strike me as correct that its mid range on risk (4) when you look at the top ten constituents. I've thought it was a 6 or 7? SMT for example, which from memory has more "blue chip" tech companies and fewer startups is rated a 5 and Fundsmith a 4 yet that is all established companies.

bowlhead99

AnotherJoe wrote: »

It doesn't strike me as correct that its mid range on risk (4) when you look at the top ten constituents. I've thought it was a 6 or 7? SMT for example, which from memory has more "blue chip" tech companies and fewer startups is rated a 5 and Fundsmith a 4 yet that is all established companies.

Unfortunately for people looking to make a proper assessment of what they might be getting into, the European regulations that drive this disclosure use a mechanical calculation based on historic volatility measures. It is not a measure of what would happen in a crash or if the stock picks turn out to be rubbish.

So, something that has been going up or down quite smoothly will get a low score, whether it has been doing that through good fortune, or by holding investments that are non volatile , or by holding things that are very volatile but uncorrelated producing low volatility overall.

Investment professionals (IFAs etc) do not use this scale. The two ends of a '4' are quite different from each other. From time to time people post examples here of risk scales overlaid on each other to see how many grades of one scale you can fit on another, and to quote advertising parlance, "the answer may surprise you..."

EdGasketTheSecond

AnotherJoe wrote: »

5.53% EACH year after 5 years.

Well 4.53% actually but still, that is only in the most favourable scenario; the other three scenarios expect to lose between 2.64% and 12.7% pa. Not a very attractive proposition based on these figures and scenarios.

DennisTenus

If any good can come out of this it would be that we would evaluate our portfolio's and attitude to risk..

I have over 30% of my portfolio in Fundsmith, that too much/too risky?