Woodford Concerns

bowlhead99

fun4everyone wrote: »

I believe the funds name was fair when the WEIF launched. It's makeup started to change drastically about a year afterwards.

It should also be noticed that there was a small change in the middle of all of this, perhaps brought about by regulators. WEIF was kicked out of the "UK equity income" sector and instead moved into the "UK all companies" sector. Why was the headline name not changed?

Not kicked out by regulators such as the FCA. Merely the Investment Association who run the classifications. Delivering more than the UK All Share over rolling 3-yr periods is a prerequisite, and his fund averaged something like 3.5% yield over 2015,16,17 while the all-share had done 3.6%. The two funds he had previously run at Invesco were likewise in the all company sector at the time.

The prospectus refers to aiming to create investors' returns through both income and capital growth. A lot of funds that don't have income as a particular target will deliver quite a bit less income than the UK All Share because the latter is necessarily weighted towards mature giant UK-listed multinationals that pay dividends such as financials, oilers, big pharma.

The marketing straplines for WEIF currently include:

"focused on delivering attractive long-term returns for investors through investment in quality companies that can deliver sustainable dividend growth"

"We aim to offer investors capital growth and a growing income stream, paid quarterly"

Long term outperformance is sought, and capital growth is a key part of the return he hopes to deliver. I don't think these are 'new' objectives. In response to investors wanting higher income perhaps at the expense of overall growth and total return, he created the Income Focus fund to ensure he still had a product qualifying for the sector where he originally made his reputation, though this is a smaller fund size.

MaxiRobriguez

Fatbritabroad wrote: »

For me this is the biggest potential issue. I bought Woodford when he set up as I used to hold his funds at invesco and before I had any clue what I was doing when I first started investing (edit I still don't know but at least I now know I have no idea which is why I buy index funds as my core holding and have a couple of punts on some satellites). Yes I should have read the prospectus but there will be alot of people buying this on reputation and because income funds are normally safe vanilla products

Whilst the regulators have sat on their hands I don't think you can go the full hog and disregard your own mistakes that were a complete ignorance of what you actually were investing your own money in. There's been a couple of people recently who've admitted to buying investments that they didn't understand nor research, yet think they have a right to enjoy uninterrupted growth.

You know what you were buying with index funds and the associated risks and had comfort in investing in those. Why not get to a similar position with this one before pulling the trigger?

webjaved

This is the perfect example of why you should diversify - when I read you had £50k in one fund, it felt like someone had punched me in the stomach and leaving me gasping.

You can only learn from your mistake and I hope you bounce back from this. There's loads of people on here that have given you solid advice. This is why I love the community on here, they genuinely want to help & make it easier for us to make decisions.

Prism

webjaved wrote: »

This is the perfect example of why you should diversify - when I read you had £50k in one fund, it felt like someone had punched me in the stomach and leaving me gasping.

You can only learn from your mistake and I hope you bounce back from this. There's loads of people on here that have given you solid advice. This is why I love the community on here, they genuinely want to help & make it easier for us to make decisions.

I don't think its a mistake to have more than 50k in a single fund. It very much depends on the total amount. I have about 130k in my largest fund. Diversifying across different asset classes is more important. I currently use equities, fixed rate savers and P2P.

MaxiRobriguez

Prism wrote: »

I don't think its a mistake to have more than 50k in a single fund. It very much depends on the total amount. I have about 130k in my largest fund. Diversifying across different asset classes is more important. I currently use equities, fixed rate savers and P2P.

Yes it's more about % of portfolio rather than actual currency amount.

Unless it's a very liquid, global index tracker by a big industry name being bought by a novice investor then allocations to one specific fund probably shouldn't be over 40% of total portfolio at the very, very max, and that is based on a portfolio which is planned around market caps by geography and has chosen just one US fund to cover all US allocation.

Malthusian

Prism wrote: »

I don't think its a mistake to have more than 50k in a single fund. It very much depends on the total amount.

Certainly, but if someone says they have £50k in a fund which has tanked, you would expect them to follow it up with "...but luckily that's only 10% of my £500k portfolio" if that were true. If they hadn't overinvested they wouldn't have mentioned the amount in the first place.

No more than 10% of your investable assets should be allocated to a "star manager" for precisely this reason. If a manager is capable of dramatically outperforming then they are capable of dramatically underperforming - whether or not you believe in star managers this is a statistical law of gravity, due to the risks they have to take to generate alpha.

Tracker funds are a different matter and there is nothing wrong with having more than 10% in those providing you are properly diversified.

Audaxer

Malthusian wrote: »

Certainly, but if someone says they have £50k in a fund which has tanked, you would expect them to follow it up with "...but luckily that's only 10% of my £500k portfolio" if that were true. If they hadn't overinvested they wouldn't have mentioned the amount in the first place.

Even if you had £500k portfolio of active funds, would it not be 'safer' to have a UK equity income allocation of say £50k split between 2 or 3 different UK Equity income funds with different managers and approaches, so you are less exposed if one underperforms really badly?

EdSwippet

Audaxer wrote: »

Even if you had £500k portfolio of active funds, would it not be 'safer' to have a UK equity income allocation of say £50k split between 2 or 3 different UK Equity income funds with different managers and approaches, so you are less exposed if one underperforms really badly?

Holding multiple actively managed funds, all with different managers and different philosophies, runs the risk of you ending up with an overall portfolio that contains a bit of everything. The more you spread things around like this, the closer you get to something equivalent to a single tracker fund, but with much higher annual charges.

JohnRo

Audaxer wrote: »

Even if you had £500k portfolio of active funds, would it not be 'safer' to have a UK equity income allocation of say £50k split between 2 or 3 different UK Equity income funds with different managers and approaches, so you are less exposed if one underperforms really badly?

That's the approach I took in the income portfolio, three investment trusts held in each category for that very reason. Cost neutral in terms of holding and one monthly rebalance at CSD.

It also opens up the opportunity with regular rebalancing to capture some of said underperformance and hopefully then capitalis when the pendulum swings back the other way. That's the theory..

Audaxer

EdSwippet wrote: »

Holding multiple actively managed funds, all with different managers and different philosophies, runs the risk of you ending up with an overall portfolio that contains a bit of everything. The more you spread things around like this, the closer you get to something equivalent to a single tracker fund, but with much higher annual charges.

I know what you mean as I do like index funds, but if you are looking for an income portfolio with a natural yield of around 4% it is hard to achieve with index funds. So rather than having one UK equity income fund, I prefer to split my UK allocation over a few funds or ITs, rather than relying on the one manager in the sector.