Woodford Concerns

seacaitch

dividendhero wrote: »

Whole point of "Wealth 50" is that HL have so called experts who do have their eyes on the ball

No, that's really not the point at all.

It's a marketing tool to grow AUM.

Reaper

seacaitch wrote: »

If investing in funds of any type, it's crucial to look under the bonnet so as to understand what the fund actually holds. This should be totally obvious but there can be a tendency for some people to regard funds somewhat as black boxes, and this seems to be most common when there is a big brand (whether a personality or an organisation) managing the fund.

I'm not sure I agree. The whole point of a fund vs DIY share selection is you don't have to look at individual shares and evaluate their risk. You buy a fund that is rated at your risk profile and investing in the area you are interested in.

When I buy a fund I will look at the aggregate data to make sure I am not over exposed to one area (eg geographical) and other info in the KIID. I'll also have a look at the top 10 investments out of interest but I wouldn't go much further than that. If you constantly look over the fund manager's shoulder there isn't much point in having an active fund manager in the first place.

StellaN

AnotherJoe wrote: »

[/B]

All three of those comments can actually be backed up with facts.

1. He bought into a company based on impossible technology from a twice convicted fraudster.
2. In the U.K. equity sector his fund is 91st out of 91 according to no less than HL, and in the area of listed funds he's had several major purchases lose the majority of the investment due to mismanagement which he failed to spot.
3. His company broke the liquidity rules multiple times, used dubious devices to evade the liquidity rules and got himself into a precarious position whereby he was extremely vulnerable to downturns causing a vicious spiral

Agreed, but I just think it is amazing that for 25+ years clients and institutions and other wealth managers such as SJP etc were delighted with NW and forever singing his praises. He then set up his own fund which excelled in the first year but then followed this by totally changing his investment strategy with a disastrous three years. He's then subject to personal insults and called a fool, bad fund manager and completely incompetent by forum members who obviously know a lot better than him. Don't get me wrong I'm not saying he's none of these but its easy to be critical without knowing the full facts and nobody called him these things prior to the past three years...just saying.

Prism

seacaitch wrote: »

If investing in funds of any type, it's crucial to look under the bonnet so as to understand what the fund actually holds. This should be totally obvious but there can be a tendency for some people to regard funds somewhat as black boxes, and this seems to be most common when there is a big brand (whether a personality or an organisation) managing the fund.

It's the assets the fund holds that determine the fund's returns.

It's true that when when investing via a fund you are outsourcing a lot of responsibility to the fund manager but you are also responsible, indeed, ultimately responsible for what you're investing in if operating your own portfolio.

A look under the bonnet of WEI made it very clear that this was an unusual fund running a very unusual portfolio that contained a lot of specific risks compared to other funds with "equity income" in their name.

How many IFAs do you think were allocating their clients' money into WEI? Not that many I would guess.

Perhaps what this episode does highlight is that some HL customers might've been better off paying someone explicitly to run their money for them rather than paying someone to allow them to DIY it themselves without perhaps knowing enough about what they were doing.

I agree. If I don't understand the ethos of the fund manager, understand the types of companies they hold and some of the details of those companies, I won't use an active fund. It is why I have never invested in any Wioodford funds regardless of performance as I had no real idea what he was trying to do. Except for a few early experiments there are only around 10 active funds I would currently consider using.

seacaitch

Reaper wrote: »

The whole point of a fund vs DIY share selection is you don't have to look at individual shares and evaluate their risk. You buy a fund that is rated at your risk profile and investing in the area you are interested in.

I didn't say to do what you're suggesting.

There's a pragmatic balance between looking inside the black box to have an appreciation of what the manager's doing with the portfolio - the types of assets it holds - and inspecting every individual holding, which would be OTT.

In WEI's case, for someone reasonably experienced it didn't require lengthy, detailed analysis to see that the shape of the portfolio was quite unusual, with particular specific risks IMO.

This isn't hindsight bias for me; I do this for each fund I own, periodically looking at the shape of the underlying portfolio to ensure it's in line with what I expect to see.

MaxiRobriguez

If you're going to chuck serious allocation of your wealth at something then it's on you to do some basic research as to what you're putting your money into.

I have some sympathy if people check, invest and then the portfolio holdings change significantly over the short-medium term, but I really struggle to find sympathy for anyone that claims they were misled because WEIF should have been composed of larger, liquid, dividend paying companies.

Probably would have taken 2 hours to get a decent grasp of the fund. Now divide the money you've spent on the fund by 2. That's effectively your hourly rate you're paying yourself to avoid situations like this, and you chose to ignore that hourly rate you could pay yourself because you couldn't be arsed.

seacaitch

Prism wrote: »

If I don't understand the ethos of the fund manager, understand the types of companies they hold and some of the details of those companies, I won't use an active fund.

I run my portfolio for a living and have done so for a long time, so if outsourcing management of my precious capital to people I: a) require a belief that the underlying strategy is sound; and b) need to see that they adhere to the stated strategy and aren't performing unexpected style drift or executing their strategy poorly IMV.

This latter point isn't about performance but about monitoring for behaviour, policies, actions that I think are unsound, imprudent, signs of a weak process etc.

As MaxiRobriguez states, when you've serious money on the line, you'd be a fool not to pay attention and ensure you're operating good oversight of those people or systems you've delegated responsibility to. This isn't the same as wishing to micromanage every holding in every fund. It's the old "Trust, but verify", and probably second nature to anyone used to running projects.

Brian65

cogito wrote: »

I think that what you’re missing is that there have been red flags over WEI for three years or so. HL were clearly wrong to continue promoting the fund.

No thats exactly my point.
So how do we know HL aren't promoting others they have red flags over?

fun4everyone

New statement from Hargreaves Lansdown.

https://www.hl.co.uk/news/articles/woodford-equity-income-what-to-expect-now

Apparently they are

learning lessons

P*** off, recommending that fund for the last 2 years was a complete scam.

Freecall

Reaper wrote: »

You buy a fund that is rated at your risk profile and investing in the area you are interested in.

Reaper wrote: »

When I buy a fund I will look at the aggregate data to make sure I am not over exposed to one area (eg geographical) and other info in the KID.

Really?

I'm not a big fan of KIDs but let's take a look at that of WPCT.

Woodford Patient Capital Trust KID

Risk Indicator
"We have classified this product as class 4 out of 7, which is a
medium risk class."

Turning to the performance scenarios, under the most favourable conditions it says you might expect an average annual return of 14.1% after 1 year (really, for early-stage unquoted enterprise investments!) which somehow reduces to 4.53% if you hold it for the longer period of 5 years.

KIDs are not only misleading but for the inexperienced have an air of authority about them because they are required by law.

I think that we should have a new warning...

'Reading KIDs can seriously damage your financial health'

They're awful.