Woodford Concerns

IanManc

Alex Brummer had penned a highly readable defenestration of Mr Woodford in the Daily Mail today:

https://www.thisismoney.co.uk/debate/article-7165405/ALEX-BRUMMER-Like-Neil-Woodford-investors-feel-utterly-betrayed.html

Enjoy!

bowlhead99

Brian65 wrote: »

I suppose in that situation the assets would be sold to the highest bidder?
In which case we would find out what they are worth instead of trusting Woodford to get more?

You don't find out what they are worth by taking the shares to a car boot sale and saying "everything must go, who wants them??!"

If your parents are moving house and need to clear the loft because they're downsizing next week, they might take everything to a garage sale and they might put the boxed mint condition 1970s star wars toys in a big bag at two for a pound. And some collector might come along and convince your mum that he is the only guy in the neighborhood who would be interested in 40 year old plastic toys so he'll do her a favour and take them away, if she makes it three for a pound. Fine, what the heck, your mum no longer has the space, and is not really motivated to get top dollar, so she does the deal.

Whereas if you have time on your hands you can strategically seek out all the sci fi nerds in the country (or other countries), and explain how these pieces will really enhance their collections, and you are not selling them because you don't like them but just because you need to sell them to make space, but you don't necessarily have the time pressure to sell because you can move them into a storage facility for a while. So you can take your time and find the highest bidder in the world who wants them.

When you embark upon that process, some people will offer you a lowball price for a quick sale hoping to flip them on to a better bidder later. But if time is on your side (rather than being to sell in the next week or month) you can find that better bidder yourself and get a much higher sale price.

Herbalus

IanManc wrote: »

Alex Brummer had penned a highly readable defenestration of Mr Woodford in the Daily Mail today:

https://www.thisismoney.co.uk/debate/article-7165405/ALEX-BRUMMER-Like-Neil-Woodford-investors-feel-utterly-betrayed.html

Enjoy!

The elephant in the room for this article is how somebody who starts off with a list of how many years they've been involved in finance doesn't appear to have done any diligence on where he's invested. I don't know if that's an unfair comment, but when the author lists off a number of examples when there were concerns about Woodford funds dating back several years, I do wonder.

The author also seems to think this Woodford issue threatens the integrity of advice, which given that the majority of investors were DIY, seems troubling that he doesn't know what advice is.

Plus, it seems nothing to do with Equitable Life whatsoever. A very odd article.

cogito

Herbalus wrote: »

The elephant in the room for this article is how somebody who starts off with a list of how many years they've been involved in finance doesn't appear to have done any diligence on where he's invested. I don't know if that's an unfair comment, but when the author lists off a number of examples when there were concerns about Woodford funds dating back several years, I do wonder.

Quite right. Bummer embarrasses himself with this article.

Incidentally, with reference to Dampier, it was revealed earlier this week that he was still investing his own money in Woodford funds as recently as last month. I always regarded him as a numpty and he has provided further evidence to back up my view of him.

short_butt_sweet

Brian65 wrote: »

The fact Woodford won't reduce his £100,000 a day fees whilst its closed suggests to me he doesn't expect to re-open it soon?

it's easy enough for HL to waive their fees for holding WEI, when that's less than 2% of their income. for woodford, the management fees from WEI are presumably most of his company's income (since the Income Focus fund is smaller and shrinking, and WPCT only pays him performance fees which so far amount to a big fat zero).

if he did waive his fees, that would incentivize him to do a fire sale of unquoted and illiquid assets so he can re-open the fund ASAP and start earning some fees again - which wouldn't be in the interests of fund holders.

talexuser

Herbalus wrote: »

A very odd article.

That's the definition of the Daily Mail. :rotfl:

added edit:

Quote
"Hargreaves tells Woodford to repay investors from frozen fund even if it means selling his entire business"

How convenient, the Woodford name disappears quickly, instead of reminding everyone who was complicit in this during the (maybe long) time needed to maximise value for the eventual wind up. Nothing to see here folks, move on.

bowlhead99

Herbalus wrote: »

The elephant in the room for this article is how somebody who starts off with a list of how many years they've been involved in finance doesn't appear to have done any diligence on where he's invested. I don't know if that's an unfair comment, but when the author lists off a number of examples when there were concerns about Woodford funds dating back several years, I do wonder.

The author also seems to think this Woodford issue threatens the integrity of advice, which given that the majority of investors were DIY, seems troubling that he doesn't know what advice is.

Plus, it seems nothing to do with Equitable Life whatsoever. A very odd article.

The equitable life bit was just a prelude to say that he had previously been burned by investing in a bad product and then thought it was reasonable to invest a chunk of his savings with a well known popular manager promoted by a well regarded popular platform. It is also good to lump different financial disasters together because the daily mail readers like to see tabloid writeups that cause outrage.

I agree he does not come across very competent when he says:

As a result, once again, I am the big financial loser, wondering if I will ever see my savings restored.

If this kind of thing can happen to me — someone who writes about economics on a daily basis — then one truly fears for all the people out there who rely on the integrity of the financial advice they are given and those who look after their money

If you are a seasoned economics guru you do need to take some personal responsibility for evaluating what you are invested in, rather than blame the system.

This type of article, putting him on the same side of the fence as people who genuinely didn't know any better and took the advertising promotions as if they were advice, helps to reassure people that it wasn't their fault that they ended up in a gated fund because even an economics specialist will make that mistake. Telling people it wasn't their fault may be counterproductive if we want people to avoid pitfalls themselves rather than have a regulator bail them out of pitfalls or prohibit them from encountering them.

Really if he was genuinely good at understanding economics and business and markets, he wouldn't have made the mistake- at least, not if the chunk of his capital was a big chunk - but that's harder to admit. Perhaps I am being harsh on him with that comment.

However, my apparent animosity is because as he is someone with a large readership I really dislike the fact that he says "once again, I am the big financial loser, wondering if I will ever see my savings restored". There are already too many people bleating on the comments section of newspapers that they have lost their "savings" as if the whole NAV of WEIF is lost for good. It is a good job it is gated, otherwise the tabloids would be fueling the death spiral. The writer adds fuel to that fire when he wonders out loud if he'll ever be able to restore his savings. Yes you muppet, of course you will.

You invested one part of your savings in a fund that hasn't been wiped out - just dropped in value with probably more loss to come from that investment. But as you know so much about economics, you know that investments going up and down and some being much better or much worse than others, is just life. You have other investments, which have likely fared better, so you might even be up overall. Other than that, you can restore your savings by taking your eventual Woodford proceeds and investing them with Woodford or with someone else that you prefer. You could tell your readers that... so that as a result of receiving a bit of an education from you, they don't all panic. If you were so inclined.

But you are not so inclined, because you are a tabloid journo who writes what he thinks the audience wants to hear...

I have mentioned in an earlier post that paying an ongoing management fee of 0.05% a month or whatever while the fund is gated and the manager is attempting to fix it while still providing ongoing management work, is not really the end of the world. Clearly it would be outrageous if he wanted to increase the manager fee because of the extra complexity of trying to sort out the sh1tshow right now. But he is not doing that. His firm is just taking the usual contractual payment for being a manager.

If it is intended that the person upon whom you're relying to sort out the mess and deliver best value is to be sacked, but you want him to have the resources and motivation to deliver that best value, it's probably not the best motivator to say, "hey, you'll be sacked soon, but while waiting to do that, we're cutting your salary to zero. Make sure you do a great job in the meantime!" Economist or not, anyone who's worked in a business before doesn't think that is the best thing to do to extract value from a departing employee.

But as this article is from a tabloid, the fees aren't described, by the man who writes about economics on a daily basis - so should understand basic business- as merely 'unfair', or 'difficult to justify'. That might not whip up enough of a storm. Instead, "there is no other word than ‘grotesque’ to describe the way that Neil Woodford ... has refused to waive the fees".

talexuser

I'd be interested in how many times Brummer has extolled the virtues of Woodford when he was doing well!

talexuser

bowlhead99 wrote: »

If you are a seasoned economics guru you do need to take some personal responsibility for evaluating what you are invested in, rather than blame the system..

This guy appears to agree.
https://www.uknewsdesk.com/alex-brummer-woodford-investors-should-have-better-understood-what-they-were-buying-into/

bowlhead99

talexuser wrote: »

This guy appears to agree.

Yeah, he was writing earlier this month that...

...Investors in Woodford funds should have better understood what they were buying. Short-term gains are nice but Woodford has a strategy which involves spotting unrealised long-term value and backing unlisted companies.

There now has to be some kind of fire sale of holdings for liquidity to be restored and redemptions honoured.

That is a bad outcome fomented by investor panic and short-term thinking

Then a few weeks later clearly frustrated by the bad outcome which was caused by panic, he tells people that they had no chance because even he - a person with decades of experience commentating on financial matters and writing daily about economics - got too greedy and didn't look under the bonnet, so you have no chance; and it's not about taking personal responsibility, it's probably more to do with 'regulatory blunders and loopholes'.

And it's clearly not about avoiding investor panic, or be wouldn't be telling people he wonders if he will ever be able to restore his savings and truly fears for people who rely on advice.

Good to see his political jab at the end of his most recent article where it stops being about the regulators being too light touch or about millions of investors losing hard earned savings through no fault of their own... and instead "the most disturbing thing about it" is that it opens up a window for Corbyn to come in, remind us that the regulator is too light touch, and then he'll install Marxism.

Tabloids are actually sometimes quite good fun to read, but we know they make their money from being entertainers who play to a crowd, rather than by impartially giving you the facts of a situation.