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The Woodford Affair - Poor media coverage
![[Deleted User]](https://us-noi.v-cdn.net/6031891/uploads/defaultavatar/nFA7H6UNOO0N5.jpg)
[Deleted User]
Posts: 0 Newbie
I was reading some of the media coverage and found it both misleading and unhelpful:
https://www.thisismoney.co.uk/money/diyinvesting/article-7576347/Woodford-investors-boil-anger-regret-stories.html
My takeaways:
1. People feel misled because recent returns did not match historic returns. That’s investment 101 and a warning in every piece of promotional literature which they chose to ignore.
2. Long term time weighted returns of the fund are still in excess of market returns (since 1985).
3. Putting money into funds of this nature is always a bet. If you like the idea of above market returns, you must expect underperformance over extended periods of time. People in the article are complaining due to ignorance and the reader is led to believe that complaints are somehow justified.
4. The funds were frozen because the investments were illiquid. That’s blatantly obvious from the description of the assets and, presumably, was specified as the fund’s right in the T&Cs. Woodford made money for the investors by picking illiquid funds; otherwise very hard to beat the efficient market. Funds which made millions for investors during the 2008 crisis were in a similar position. There is no potential for over performance otherwise.
5. Everyone is complaining about the ongoing charges. Costs don’t stop when the funds are frozen. The alternative is a fire sale to get pennies on the pound. Nobody seems to be requesting that.
6. I see a lot of mainstream funds mentioned on this board having a significant illiquid component. Presumably funds are offering them because investors in Britain like the sound of “my pension money is in the real estate”.
I certainly wouldn’t buy into active funds managed by star managers showing amazing historic returns but once you do, the investor should take responsibility for own actions rather than just blame the vehicle.
https://www.thisismoney.co.uk/money/diyinvesting/article-7576347/Woodford-investors-boil-anger-regret-stories.html
My takeaways:
1. People feel misled because recent returns did not match historic returns. That’s investment 101 and a warning in every piece of promotional literature which they chose to ignore.
2. Long term time weighted returns of the fund are still in excess of market returns (since 1985).
3. Putting money into funds of this nature is always a bet. If you like the idea of above market returns, you must expect underperformance over extended periods of time. People in the article are complaining due to ignorance and the reader is led to believe that complaints are somehow justified.
4. The funds were frozen because the investments were illiquid. That’s blatantly obvious from the description of the assets and, presumably, was specified as the fund’s right in the T&Cs. Woodford made money for the investors by picking illiquid funds; otherwise very hard to beat the efficient market. Funds which made millions for investors during the 2008 crisis were in a similar position. There is no potential for over performance otherwise.
5. Everyone is complaining about the ongoing charges. Costs don’t stop when the funds are frozen. The alternative is a fire sale to get pennies on the pound. Nobody seems to be requesting that.
6. I see a lot of mainstream funds mentioned on this board having a significant illiquid component. Presumably funds are offering them because investors in Britain like the sound of “my pension money is in the real estate”.
I certainly wouldn’t buy into active funds managed by star managers showing amazing historic returns but once you do, the investor should take responsibility for own actions rather than just blame the vehicle.
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Comments
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Deleted_User wrote: »
4. The funds were frozen because the investments were illiquid. That’s blatantly obvious from the description of the assets and, presumably, was specified as the fund’s right in the T&Cs. Woodford made money for the investors by picking illiquid funds; otherwise very hard to beat the efficient market. Funds which made millions for investors during the 2008 crisis were in a similar position. There is no potential for over performance otherwise.
Investing in unquoted stocks was Woodfords misdemeanour. Illiquidity could be a problem for any fund with a sizable holding in an individual stock.0 -
I think the way Baillie Gifford do it is more appropriate with funds and trusts. If you compare Scottish Mortgage and Long Term Global Growth the main difference between the two is the addition of the unquoted companies in SMT.
Woodford for some reason decided that he could cope with such a split in a single large fund - most likely so he could get business from pension funds which don't tend to touch IT's. Thats the bit I find most surprising. Saying that I have very little sympathy for anyone in that article. I bet none of them had a clue what they were invested in even though Woodford was incredibly transparent about the investments. There seems to be some overriding expectation that their capital was somehow safe.0 -
Thrugelmir wrote: »Investing in unquoted stocks was Woodfords misdemeanour. Illiquidity could be a problem for any fund with a sizable holding in an individual stock.
How is that a misdemeanour in the first case if it isn’t in the second? Exact same issue. Asset prices could drop, investors could ask for the money, which wouldn’t be available without significant losses.0 -
Richard Batchelor has little confidence he will get much of his £2,000 investment back and has accused fund manager Neil Woodford of being 'arrogant and unsympathetic', writes the Daily Mail here.
The former printing company owner, 66, and his wife Kitrina, 67, had about £300,000 in a personal retirement plan, and about £2,000 of this was invested in Equity Income in 2010, on the recommendation of his then-financial adviser.
I can't believe the guy whinging about have £2K of his £300K fund in Woodford. I'm also not sure why his FA thinks it's a good idea for him to have 0.67% investments in anything. I wonder how many funds he holds in total."Real knowledge is to know the extent of one's ignorance" - Confucius0 -
I can't believe the guy whinging about have £2K of his £300K fund in Woodford. I'm also not sure why his FA thinks it's a good idea for him to have 0.67% investments in anything. I wonder how many funds he holds in total.
Losses are painful. 1% loss feels stronger than a 5% gain. Investors are not rational.
Agree that it wasn’t a meaningful allocation.0 -
Richard Batchelor has little confidence he will get much of his £2,000 investment back and has accused fund manager Neil Woodford of being 'arrogant and unsympathetic', writes the Daily Mail here.
The former printing company owner, 66, and his wife Kitrina, 67, had about £300,000 in a personal retirement plan, and about £2,000 of this was invested in Equity Income in 2010, on the recommendation of his then-financial adviser.
I can't believe the guy whinging about have £2K of his £300K fund in Woodford. I'm also not sure why his FA thinks it's a good idea for him to have 0.67% investments in anything. I wonder how many funds he holds in total.
How can you blame an ex-advisor from 9 years ago? Sounds as if going DIY is the root cause of his problems.0 -
Thrugelmir wrote: »How can you blame an ex-advisor from 9 years ago? Sounds as if going DIY is the root cause of his problems.
Irrelevant. The risk with this fund was there 9 years ago.0 -
Deleted_User wrote: »Irrelevant. The risk with this fund was there 9 years ago.
The fund did not exist 9 years ago. WEIF only started on 2 June 2014 so someone is telling porkies here.0 -
Deleted_User wrote: »Irrelevant. The risk with this fund was there 9 years ago.
People shouldn't be investing at all if they have no comprehension of the risk they are exposed to.0
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