The Woodford Affair - Poor media coverage

bowlhead99

bigadaj wrote: »

And actually well beyond that in the way he invested in unquoted funds was hidden by holding investment vehicles on small exchanges to cover the fact he was massively overweight in illiquid and speculatory investments.

Not exactly 'hidden' because he published his holdings monthly for all to see.

The issue was that he had at one point a very large pool of capital to work with, especially after his early success, but it wasn't permanent capital. He didn't appear to aggressively buy unquoted investments above any thresholds set, but they exceeded those thresholds when the total NAV shrank due to poor performance and redemptions, as the illiquid / unquoted stuff couldn't be exited at the same pace.

At the height of the reporting of the 'crisis', the people screaming that he was buying all this dodgy stuff and hiding it were perhaps missing the somewhat understandable logic behind the course of actions he was taking. The packaging of private assets into listed vehicles only happened as a result of the thresholds being threatened or actually broken as NAVs declined, and arguably were done to 'protect' investors from the alternative of firesales.

This is not to suggest that his original plan to get anywhere near to the thresholds as the fund grew, was sound. Of course it wasn't. He probably didn't realise how heavy the outflows would get if his fund delivered a run of losses.

brewerdave

My "ire" is reserved for the likes of HL, who pushed Woodford funds for all they were worth ,for several years. My wife and I are sitting on losses of considerably more than £2k in HL ISAs and Sipps - but of course, all this promotion was not advice:mad:
But ,one wonders ,would it have been any better if we had paid for advice ? I think not!

SonOf

brewerdave wrote: »

My "ire" is reserved for the likes of HL, who pushed Woodford funds for all they were worth ,for several years. My wife and I are sitting on losses of considerably more than £2k in HL ISAs and Sipps - but of course, all this promotion was not advice:mad:
But ,one wonders ,would it have been any better if we had paid for advice ? I think not!

in November 2017, the research company that we pay to support our advice told us (and all other IFAs that use their service) to not use that fund due to the high quantity of illiquid assets being used.

It is notable that not all research companies did this but the fact that some did suggests that you could have avoided this issue if you had used an adviser.

For reference, we only ever had 1 investor in that fund and that was him overriding our advice to not use it. We persuaded him to get out years ago.

Thrugelmir

brewerdave wrote: »

My "ire" is reserved for the likes of HL, who pushed Woodford funds for all they were worth ,for several years. My wife and I are sitting on losses of considerably more than £2k in HL ISAs and Sipps - but of course, all this promotion was not advice:mad:
But ,one wonders ,would it have been any better if we had paid for advice ? I think not!

Hope that your other investments are invested more conservatively then. A £2k notional loss is little more than part and parcel of investing. With some investments increasing in value while others decline over periods of time.

bigadaj

bowlhead99 wrote: »

Not exactly 'hidden' because he published his holdings monthly for all to see.

The issue was that he had at one point a very large pool of capital to work with, especially after his early success, but it wasn't permanent capital. He didn't appear to aggressively buy unquoted investments above any thresholds set, but they exceeded those thresholds when the total NAV shrank due to poor performance and redemptions, as the illiquid / unquoted stuff couldn't be exited at the same pace.

At the height of the reporting of the 'crisis', the people screaming that he was buying all this dodgy stuff and hiding it were perhaps missing the somewhat understandable logic behind the course of actions he was taking. The packaging of private assets into listed vehicles only happened as a result of the thresholds being threatened or actually broken as NAVs declined, and arguably were done to 'protect' investors from the alternative of firesales.

This is not to suggest that his original plan to get anywhere near to the thresholds as the fund grew, was sound. Of course it wasn't. He probably didn't realise how heavy the outflows would get if his fund delivered a run of losses.

It was reported as a being beyond what he was allowed to do, it may have been beneficial but it could also have been detrimental if the fund had been suspended earlier and more liquid assets not have been sold, depends on each investors position.

Woodford largely made his name by avoiding fashion investing over the dotcom years and staying with tried and trusted higher dividend stocks, seemed an odd aberration to have then gone heavily into speculative investments including cold fusion.

Thrugelmir

bigadaj wrote: »

Woodford largely made his name by avoiding fashion investing over the dotcom years and staying with tried and trusted higher dividend stocks, seemed an odd aberration to have then gone heavily into speculative investments including cold fusion.

Should have capped the size of the fund. Lack of opportunities to deploy investors cash must have been one major consideration. At it's peak over £10bn funds under management. Whereas even VLS60 only has £7.3bn now.

Linton

Thrugelmir wrote: »

Should have capped the size of the fund. Lack of opportunities to deploy investors cash must have been one major consideration. At it's peak over £10bn funds under management. Whereas even VLS60 only has £7.3bn now.

Exactly. Having run out of of sensible places in which to invest he was left with the non-sensible ones.

[Deleted User]

A quarter of a million HL clients are stuck with Woodford investments. Staggering.

https://uk.reuters.com/article/uk-woodford-inv-suspension-hargreaves/nearly-300000-hargreaves-lansdown-clients-exposed-to-woodford-fund-idUKKCN1TK10P

Prism

ZingPowZing wrote: »

A quarter of a million HL clients are stuck with Woodford investments. Staggering.

https://uk.reuters.com/article/uk-woodford-inv-suspension-hargreaves/nearly-300000-hargreaves-lansdown-clients-exposed-to-woodford-fund-idUKKCN1TK10P

Shows how many people are pretty bad at looking after their own SIPP. These are the kind of people that might be better off with an IFA

[Deleted User]

Prism wrote: »

Shows how many people are pretty bad at looking after their own SIPP. These are the kind of people that might be better off with an IFA

Firstly, many IFAs recommended Woodford.

Secondly, lots of other active funds still around that recommended by IFAs holding illiquid assets. Always possible for them to underperform leading to large withdrawals and instability

Really not sure how having an IFA helps. Guess it helps having an IFA who doesn’t recommend such funds but how do you evaluate IFAs if you don’t understand investments?

As far as I can tell, four things made Woodford special:

1. More transparent with his holdings than the other funds. When the trouble started it meant an annual downgrade from the Morningstar and eventually short-selling which precipitated and accelerated the end.

2. A lot of large institutional clients who could withdraw huge chunks instantaneously

3. Popularity of a star manager which resulted in size he couldn’t manage. This story keeps repeating again and again and again but people still fall for stardom

4. These funds were genuinely active rather than closet passive. By definition this means long periods of significant underperformance leading to risk of large withdrawals.