Neil Woodford makes a comeback

Moe_The_Bartender

ZingPowZing said:

Arguably, but Moe The Bartender is saying something else, he says it is the buyer's responsibility to look under the bonnet, check the electronics and, if it goes wrong, blame herself. If investors were held to that level of expertise, there would be no need for a list of recommendations on the Hargreaves Lansdown website, by which most private investors in Woodford were netted.

Hargreaves Lansdown has a lot to answer for for their part in the Woodford funds fiasco.

I was speaking metaphorically as I’m sure you know. Woodford made his objectives very clear in his prospectus for anyone who cared to read it. Every single holding was fully disclosed on his website. I'm not going to claim any special knowledge but I had what was for me a very significant sum tied up in his fund but alarm bells started ringing for me when I saw the extent of the unlisted stocks in the portfolio. There was no breach of his prospectus at the time (that only came about when he breached the 10% limit for unlisted stocks when he had to sell the liquid stuff to meet redemptions) but these did not belong in an income fund as far as I was concerned so I sold out - fortunately for me before the rot set in.

I’m not completely without sympathy for those who lost money but many of them clearly did not understand what they had bought. I include the idiots at Kent Council in that. They really should have known better but then, they were the same idiots who had huge sums on deposit in the Icelandic banks that failed in the GFC.

[Deleted User]

Investors are protected by EU regulation that restricts unlisted holdings to 10% of the value of these funds. Technically there was no breach, but only because many Woodford holdings were listed through the Guernsey stock exchange (deputy chairman Steve Lansdown);  a practice described by Bailey as "regulatory arbitrage." It's hard to describe that as anything other than deceptive. “Listing something on an exchange where trading does not actually happen, as far as I can see, does not actually count as liquidity,” FCA chief executive Andrew Bailey pointedly told Morgan’s committee.

Perhaps the strongest criticism of all, however, came from the Bank of England, whose governor Mark Carney described funds promising daily redemptions while investing in illiquid assets as “built on a lie”.

“That leads to an expectation of individuals that it is not that different to having money in a bank,” he told the Treasury Select Committee last month.

You may have seen warning signs, many were reassured by Hargreaves Lansdown full support for the fund up to the day it was gated. It is implausible that Hargreaves Lansdown were not abreast of developments; they had nineteen meetings with Woodford before the fall. It wasn't all Woodford's fault, Link were weak (that is why they were chosen for the job) Hargreaves Lansdown were complicit.

eastmidsaver

it's fair to say only invest what you can afford to lose, and investments can go down as well as up, but in this instance it wasn't fair game. as the majority of people have pointed out, what was advertised as being the fund objective turned out to be completely untrue. i think this is a big part of the upcoming litigation cases.

Prism

kerpunk said:

it's fair to say only invest what you can afford to lose, and investments can go down as well as up, but in this instance it wasn't fair game. as the majority of people have pointed out, what was advertised as being the fund objective turned out to be completely untrue. i think this is a big part of the upcoming litigation cases.

This is what the KIID said
The fund aims to provide a reasonable level of income together with capital growth. Investment Policy The fund will invest primarily in the shares of companies listed in the United Kingdom. It may also invest in unlisted companies, overseas entities and derivatives. It is not anticipated that the use of derivatives will have a significant adverse effect on the risk profile of the fund. 

It sounds pretty much like the fund as advertised

Moe_The_Bartender

Prism said:

kerpunk said:

it's fair to say only invest what you can afford to lose, and investments can go down as well as up, but in this instance it wasn't fair game. as the majority of people have pointed out, what was advertised as being the fund objective turned out to be completely untrue. i think this is a big part of the upcoming litigation cases.

This is what the KIID said
The fund aims to provide a reasonable level of income together with capital growth. Investment Policy The fund will invest primarily in the shares of companies listed in the United Kingdom. It may also invest in unlisted companies, overseas entities and derivatives. It is not anticipated that the use of derivatives will have a significant adverse effect on the risk profile of the fund. 

It sounds pretty much like the fund as advertised

Take a random selection of equity income funds and you’ll find that the KIIDs all say pretty much the same thing. Only the form of words is different. KIIDs give no information that’s of use to anyone.

An exception is Fundsmith which not only says what they will invest in but also what they won’t. Clear as daylight.

Prism

Moe_The_Bartender said:

Prism said:

kerpunk said:

it's fair to say only invest what you can afford to lose, and investments can go down as well as up, but in this instance it wasn't fair game. as the majority of people have pointed out, what was advertised as being the fund objective turned out to be completely untrue. i think this is a big part of the upcoming litigation cases.

This is what the KIID said
The fund aims to provide a reasonable level of income together with capital growth. Investment Policy The fund will invest primarily in the shares of companies listed in the United Kingdom. It may also invest in unlisted companies, overseas entities and derivatives. It is not anticipated that the use of derivatives will have a significant adverse effect on the risk profile of the fund. 

It sounds pretty much like the fund as advertised

Take a random selection of equity income funds and you’ll find that the KIIDs all say pretty much the same thing. Only the form of words is different. KIIDs give no information that’s of use to anyone.

An exception is Fundsmith which not only says what they will invest in but also what they won’t. Clear as daylight.

Oh I agree, pretty useless. However vague enough to withstand any litigation that says the fund didn't do what it said it would... since like you say it doesn't say much at all.

talexuser

My opinion there is no case against Woodford, while he outperformed everyone was very happy to accept his positions, you can't sue just because he underperformed. The only case is against HL, and then only if you had clear transcripts of what was discussed with Woodford during the  two years of underperformance and if that is clearly at variance with what they were saying in public to their investors that they continued to have faith with him. Since this is pretty unlikely unless a whisteblower had a recorder going, and HL has had plenty of time to "update" their records, money for ambulance chasing lawyers is down the drain. 

Moe_The_Bartender

talexuser said:

My opinion there is no case against Woodford, while he outperformed everyone was very happy to accept his positions, you can't sue just because he underperformed. The only case is against HL, and then only if you had clear transcripts of what was discussed with Woodford during the  two years of underperformance and if that is clearly at variance with what they were saying in public to their investors that they continued to have faith with him. Since this is pretty unlikely unless a whisteblower had a recorder going, and HL has had plenty of time to "update" their records, money for ambulance chasing lawyers is down the drain. 

The only solid case is against Link who were responsible for overseeing the fund in which they failed abysmally. This was compounded by their disposal of some of the illiquid assets which were then sold on at a massive profit. I doubt that a case against HL or the FCA could be made to stick.

Thrugelmir

Moe_The_Bartender said:

talexuser said:

My opinion there is no case against Woodford, while he outperformed everyone was very happy to accept his positions, you can't sue just because he underperformed. The only case is against HL, and then only if you had clear transcripts of what was discussed with Woodford during the  two years of underperformance and if that is clearly at variance with what they were saying in public to their investors that they continued to have faith with him. Since this is pretty unlikely unless a whisteblower had a recorder going, and HL has had plenty of time to "update" their records, money for ambulance chasing lawyers is down the drain. 

This was compounded by their disposal of some of the illiquid assets which were then sold on at a massive profit.

Fire sales result in a buyers market. Be little demand in the UK. 

Steve182

ZingPowZing said:

Exactly the same strategy as before.

"When Woodford left Invesco and started his own firm he simply bought the same companies again, taking roughly 20% stakes in many of the same illiquid companies. He bought 30% in these companies at Invesco and 20% of these companies at his own firm. No wonder these stocks went up and no wonder his performance looked so good. Woodford managed £32bn at Invesco and £16bn at his own firm. The sheer weight of money going into the same stocks drove up their prices.

We all now know what happened when the money stopped flowing in and flowed out; the process reversed. When Woodford started selling his stakes, the hype went out of valuations and having Woodford on a shareholder register became Kryptonite to the stock price, compounding the underperformance of the fund."

The Telegraph interview (his first for years) would have been the choice of Woodford himself, and the names of the stocks he dropped into the conversation didn't happen by accident.  There were tears, reportedly. Whether Woodford once more intends to circumvent regulations by listing holdings on the Guernsey Stock Exchange wasn't broached in the interview afaik.

It's always been my understanding that he did change his strategy after leaving Investico and was basically in unchartered territory as far as his experience was concerned? That in addition to the fundamental problem of an OEIC with illiquid assets (never a good mix).