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  • FIRST POST
    • Jonah01
    • By Jonah01 23rd May 19, 10:12 AM
    • 232Posts
    • 61Thanks
    Jonah01
    Woodford Concerns
    • #1
    • 23rd May 19, 10:12 AM
    Woodford Concerns 23rd May 19 at 10:12 AM
    Hi guys,

    Like most people invested in the Woodford Equity income it is very depressing and worrying.

    I have around 50k invested and have obviously lost on this due to his poor performance recently.

    I don't need access to the money so am happy to hold and wait until Brexit is done and for the UK to pick up.


    My concern and my main question to the people in the know here is can funds completely tank. By this I mean is it possibly that an investor could lose all of the money they have invested in fund? Can the fund go bust?

    I am thinking of getting out due to this concern.

    Thanks
Page 71
    • ZingPowZing
    • By ZingPowZing 21st Oct 19, 4:14 PM
    • 254 Posts
    • 92 Thanks
    ZingPowZing
    BBC Panorama's take on problematic aspects of the financial services industry tonight:

    https://www.bbc.co.uk/programmes/m0009mvp

    Should be interesting. Reform overdue for some flawed processes imo
    • itwasntme001
    • By itwasntme001 21st Oct 19, 4:16 PM
    • 442 Posts
    • 191 Thanks
    itwasntme001
    Linton's comment was in response to the person that said you should compare your returns to a world equity tracker and effectively if you don't beat the tracker you should ask questions.

    Nobody is denying that it depends on objectives, risk tolerance blah blah blah and having *some of* their wealth in a global equity tracker is not bad advice.

    However, to assume that some mistakes have been made if your balanced portfolio doesn't beat a global equity tracker during a period in which GBP weakens - favouring, with hindsight, overseas investments - seems quite a flawed premise. No doubt the adviser did not recommend the whole portfolio to be invested in an international equities product which can crash 50-60% from peak to trough over a couple of years of market downturn. So, when markets are favourable for that index, one wouldn't expect the more appropriate and balanced portfolio to keep up with the aggressive index product
    Originally posted by bowlhead99

    But all this is in context of WEIF as an investment. If one had invested in Woodford and compare every quarter its performance against a world equity index, one would have seen in 2017 it started to significantly underperform. Ok fine lets say they compared against an income fund benchmark as that would be the closest in terms of fair comparison. WEIF would still have shown a significant underperformance in 2017.


    Then the questions should have been raised. Why was WEIF underperforming? Had the strategy changed? Is it really an income fund still? Why isn't it a pure income fund anymore (when all the other income funds are)? Why was i mislead to believing the fund was and will remain an income fund when there are some companies in the fund that produce no company profits let alone dividends?


    Then one would have decided to sell out probably sometime in 2018 before the SHTF!!!
    Last edited by itwasntme001; 21-10-2019 at 4:41 PM.
    • Prism
    • By Prism 21st Oct 19, 4:59 PM
    • 1,199 Posts
    • 895 Thanks
    Prism
    More difficult yes, but it's not beyond the wit of even the most hands off investor to try and work how their performance stacks up against the market in general.

    How do you measure the performance of people making a living investing your money for you? They'll be thoroughly delighted to hear you you religiously check up on them every economic cycle or two.
    Originally posted by Sailtheworld
    Its harder than you make out though I would say. I don't use an IFA, but I do use some managed funds. I can compare against the world index but over a few years it really doesn't tell me much. I won't really know until after possibly 10-15 years if what I have chosen will do what I want it to do, which is help me retire early. I really need to see how it does during a recession but we haven't had one in the period I have been monitoring.

    I would say its the same for an IFA approach - its really hard to tell how well its doing over a short time frame, but its also asking a lot to wait for 10+ years to find out. I'm not sure comparing performance vs an index over a 3 or even 5 year period helps much.

    If we take Woodford (since this is a thread about him), its not the performance that would worry me initially but the makeup of the funds holdings. Thats what I would want an explanation of from an IFA over the last few years.
    • Thrugelmir
    • By Thrugelmir 21st Oct 19, 5:07 PM
    • 65,410 Posts
    • 57,549 Thanks
    Thrugelmir
    If one had invested in Woodford and compare every quarter its performance against a world equity index, one would have seen in 2017 it started to significantly underperform.
    Originally posted by itwasntme001
    Was the World Equity Index the fund's benchmark though?

    Secondly a diversified portfolio should have still registered a net overall gain. An all eggs in one basket approach with a Global Fund could equally be disappointing over a given time frame.
    ““there really is no such thing as ‘the future’, singular. There are only multiple, unforeseeable futures, which will never lose their capacity to take us by surprise.””
    ― Niall Ferguson
    • itwasntme001
    • By itwasntme001 21st Oct 19, 5:11 PM
    • 442 Posts
    • 191 Thanks
    itwasntme001
    Was the World Equity Index the fund's benchmark though?

    Secondly a diversified portfolio should have still registered a net overall gain. An all eggs in one basket approach with a Global Fund could equally be disappointing over a given time frame.
    Originally posted by Thrugelmir

    If you had read on i did say an income fund would be a better benchmark.
    • AnotherJoe
    • By AnotherJoe 21st Oct 19, 5:21 PM
    • 16,256 Posts
    • 19,498 Thanks
    AnotherJoe
    But all this is in context of WEIF as an investment. If one had invested in Woodford and compare every quarter its performance against a world equity index, one would have seen in 2017 it started to significantly underperform. Ok fine lets say they compared against an income fund benchmark as that would be the closest in terms of fair comparison. WEIF would still have shown a significant underperformance in 2017.

    Then the questions should have been raised. Why was WEIF underperforming? Had the strategy changed? Is it really an income fund still? Why isn't it a pure income fund anymore (when all the other income funds are)? Why was i mislead to believing the fund was and will remain an income fund when there are some companies in the fund that produce no company profits let alone dividends?

    Then one would have decided to sell out probably sometime in 2018 before the SHTF!!!
    Originally posted by itwasntme001

    Some great points there.
    Perhaps you could also send them to HL
    Please dont criticise my spelling. It's excellent. Its my typing that's bad.
    • itwasntme001
    • By itwasntme001 21st Oct 19, 5:27 PM
    • 442 Posts
    • 191 Thanks
    itwasntme001
    Some great points there.
    Perhaps you could also send them to HL
    Originally posted by AnotherJoe

    There would be no point as they would just point the finger at Woodford and say "no guarantees in investing, could lose all your wealth, we are just the middle man who just rake in fees at your expense blah blah blah".
    • Linton
    • By Linton 21st Oct 19, 5:35 PM
    • 11,394 Posts
    • 11,825 Thanks
    Linton
    If you had read on i did say an income fund would be a better benchmark.
    Originally posted by itwasntme001

    Woodford couldnt really be classed as an income fund since from 2015 at least its dividends were less than those from the FTSE100. It certainly wasnt a Global Fund either since it was 80% or more UK. Perhaps the best comparison was with the FTSE AllShare.


    That was the main reason I never considered investing in it - it was difficult to see what objectives it satisfied.
    • itwasntme001
    • By itwasntme001 21st Oct 19, 5:48 PM
    • 442 Posts
    • 191 Thanks
    itwasntme001
    Woodford couldnt really be classed as an income fund since from 2015 at least its dividends were less than those from the FTSE100. It certainly wasnt a Global Fund either since it was 80% or more UK. Perhaps the best comparison was with the FTSE AllShare.


    That was the main reason I never considered investing in it - it was difficult to see what objectives it satisfied.
    Originally posted by Linton

    The fact that it has lower dividend yield to FTSE100 does not mean it was not a fund who's main objective was to produce income for the investor in the form of dividends. That was it's main objective along with capital growth. So perhaps the basket of shares held by WEIF met both objectives (in the eyes of Woodford...) compared to blindly buying the FTSE100 and also that the dividends were more reliable overall compared to the FTSE100.


    Is there some sort of rule that says a fund needs to have a certain yield to classify itself as an income fund?


    And the fact that capital growth was also an objective does not make it immune to Woodford's decision to select those oh so very dodgy scam profitless "companies". You could argue about this all day, but if you have "income" a a main objective and/or "income" in your fund name, investing in anything that is as risky as he had done - and would seriously harm the income objective due to it being an OEIC - is completely unacceptable and anyone who had marketed or advised/recommended WEIF should be ashamed of themselves.
    Last edited by itwasntme001; 21-10-2019 at 5:52 PM.
    • Moe The Bartender
    • By Moe The Bartender 21st Oct 19, 6:07 PM
    • 529 Posts
    • 1,447 Thanks
    Moe The Bartender
    Difficult to pass comment without knowing what 'odd assortment of funds' he and his support team/ outsourced screening firm thought appropriate for you to hold.

    Still, if you are going to say "just because I have a high tolerance for risk, doesn't mean you should use an emerging markets fund as part of the portfolio", something is perhaps lost in translation. Emerging EMEA should be no more 'off the table' for a 'high risk tolerance' investor than emerging Asia or Latin America. Whether you hold a single global emerging market fund or employ three managers for three emerging regions and rebalance them, neither approach is a fundamentally flawed choice, if you don't mind having more moving parts in the model.

    That particular fund has done ok over the last decade or so, coming out of the last crash better than the IA Emerging Markets sector generally. Held on its own, you would probably say 'not one for widows and orphans', but it wouldn't be held on its own and you were not a widow or orphan, and had a high risk tolerance. Am I missing the point somewhere?
    Originally posted by bowlhead99
    I fully understand the point you are making here. The IFA's fund selection was based on the risk tolerance questionnaire which we completed together at the time (about ten years ago). It was interesting because I recall discussing the GFC with him and saying that I would never invest in banks. The EMEA fund invests in Russian and South African banks. If I wouldn’t invest in a UK bank, why on earth would I put money into a Russian one?

    It’s a long time since then and I have since come to the conclusion that investing on a geographical basis makes no sense at all. I can have exposure to these markets through Unilever, Diageo etc. so why invest in companies or countries where corporate governance and the political are two of the biggest risks?

    Incidentally, the annualised return of Fidelity EMEA is less than 6% over the last ten years and the ongoing charge is 1.83%. Nothing really to write home about and far inferior to the investments which I selected for myself.
    Hey, don't you badmouth this country. Compared to the rest of the third-world, we're doing great.
    • Thrugelmir
    • By Thrugelmir 21st Oct 19, 6:11 PM
    • 65,410 Posts
    • 57,549 Thanks
    Thrugelmir
    Woodford couldnt really be classed as an income fund since from 2015 at least its dividends were less than those from the FTSE100.
    Originally posted by Linton
    For definition purposes.

    UK Equity Income
    Funds which invest at least 80% in UK equities and which intend to achieve a historic yield on the distributable income in excess of 100% of the FTSE All Share yield at the fund's year end on a 3 year rolling basis and 90% on an annual basis.
    and for reference

    Global Equity Income
    Funds which invest at least 80% of their assets globally in equities. Funds must be diversified by geographic region and intend to achieve a historic yield on the distributable income in excess of 100% of the MSCI World Index yield at the fund’s year end on a 3 year rolling basis and 90% on an annual basis.
    ““there really is no such thing as ‘the future’, singular. There are only multiple, unforeseeable futures, which will never lose their capacity to take us by surprise.””
    ― Niall Ferguson
    • itwasntme001
    • By itwasntme001 21st Oct 19, 6:30 PM
    • 442 Posts
    • 191 Thanks
    itwasntme001
    For definition purposes.



    and for reference
    Originally posted by Thrugelmir

    So by that definition Woodford stopped being an income fund in 2015. Was the fund marketed as such before 2015 and did it continue to do so?


    Even if it was never meant to meet the requirement of an income fund by that definition, his main objective was income and his investment decisions seriously harmed this objective and it was easy to see if one took time to investigate his holdings back in 2017/2018.


    Although i understand some people may not be as clued up so would not know but many of these people would have used an IFA who should have been clued up and should have advised to exit Woodford back in 2018. IFAs and HL are both to be blamed for investor losses.
    Last edited by itwasntme001; 21-10-2019 at 6:34 PM.
    • talexuser
    • By talexuser 21st Oct 19, 7:29 PM
    • 2,864 Posts
    • 2,214 Thanks
    talexuser
    I well remember the headlines of Income being reclassified from the Income sector to Investment Association All Companies or Unclassified because of a small fall in dividend. It was not a big deal at the time because performance was good and it has happened before to many funds (If my memory is correct it happened at Invesco too?). The same has happened to my best performing UK Income fund.
    • Brian65
    • By Brian65 22nd Oct 19, 7:00 AM
    • 207 Posts
    • 106 Thanks
    Brian65
    Panorama BBC1 Mon 21 Oct 8.30pm is about Fund Managers including Woodford.
    Originally posted by Brian65
    Anyone else see it?
    It appears the early 'growth' in Woodford's fund was his own inflated valuations, which increased his fees and sucked in more investors. The programme ended with a camera crew outside Woodford's office, where he ignored their questions and scurried past them away inside without saying a word, like a cowboy roofer on rogue traders.
    Edit: Sorry didn't notice a separate thred has started on this programme.
    Last edited by Brian65; 22-10-2019 at 7:11 AM.
    • bowlhead99
    • By bowlhead99 22nd Oct 19, 8:45 AM
    • 9,502 Posts
    • 17,303 Thanks
    bowlhead99
    Anyone else see it?
    It appears the early 'growth' in Woodford's fund was his own inflated valuations, which increased his fees and sucked in more investors.
    Originally posted by Brian65
    I don't think that's really the case. He had a 5 to 10 billion fund which increased its NAV by 25% over the first 18 months (end of 2015) and was up to about 40% after about 3 years (mid 2017), and they were only nudging over the 10% threshold for unquoteds by 2018 when FCA looked at them as their NAV and AUM fell.

    The idea that the high percentage growth on billions really came from a few tens of millions of upwards valuations on the unquoteds is somewhat far fetched. Some of the 'notorious' upwards valuations such as IH did not happen until 2018, so it seems unlikely that little old ladies invested their life savings in 2016 in a fast growing fund which was only growing fast due to it rapidly marking up things like IH.

    The programme ended with a camera crew outside Woodford's office, where he ignored their questions and scurried past them away inside without saying a word, like a cowboy roofer on rogue traders.
    Hmm, analysts earlier in our programme are saying that some time ago it could be difficult to get a meeting with him even if you are considering investing £200m in his products, so we think the best way to get an interview is to go to his office in the dark and ambush him unannounced with a film crew as he gets out of his car to ask whether he overvalued companies in his fund and rant at him about 'what would you say to the people who put money in your fund and can't now get at it' as he walks past.

    The result: presenter gives a strong sigh of exasperation for the cameras as unsurprisingly Neil doesn't choose to engage.

    The guy has done a carefully crafted press release saying what he wants to say to the people who put money in the fund and can't get at it, and again when the redemption freeze was extended. So, what serious 'new insight' does the chap from Panorama think he will get by rocking up a some time later for an unscheduled ambush and hollering at him as he goes into his offce?

    The visit was after the fund was gated but before Link delivered the news that the fund should not reopen and fired him. The reporter ended his segment with "That was the last time he went to work. One hour after we approached him, Neil Woodford was sacked by the administrator of the fund. All his funds have now been closed down".

    That's a considerable amount of spin / artistic licence and does little to inform investors in the products about what is going on. So there are now probably some worried little old ladies with some 'savings' in WIF or WPCT who watched the show and think that the manager has gone and their fund is closed down and maybe they lost all their money because the programme was talking about investors losing hundreds of pounds every day.

    In reality Woodford is still 'going to work' and employing staff at his management firm, continuing to discharge his obligations to WIF and WPCT which have not been closed down. WIF is suspended to avoid a run on it, with the assets managed by Woodford who is serving notice, and Link are looking at options. The daily reported NAV of WIF, still managed by Woodford, is 3.5% higher than it was when suspended a week ago. Meanwhile the WPCT board are looking at alternative management groups to put something in place during the three month notice period given to them by Woodford. As discussed upthread, WPCT investors who hold out may eventually get more or less than the current market price.
    • Brian65
    • By Brian65 22nd Oct 19, 9:16 AM
    • 207 Posts
    • 106 Thanks
    Brian65
    I don't think that's really the case. He had a 5 to 10 billion fund which increased its NAV by 25% over the first 18 months (end of 2015) and was up to about 40% after about 3 years (mid 2017), and they were only nudging over the 10% threshold for unquoteds by 2018 when FCA looked at them as their NAV and AUM fell.

    The idea that the high percentage growth on billions really came from a few tens of millions of upwards valuations on the unquoteds is somewhat far fetched. Some of the 'notorious' upwards valuations such as IH did not happen until 2018, so it seems unlikely that little old ladies invested their life savings in 2016 in a fast growing fund which was only growing fast due to it rapidly marking up things like IH.

    Hmm, analysts earlier in our programme are saying that some time ago it could be difficult to get a meeting with him even if you are considering investing £200m in his products, so we think the best way to get an interview is to go to his office in the dark and ambush him unannounced with a film crew as he gets out of his car to ask whether he overvalued companies in his fund and rant at him about 'what would you say to the people who put money in your fund and can't now get at it' as he walks past.

    The result: presenter gives a strong sigh of exasperation for the cameras as unsurprisingly Neil doesn't choose to engage.

    The guy has done a carefully crafted press release saying what he wants to say to the people who put money in the fund and can't get at it, and again when the redemption freeze was extended. So, what serious 'new insight' does the chap from Panorama think he will get by rocking up a some time later for an unscheduled ambush and hollering at him as he goes into his offce?

    The visit was after the fund was gated but before Link delivered the news that the fund should not reopen and fired him. The reporter ended his segment with "That was the last time he went to work. One hour after we approached him, Neil Woodford was sacked by the administrator of the fund. All his funds have now been closed down".

    That's a considerable amount of spin / artistic licence and does little to inform investors in the products about what is going on. So there are now probably some worried little old ladies with some 'savings' in WIF or WPCT who watched the show and think that the manager has gone and their fund is closed down and maybe they lost all their money because the programme was talking about investors losing hundreds of pounds every day.

    In reality Woodford is still 'going to work' and employing staff at his management firm, continuing to discharge his obligations to WIF and WPCT which have not been closed down. WIF is suspended to avoid a run on it, with the assets managed by Woodford who is serving notice, and Link are looking at options. The daily reported NAV of WIF, still managed by Woodford, is 3.5% higher than it was when suspended a week ago. Meanwhile the WPCT board are looking at alternative management groups to put something in place during the three month notice period given to them by Woodford. As discussed upthread, WPCT investors who hold out may eventually get more or less than the current market price.
    Originally posted by bowlhead99
    Sorry yes I meantthe inflated asset value of the trust not fund and should have said so.

    One might have hoped he would have had an update for his worried punters when the BBC crew were there. Hard to imagine Woodford couldn't be bothered to talk to someone with £250 million to invest - rather he was evading answering their awkward questions - again.
    • Sailtheworld
    • By Sailtheworld 22nd Oct 19, 10:45 AM
    • 531 Posts
    • 544 Thanks
    Sailtheworld
    Its harder than you make out though I would say. I don't use an IFA, but I do use some managed funds. I can compare against the world index but over a few years it really doesn't tell me much. I won't really know until after possibly 10-15 years if what I have chosen will do what I want it to do, which is help me retire early. I really need to see how it does during a recession but we haven't had one in the period I have been monitoring.

    I would say its the same for an IFA approach - its really hard to tell how well its doing over a short time frame, but its also asking a lot to wait for 10+ years to find out. I'm not sure comparing performance vs an index over a 3 or even 5 year period helps much.
    Originally posted by Prism
    It has to be worth the effort to try and monitor the performance of people you employ surely? The wrong (or right) decision can make a huge difference over a decade.

    You offer strong opinions on here frequently - how do you back them up if you're effectively saying we won't know if you're right or wrong for a decade or two. That would make them look like untested guesswork.

    I don't buy into the idea that you need a good recession to test the mettle of a fund manager either. Sounds like a jam tomorrow sales pitch.

    If we take Woodford (since this is a thread about him), its not the performance that would worry me initially but the makeup of the funds holdings. Thats what I would want an explanation of from an IFA over the last few years.
    Originally posted by Prism
    You looked at the holdings but don't forget that puts you at the extreme of the bell curve.

    The average punter does no due diligence other than read articles and advertorials about star managers and the flavour of the month. When one of these people see an IFA it's the easiest sell in the World (because they've already identified they're willing to pay a surcharge for the same thing just by walking into their office). Nobody, ever, put an IFA on the spot by asking them to justify the holdings of Neil Woodford.
    • gadgetmind
    • By gadgetmind 22nd Oct 19, 5:59 PM
    • 10,956 Posts
    • 8,964 Thanks
    gadgetmind
    I think you're well entitled to ask why the IFA felt that the fund was still appropriate for your portfolio
    Originally posted by bowlhead99
    Maybe, but they got you to do the risk questionnaire, fed the outcome to someone else, computer said XYZ Equity Income, and there you go. They can't explain the reasoning as they don't know it. That doesn't prevent them woffling, but woffle is cheap. Or not.

    I used to use IFAs, and this is what they did, and with their fees and fund fees, it was a rough ride. I took the reigns in my 40s (a little too late, I was busy, there you go), ditched IFAs, learned the rules, read some books on portfolio theory, went almost totally passive, and retired on pension+ISA+etc at age 54.
    I am not a financial adviser and neither do I play one on television. I might occasionally give bad advice but at least it's free.

    Like all religions, the Faith of the Invisible Pink Unicorns is based upon both logic and faith. We have faith that they are pink; we logically know that they are invisible because we can't see them.
    • xylophone
    • By xylophone 22nd Oct 19, 7:09 PM
    • 31,614 Posts
    • 19,606 Thanks
    xylophone
    I used to use IFAs, and this is what they did, and with their fees and fund fees, it was a rough ride. I took the reigns in my 40s (a little too late, I was busy, there you go),
    From a Jack to a King?
    • Prism
    • By Prism 22nd Oct 19, 7:13 PM
    • 1,199 Posts
    • 895 Thanks
    Prism
    It has to be worth the effort to try and monitor the performance of people you employ surely? The wrong (or right) decision can make a huge difference over a decade.
    Originally posted by Sailtheworld
    It is but how to actually do that, especially for someone with little experience or interest in the stock market. If you told an IFA that you were expecting superior gains over a three year period then are you not putting pressure on the IFA to take more risk to try and make those gains. This agreement can surely only be based on trust - a trust in something you cannot test until the time is up. How you build that trust is the difficult part.

    The same should be said for active fund managers - to a lesser degree maybe. Some of my funds have underperformed various benchmarks over an extended period. I have to decide if I trust the manager (by what they say and do) to continue for the long term. Comparing the fund performance over a few years it not the only measure, though certainly hard to ignore.

    Its a tricky one. What I can say in relation to this thread is that several years ago I watched several videos of Woodford and read up as much as I could about his investment style. I decided pretty quickly that I didn't trust him to make money for me. In fact he became a manager I never looked back at.


    The average punter does no due diligence other than read articles and advertorials about star managers and the flavour of the month. When one of these people see an IFA it's the easiest sell in the World (because they've already identified they're willing to pay a surcharge for the same thing just by walking into their office). Nobody, ever, put an IFA on the spot by asking them to justify the holdings of Neil Woodford.
    I couldn't comment on what reasons some IFAs pushed this fund, or in fact many active funds. I get the feeling though that much of the investment in Woodford at least in the later days was self selected by those people that you rightly point out should not really be self selecting.
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