Woodford Concerns
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bowlhead99 wrote: »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
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!!!0 -
Sailtheworld wrote: »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.
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.0 -
itwasntme001 wrote: »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.
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.0 -
Thrugelmir wrote: »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.
If you had read on i did say an income fund would be a better benchmark.0 -
itwasntme001 wrote: »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!!!
Some great points there.
Perhaps you could also send them to HL
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AnotherJoe wrote: »Some great points there.
Perhaps you could also send them to HL
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".0 -
itwasntme001 wrote: »If you had read on i did say an income fund would be a better benchmark.
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.0 -
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.
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.0 -
bowlhead99 wrote: »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?
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.The fascists of the future will call themselves anti-fascists.0 -
Woodford couldnt really be classed as an income fund since from 2015 at least its dividends were less than those from the FTSE100.
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 referenceGlobal 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.0
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