An ill wind...

[monabri]

https://citywire.co.uk/investment-trust ... ider+Daily


"The US investor acquiring cut-price assets from the failed Woodford Equity Income fund is offloading the stocks just days after completing the deal, in one case generating a £750,000 profit from a sale at more than 12 times the price paid.

Acacia Research was earlier this month unveiled as the buyer of up to 19 of the fund’s biotech stocks in a £224m deal struck with Link Fund Solutions, the fund’s administrator, which is overseeing the sell-off of assets."

[Nocton]

The single most incredible one was investing in a cold fusion experiment. Anyone who stayed invested after that was, quite frankly, simply nuts.
RVF

I totally agree. That was exactly my sentiment when I heard that. He should have read "Too Hot to Handle - the Story of the Race for Cold Fusion" by Frank Close about the 'Utah' claim to have discovered cold fusion in a test tube.

[Rooky102]

Now it's Alexander Darwall. Moves off to his own company, retaining management of JEO (European Opportunities Trust).

JEO at one time had 17% of shareholders' funds in Wirecard (still has 10%), despite continuing questions about the company's finances in the FT and elsewhere for years, and suggestions of fraud from some quarters .

Well Wirecard is down 63% today and JEO down 10%.

"Ernst & Young said it didn’t have sufficient audit evidence for €1.9 billion euros in cash." !!

Darwall's replacements on Jupiter's other European funds dumped Wirecard as soon as they got in place.

Darwall has a lot of his own money in JEO, so that isn't an answer, surprisingly.

What is it that makes very successful managers throw caution to the winds?
When does self-conviction turn into self-delusion and hubris?

Certainly, any manager that moves out to start his own management company is now issuing a strong warning.

[Lootman]

Now it's Alexander Darwall. Moves off to his own company, retaining management of JEO (European Opportunities Trust).

JEO at one time had 17% of shareholders' funds in Wirecard (still has 10%), despite continuing questions about the company's finances in the FT and elsewhere for years, and suggestions of fraud from some quarters .

Well Wirecard is down 63% today and JEO down 10%.

Yeah, 63% of 17% is about 10% so that explains it.

A couple of years ago I sold all my European ITs and put the lot in the Vanguard ex-UK European ETF. But I kept JEO because it was quirky rather than being a closet tracker, and I thought it would add a bit of spice and diversity.

Bad idea. Should have dumped it as well. It is still well up from what I bought it for but there is an opportunity cost. It is going.

[scotia]

What is it that makes very successful managers throw caution to the winds?
When does self-conviction turn into self-delusion and hubris?

Good question - perhaps the answer may be that there are few (if any) very successful managers - rather there are a few very lucky managers, whose luck finally runs out. Taking Woodford as an example - he had a long run of success with Tobacco and Pharma at Invesco Perpetual. But that eventually ran out, and in his 5 final years at Invesco, his returns were around the same as a FTSE tracker. So he had to think of pastures new, which he couldn't easily change to, given the size of his funds. So he started anew - and the money rolled in. And he had to put it somewhere, but not back into the same old shares that he used to buy. So he set off into new territories, well out of his comfort zone, and given the amount of money he had to invest, there was no time to carry out in-depth research. And this time his guesses were not lucky ones.
Antony Bolton of Fidelity was on record as saying that there was a large element of luck in investing.
So in choosing a fund manager - Do You Feel Lucky?

[Lootman]

What is it that makes very successful managers throw caution to the winds?
When does self-conviction turn into self-delusion and hubris?

Good question - perhaps the answer may be that there are few (if any) very successful managers - rather there are a few very lucky managers, whose luck finally runs out. Taking Woodford as an example - he had a long run of success with Tobacco and Pharma at Invesco Perpetual. But that eventually ran out, and in his 5 final years at Invesco, his returns were around the same as a FTSE tracker. So he had to think of pastures new, which he couldn't easily change to, given the size of his funds. So he started anew - and the money rolled in. And he had to put it somewhere, but not back into the same old shares that he used to buy. So he set off into new territories, well out of his comfort zone, and given the amount of money he had to invest, there was no time to carry out in-depth research. And this time his guesses were not lucky ones.
Antony Bolton of Fidelity was on record as saying that there was a large element of luck in investing.
So in choosing a fund manager - Do You Feel Lucky?

There is another factor too. If you are successful you attract huge amounts of money. It is much harder to get an edge if you have to invest billions because it limits the shares you can invest in, and your orders move the market against you.

Back when I worked in fund management the general rule of thumb was that our best-performing fund would be our newest/smallest fund. There were a number of reasons for that including some I should probably still not talk about.

Bill Miller beat the S&P 500 for 15 consecutive years. A remarkable performance that is thousands to one against randomly. He got killed in the financial crisis and has not recovered to this day.

[Breelander]

...Back when I worked in fund management the general rule of thumb was that our best-performing fund would be our newest/smallest fund. There were a number of reasons for that including some I should probably still not talk about...

Perhaps you don't need to, some of them may be discussed here....

Despite years and years of data showing that, on average, actively managed funds underperform their passive brethren by around the amount charged in fees ... the darned things won’t lie down and be slain. Worse still, they use their excess fees to dream up smart new ways of improving their apparent returns.

http://www.psyfitec.com/2009/04/survivo ... utual.html

[Lootman]

...Back when I worked in fund management the general rule of thumb was that our best-performing fund would be our newest/smallest fund. There were a number of reasons for that including some I should probably still not talk about...

Perhaps you don't need to, some of them may be discussed here....

Despite years and years of data showing that, on average, actively managed funds underperform their passive brethren by around the amount charged in fees ... the darned things won’t lie down and be slain. Worse still, they use their excess fees to dream up smart new ways of improving their apparent returns.

http://www.psyfitec.com/2009/04/survivo ... utual.html

Yeah, and the rest. I will give one example. A fund manager submits block orders and then allocates them across the various funds it runs. There is a lot of discretion about how that is done, and it happens overnight rather than during the trading day.

Suppose we get a million shares in an IPO. If it is up 20% then I put it in the funds I want to ramp e.g. new fund, favoured clients etc. If it is down 20% I dump it in the old retail funds because those clients are the least discriminating and won't notice, whereas the institutions, partnerships and HNWI's with private accounts will.

We'd also charge costs that benefit the entire organisation to the retail funds. Soft dollaring and the like.

I could go on but I believe I have mentioned where i worked before so should be circumspect.

[Nocton]

perhaps the answer may be that there are few (if any) very successful managers - rather there are a few very lucky managers, whose luck finally runs out.

I agree and that is why 10 years ago I chose 10 ITs with varying aims and managers, including JEO. Each will have its ups and downs, good or bad luck, but over the years I expected the average to outperform the market - and so it has proved. I have made only one change in the last 10 years. I have long given up trying to be 'clever'.

[Rooky102]

When Woodford was beguiled by Cold Fusion, it took a couple of weeks for me to believe someone so successful could be so dumb, before I dumped WPCT, and it pretty much only went down after that, so it seems that no lessons were learnt.

A key question to answer is 'can these guys learn from their mistakes, or is the hubris too great'?
Have they given a signal that it's time to go, and their fund is slowly but inevitably going down hill from now?

Well it looks like Darwall can and has learnt the lesson over Wirecard (finally) - there's a RNS today that JEO has completely sold out of Wirecard (which itself is down 28% again), and JEO has a 4% bounce up, presumably as a result.

P.S. there should be less tricks available to manipulate ITs than funds. Where mergers are used to cover bad performance in IT's, then there is usually also a discount opportunity.

[monabri]

Wirecard

https://www.telegraph.co.uk/business/20 ... fraud/amp/

"The chief executive of Wirecard has resigned as the embattled German payment firm’s share price continued to collapse a day after its auditor could not confirm the existence of almost €2bn (£1.8bn) in cash in trust accounts"