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Woodford to return.

Closed-end funds and OEICs
Pipsmum
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Re: Woodford to return.

#387719

Postby Pipsmum » February 18th, 2021, 1:02 pm

I think anyone could forgive an error, and of course everyone makes mistakes. Those sort of one offs (or even few offs) can be forgiven, but to consistently be allowed to flout convention under the umbrella of forward thinking, without any active safety net in place is plain daft.

It brings into question how much safety net there is in anything. If one invests in a highly thought of establishment such as Hargreaves Landsdown then isn't there any insurance for such a disaster?

Part of the problem as I understood it was the hype surrounding it causing even more investors than normal to flee at the same time. Then the sudden lack of faith by those who had previously said what a clever boy he was, who then suddenly wanted to appear as white as snow.

This was not a single act by one madman.

GeoffF100
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Woodford

#388163

Postby GeoffF100 » February 20th, 2021, 11:43 am

https://www.bbc.co.uk/news/business-56083957

Activists Gina Miller and Alan Miller, co-founders of the True and Fair Campaign, which seeks improvements to consumer protection standards, wrote to the Treasury Select Committee on Tuesday urging an independent investigation.

"We believe it ought to be a very serious source of public policy concern that high profile individuals such as Mr Woodford can be allowed to recommence trading, with the slate ostensibly wiped clean, when over 300,000 people some of whom may be your own constituents, are scrabbling to make ends meet after seeing their life savings decimated and their prudent actions and hopes for a secure and comfortable future suddenly and unexpectedly dashed," the activists said in a letter.

"Prudent actions?" They could have put the money in the bank or bought a tracker. They wanted more. They ignored the disclaimer about past performance. They gambled and lost.

AsleepInYorkshire
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Re: Woodford

#388167

Postby AsleepInYorkshire » February 20th, 2021, 11:58 am

GeoffF100 wrote:https://www.bbc.co.uk/news/business-56083957

Activists Gina Miller and Alan Miller, co-founders of the True and Fair Campaign, which seeks improvements to consumer protection standards, wrote to the Treasury Select Committee on Tuesday urging an independent investigation.

"We believe it ought to be a very serious source of public policy concern that high profile individuals such as Mr Woodford can be allowed to recommence trading, with the slate ostensibly wiped clean, when over 300,000 people some of whom may be your own constituents, are scrabbling to make ends meet after seeing their life savings decimated and their prudent actions and hopes for a secure and comfortable future suddenly and unexpectedly dashed," the activists said in a letter.

"Prudent actions?" They could have put the money in the bank or bought a tracker. They wanted more. They ignored the disclaimer about past performance. They gambled and lost.

I wonder if the resentment and bitterness has evolved from Woodford's "flouting" with the rules. I think the FCA may also have a case to answer? Have they been asleep at the wheel?

This wasn't a simple risk/reward situation. This was more to do with a fund manager who at the very least wasn't ethical. He took risks that his customers had not authorised him to take.

AiY

Dod101
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Re: Woodford

#388175

Postby Dod101 » February 20th, 2021, 12:27 pm

GeoffF100 wrote:https://www.bbc.co.uk/news/business-56083957

Activists Gina Miller and Alan Miller, co-founders of the True and Fair Campaign, which seeks improvements to consumer protection standards, wrote to the Treasury Select Committee on Tuesday urging an independent investigation.

"We believe it ought to be a very serious source of public policy concern that high profile individuals such as Mr Woodford can be allowed to recommence trading, with the slate ostensibly wiped clean, when over 300,000 people some of whom may be your own constituents, are scrabbling to make ends meet after seeing their life savings decimated and their prudent actions and hopes for a secure and comfortable future suddenly and unexpectedly dashed," the activists said in a letter.

"Prudent actions?" They could have put the money in the bank or bought a tracker. They wanted more. They ignored the disclaimer about past performance. They gambled and lost.


Oh come on. They were not investing in high risk bonds or something like that nor was Woodford promising the earth as far as I know. He had a good past record and a long and successful one. Only to the extent that all investing might be considered a gamble did these investors gamble and lose. At the time, whilst I would not have and did not invest with Woodford, it seemed like a perfectly prudent and long term investment.

It was Woodford that stretched the rules and moved away from what had been a successful investment style into unlisted securities and rather adventurous start ups. Our totally useless FCA did nothing to stop him and well we all know the story from there. I am no supporter and never was of Woodford nor for that matter of Gina or Alan Miller, but at least their comments are pertinent to their business this time.

Dod

AsleepInYorkshire
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Re: Woodford

#388188

Postby AsleepInYorkshire » February 20th, 2021, 1:35 pm

Dod101 wrote: into unlisted securities and rather adventurous start ups.

That's quite a restrained description of his investment in cold fusion :lol:

AiY

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Re: Woodford

#388192

Postby doug2500 » February 20th, 2021, 1:51 pm

While I have some sympathy for investors I also believe that to a certain extent this is the way markets function.

Did they take responsibility for their own investments? To save advisor fees? Did they ever read an annual report? Did they diversify? Did they understand the risks of holding unlisted investments in an open ended structure?

If they cut out advisors and pension funds etc and then failed to administer their investments properly they have to take some (most) of the responsibility. Anyone using advice will have lost but should at least have been diversified so it shouldn't be catastrophic.

I'm afraid I view Gina Miller as a bit of a do gooder.

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Re: Woodford

#388193

Postby GeoffF100 » February 20th, 2021, 1:52 pm

I did not see any news reposts claiming that Woodford had broken any rules. His bets just did not come off. The investors in his funds should have known that the average performance of funds is the index minus their costs. They should have known that some managed funds do much better than the index and some do much worse. They should also have known that managed funds that did well in the past are no more likely to do well in the future than those that did badly. Nonetheless, they decided to gamble that Woodford would beat the odds. Many of them not only bought a risky investment, but they also failed to spread their risk.

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Re: Woodford

#388195

Postby Alaric » February 20th, 2021, 1:59 pm

GeoffF100 wrote:I did not see any news reposts claiming that Woodford had broken any rules.


There was a certain amount of bending of rules though that was eventually reported. For example there's a rule for OEICs that no more than 10% can be in unquoted securities. The way round this was to list some such shares on obscure exchanges where there wasn't any trading and thus no liquidity or assurance of fair value but it did have the effect of bring the holdings within the fence of being 90% quoted.

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Re: Woodford

#388205

Postby Dod101 » February 20th, 2021, 2:52 pm

GeoffF100 wrote:I did not see any news reposts claiming that Woodford had broken any rules. His bets just did not come off. The investors in his funds should have known that the average performance of funds is the index minus their costs. They should have known that some managed funds do much better than the index and some do much worse. They should also have known that managed funds that did well in the past are no more likely to do well in the future than those that did badly. Nonetheless, they decided to gamble that Woodford would beat the odds. Many of them not only bought a risky investment, but they also failed to spread their risk.


I did not say he had broken any rules. I said he had stretched them. (He may have broken some but that seems to be an unproven assertion at this point) I know what you are saying and of course with hindsight you are right but investors with Woodford were I think entitled not to expect that matters would come to a closing of his fund so that the were locked in. He was an experienced investment manager and must have known that liquidity in an OEIC is a fundamental requirement. If not then monitoring by the FCA would take place.

I think you are with respect being a bit obtuse for the sake of your argument. The other point is that the majority of the British investing public is not like the majority of the contributors to sites like this. I expect most of them knew the things that you have listed but what they did not know was that Woodford would invest much more than was prudent in unlisted and illiquid investments. There is no point in each of us continuing to repeat what has already been said and others can judge the argument so I will leave it there.

Dod

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Re: Woodford

#388218

Postby GeoffF100 » February 20th, 2021, 3:41 pm

Alaric wrote:
GeoffF100 wrote:I did not see any news reposts claiming that Woodford had broken any rules.

There was a certain amount of bending of rules though that was eventually reported. For example there's a rule for OEICs that no more than 10% can be in unquoted securities. The way round this was to list some such shares on obscure exchanges where there wasn't any trading and thus no liquidity or assurance of fair value but it did have the effect of bring the holdings within the fence of being 90% quoted.

Bending of the rules is permitted. The fund manager is permitted to make any investment that falls within the rules. Those who invest in a fund give the fund manger total discretion in which investments he chooses. They are paying him to roll the dice for them. If the fund had done well, there would have been no complaints.

As I understand it, the percentage invested in illiquid securities in Woodford's was not particularly high, but the fund did not do well and people started selling. The fund then had to sell its liquid securities and the proportion of illiquid securities rose as a result.

There are problems with having a limit on the percentage of illiquid securities in an open ended fund. The percentage of illiquid investments increases if people sell out. Securities can initially be liquid enough to meet the liquidity hurdle, and then become less illiquid. If a fund, particularly a large fund, holds a lot of illiquid investments it may be impossible to sell them in sufficient quantity to meet the limit.

Personally, I believe that the warnings attached to this kind of investment are too weak. Nonetheless, asking for more warnings has its downside. We can no longer buy US based ETFs because they do not provide the required (and rather useless) documentation. Anyway, as the saying goes: there is one born every minute. The FCA could do more checking, but someone would have to pay for that. We could have more nanny state rules, but I would not be in favour of that. We could insist that investors pass an exam before they place their bets, but someone would have to pay for that too. Caveat emptor.

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Re: Woodford

#388220

Postby Leif » February 20th, 2021, 3:52 pm

I suspect a large part of the problem is that his fund was heavily promoted by HL. I’m not a fan of HL, and to me their web site looks like a triumph of smooth marketing to get people to pay their high fees. However, even if you don’t agree with my characterisation of HL, you will surely agree that they are a respected name in the marketplace, with a high degree of trust from consumers, and an awful lot of people will have invested on the basis of their recommendation. It seems to be that HL are as guilty as Woodford.

And from what I have read, part of the problem was the forced winding up of the fund that meant stocks had to be sold en masse. I think Woodford argued that many of his investments have since recovered. It’d be interesting to see a notional current valuation for the assets that he held. His claims might, of course, be nonsense.

AsleepInYorkshire
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Re: Woodford

#388223

Postby AsleepInYorkshire » February 20th, 2021, 3:58 pm

GeoffF100 wrote:
Alaric wrote:
GeoffF100 wrote:I did not see any news reposts claiming that Woodford had broken any rules.

There was a certain amount of bending of rules though that was eventually reported. For example there's a rule for OEICs that no more than 10% can be in unquoted securities. The way round this was to list some such shares on obscure exchanges where there wasn't any trading and thus no liquidity or assurance of fair value but it did have the effect of bring the holdings within the fence of being 90% quoted.

Bending of the rules is permitted. The fund manager is permitted to make any investment that falls within the rules. Those who invest in a fund give the fund manger total discretion in which investments he chooses. They are paying him to roll the dice for them. If the fund had done well, there would have been no complaints.

As I understand it, the percentage invested in illiquid securities in Woodford's was not particularly high, but the fund did not do well and people started selling. The fund then had to sell its liquid securities and the proportion of illiquid securities rose as a result.

There are problems with having a limit on the percentage of illiquid securities in an open ended fund. The percentage of illiquid investments increases if people sell out. Securities can initially be liquid enough to meet the liquidity hurdle, and then become less illiquid. If a fund, particularly a large fund, holds a lot of illiquid investments it may be impossible to sell them in sufficient quantity to meet the limit.

Personally, I believe that the warnings attached to this kind of investment are too weak. Nonetheless, asking for more warnings has its downside. We can no longer buy US based ETFs because they do not provide the required (and rather useless) documentation. Anyway, as the saying goes: there is one born every minute. The FCA could do more checking, but someone would have to pay for that. We could have more nanny state rules, but I would not be in favour of that. We could insist that investors pass an exam before they place their bets, but someone would have to pay for that too. Caveat emptor.

I'm struggling with your comments and will bow out at this time.

I wish you well

AiY

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Re: Woodford

#388252

Postby GeoffF100 » February 20th, 2021, 5:53 pm

Leif wrote:I suspect a large part of the problem is that his fund was heavily promoted by HL. I’m not a fan of HL, and to me their web site looks like a triumph of smooth marketing to get people to pay their high fees. However, even if you don’t agree with my characterisation of HL, you will surely agree that they are a respected name in the marketplace, with a high degree of trust from consumers, and an awful lot of people will have invested on the basis of their recommendation. It seems to be that HL are as guilty as Woodford.

I do not think that we can blame either Woodford or HL. I expect that Woodford was doing his best to grow his fund and his income along with it. HL knows that there are plenty of people who believe (contrary to the evidence and to the statutory warning) that funds that have done well in the past are likely to do well in the future. HL exploits that to gain customers paying high fees. These customers are blind to the high fees because they think that they are backing a sure winner. I do not blame HL for that. They are a commercial company trying to make money. As with Woodford, I expect that they are complying with all the rules. No business is completely ethical. My local supermarket sells alcohol, cigarettes, junk food...

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Re: Woodford to return.

#388283

Postby Dod101 » February 20th, 2021, 8:25 pm

Geoff100 has of course put his finger on the conflict of interest with an operation like HL, in promoting funds. If I had my way I would not allow them or other platforms to do that. It may not be advice but plenty will take it as being so.

Dod

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Re: Woodford to return.

#388460

Postby terminal7 » February 21st, 2021, 4:14 pm

Woodford and his sidekick Newman received extraordinary amounts of money from WIM despite the underperformance of the funds. The Daily Mail article provides some of this detail (see link below).

https://www.dailymail.co.uk/news/article-9281967/amp/The-story-shatter-Neil-Woodfords-shameless-comeback.html

Some Fools appear to deride private investors who lost money on the basis that they should have read 'the details'. I suspect that most investors do not possess the levels of expertise that many posters on this site have. These investors follow the 'top 50 lists' as promoted on a number of platforms. We are all aware of the heavy promotion by HL of Woodford - in particular by one of their senior and high profile analysts - who has since left.

The levels of remuneration received by Woodford and Newman appear to have been totally disproportionate to the financial results of WIM. Surely it should be the role of the regulatory bodies to monitor/highlight such actions?

T7

ps I have never invested in any Woodford funds

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Re: Woodford to return.

#388510

Postby GeoffF100 » February 21st, 2021, 7:11 pm

terminal7 wrote:Woodford and his sidekick Newman received extraordinary amounts of money from WIM despite the underperformance of the funds. The Daily Mail article provides some of this detail (see link below).

https://www.dailymail.co.uk/news/article-9281967/amp/The-story-shatter-Neil-Woodfords-shameless-comeback.html

Some Fools appear to deride private investors who lost money on the basis that they should have read 'the details'. I suspect that most investors do not possess the levels of expertise that many posters on this site have. These investors follow the 'top 50 lists' as promoted on a number of platforms. We are all aware of the heavy promotion by HL of Woodford - in particular by one of their senior and high profile analysts - who has since left.

The levels of remuneration received by Woodford and Newman appear to have been totally disproportionate to the financial results of WIM. Surely it should be the role of the regulatory bodies to monitor/highlight such actions?

T7

ps I have never invested in any Woodford funds

It is a citizen's right to be stupid with their money. If HL do not actually lie, they are well ahead of much of social media, a former President and a current Prime Minister. Why should the remuneration be proportional to the results, when the results are mostly a matter of chance? Hedge funds with performance fees cost investors even more. The hedge fund manager makes a fortune if his bets come off, and the investors take the loss if they do not. If people want to pay high fees, that is up to them. There are plenty of low cost alternatives.

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Re: Woodford to return.

#388512

Postby terminal7 » February 21st, 2021, 7:13 pm

Indeed, methinks that given the closeness of the relationship between Woodward and the HL senior high profile analyst (I think we all know who we are talking about here), HL should have picked up details of the astronomic remunerations received by Woodward/Newman and highlighted this in their fulsome praise of WIM on the HL site. Did they miss this year after year?

T7

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Re: Woodford to return.

#388632

Postby GeoffF100 » February 22nd, 2021, 9:35 am

terminal7 wrote:Indeed, methinks that given the closeness of the relationship between Woodward and the HL senior high profile analyst (I think we all know who we are talking about here), HL should have picked up details of the astronomic remunerations received by Woodward/Newman and highlighted this in their fulsome praise of WIM on the HL site. Did they miss this year after year?

That would be against their interests. Their pitch is that cost does not matter because the performance will be astronomical. If they gave people the impression that cost did matter, they might not buy open ended funds with HL.

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Re: Woodford to return.

#388697

Postby scotia » February 22nd, 2021, 12:31 pm

I think we may be losing a reasonable perspective on the Woodford Equity Income Fund. On liquidation (by Link Funds) I believe that there were four payments in 2020, amounting to around 70p, with a possible 5p of investments still waiting to be sold. With an initial purchase price of £1, this looks like a 25% to 30% loss for investors - although I'm willing to be corrected by anyone who actually purchased this fund. How many of us have not experienced losses of this magnitude in some of our investments? And were the managers involved hounded out of existence?
As for HL recommending this fund - they were certainly not alone. Woodford had a past reputation of being a sound manager. Fund platforms and Stockbrokers usually have a "recommended" list, possibly based on their past experience - but there is no guarantee that they will get it right. I remember a respectable stockbroker with whom I had an account "recommending" shares in Marconi before it collapsed in the dotcom bubble.

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Re: Woodford to return.

#389362

Postby ADrunkenMarcus » February 23rd, 2021, 10:59 pm

Was converting the open-ended fund to an investment trust ever a doable option?

Best wishes


Mark.


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