Woodford anyone?

Author
Discussion

DonkeyApple

55,988 posts

171 months

Sunday 20th October 2019
quotequote all
Derek Chevalier said:
rockin said:
There certainly seems to me to be information (such as IM vs Vanguard comparison in the IM thread) which could influence whether customers buy or sell a particular fund. I don't see a problem with it - facts are facts.
As long as people are looking at the headline returns in the context of corresponding risk levels I don't see a problem either, but I wonder how many people look beyond raw return numbers.

If one fund is showing greater returns it is likely to be taking more risk. That doesn't mean it is better or worse, just that looking in returns in isolation is meaningless.
I like a spot of active management , I feel it definitely has a place and a value. I don’t invest in any actively managed funds because I know myself well enough to know that I won’t switch out when that type of fund goes off the boil as I won’t be paying enough attention and so I would be buying in risk for out performance knowing that I’d then almost certainly be handing any gains back due to personal lack of attention.

Where it does work for me is using leverage to seek outperformance. If I see a blue chip asset or market that is looking over sold and can understand the reason behind it or if it is in a long standing cycle and coming off from the bottom of it then I am very comfortable to take out a leveraged position such as a spreadbet.

My real aversion is in seeking out performance by investing in the small caps or more third world exchanges. I have seen far too much price manipulation, thievery, stupidity, ignorance and plain dishonesty in these imperfect markets over the years to ever want my money anywhere near them in the hopes for beating the market. In my line of work you end up rubbing shoulders with the punters who play in those markets and they are just ghastly, ghastly. And there are just too many weird risks inherent in small caps beyond just illiquidity and fraud. Companies are often just built around one individual rather than a core or replaceable people, or located in jurisdictions which are politically unstable but mainly there are just parts of the market and parts of the world where Manila envelopes are still the core means for getting stuff done.

JulianPH

10,003 posts

116 months

Sunday 20th October 2019
quotequote all
rockin said:
JulianPH said:
They go beyond the mere provision of information are likely to objectively influence whether customers buy or sell a particular fund.
People want "help" sifting the hundreds of funds available. The whole point of buying a fund is to avoid having to do all the homework yourself so it's pretty pointless if you have to do as much homework sifting through funds as you would have to do sifting through shares.

That is surely the whole point of IM sponsorship of this forum - not to scare customers away but to draw them in to IM funds. There certainly seems to me to be information (such as IM vs Vanguard comparison in the IM thread) which could influence whether customers buy or sell a particular fund. I don't see a problem with it - facts are facts.

I was on the motorway around midday today so switched on BBC news to catch the headlines. It was immediately followed by a MoneyBox program which opened with discussion of the Woodford situation. (It may be available on iPlayer link posted above.) Their commentator's view was much the same as mine - namely that HL customers might rightly feel let down by HL's enthusiastic promotion of Woodford but it's difficult to say that HL stepped over the line, however close to it they may have been running. Similarly Woodford is highly unlikely to have operated outside the permitted remit of the fund, however close to the edge he may have run. Inevitably people who have lost money want to find someone to blame so they can get "compensation".

IMO at the end of the day if you decide to run equity risk and choose a fund talked about in a publication which clearly states "We are not advising you to buy these funds and past performance is no guarantee" then you must live with your decisions.

As it happens, I choose to suppress what I call "manager risk" by having two (or more) funds in each category. So if I held any Woodford, I would only be taking half of the damage currently flying around.

In the case of Woodford it's regrettable that Mr & Mrs Investor just want their cash out a.s.a.p. so are making the fund a forced seller of relatively illiquid assets. A bonanza for the bottom feeders.
Hi Steve

I agree 100%.

All I was showing is how the FCA currently make the rules for this.

It is all complete madness. Of course most people just want some "help", but regulated firms need to ensure that such "help" does not become classed as "advice".

In the real world we all know what advice means - help, pointers, information, guidance, etc. In the regulated world it has a legal meaning though.

I have been on MoneyBox many times and I assume it was Paul Lewis presenting. Neil Woodford had a limit of 10% non-listed equities within his fund. He touched 30% though. That is completely outside of the rules.

After years of trying to be helpful here I took the decision to sponsor in order to formalise the giving of help, information, guidance and all other things that everyone would call advice. In doing so I have had to ensure that I do not stray over the line into Regulated Financial Advice.

Whilst we provide information (such as comparisons with Vanguard), what we don't do is use this data to make recommendations.

The information (and comments as to why IM Index has performed better and behaved differently) may indeed influence people, but this is only down to us providing facts, not us making a judgement value.

HL use such data and make a judgement value (by making fund recommendations).

If IM suddenly opened up to all investments, and in doing so we said this is the best for this - and this is the best for that, then we would have to take responsibility for these judgements. HL manage to escape this.

I also agree that people need to take responsibility for their decisions, but HL did push this down people's throats!

smile

Derek Chevalier

3,942 posts

175 months

Sunday 20th October 2019
quotequote all
JulianPH said:
The information (and comments as to why IM Index has performed better and behaved differently) may indeed influence people, but this is only down to us providing facts, not us making a judgement value.
Re my previous comments I think it could be useful to give a bit more information around the relative risk levels of the two offerings in addition to the performance. Appreciate that you don't want to bombard people with too much information.

Derek Chevalier

3,942 posts

175 months

Sunday 20th October 2019
quotequote all
DonkeyApple said:
Derek Chevalier said:
rockin said:
There certainly seems to me to be information (such as IM vs Vanguard comparison in the IM thread) which could influence whether customers buy or sell a particular fund. I don't see a problem with it - facts are facts.
As long as people are looking at the headline returns in the context of corresponding risk levels I don't see a problem either, but I wonder how many people look beyond raw return numbers.

If one fund is showing greater returns it is likely to be taking more risk. That doesn't mean it is better or worse, just that looking in returns in isolation is meaningless.
I like a spot of active management , I feel it definitely has a place and a value. I don’t invest in any actively managed funds because I know myself well enough to know that I won’t switch out when that type of fund goes off the boil as I won’t be paying enough attention and so I would be buying in risk for out performance knowing that I’d then almost certainly be handing any gains back due to personal lack of attention.

Where it does work for me is using leverage to seek outperformance. If I see a blue chip asset or market that is looking over sold and can understand the reason behind it or if it is in a long standing cycle and coming off from the bottom of it then I am very comfortable to take out a leveraged position such as a spreadbet.

My real aversion is in seeking out performance by investing in the small caps or more third world exchanges. I have seen far too much price manipulation, thievery, stupidity, ignorance and plain dishonesty in these imperfect markets over the years to ever want my money anywhere near them in the hopes for beating the market. In my line of work you end up rubbing shoulders with the punters who play in those markets and they are just ghastly, ghastly. And there are just too many weird risks inherent in small caps beyond just illiquidity and fraud. Companies are often just built around one individual rather than a core or replaceable people, or located in jurisdictions which are politically unstable but mainly there are just parts of the market and parts of the world where Manila envelopes are still the core means for getting stuff done.
We may disagree on active vs passive, but this is pretty irrelevant if you

1. Don't have a strategy in place
2. Don't have an understanding of the pitfalls of certain markets instruments.

Which you obviously have smile

Small caps is interesting one - in theory tilting towards small cap and value shares could give a better risk adjusted returns over the long term, but as you point out, not without risks. Same could be said of emerging/frontier markets?

Jockman

17,917 posts

162 months

Monday 21st October 2019
quotequote all
DonkeyApple said:
I like a spot of active management , I feel it definitely has a place and a value. I don’t invest in any actively managed funds because I know myself well enough to know that I won’t switch out when that type of fund goes off the boil as I won’t be paying enough attention and so I would be buying in risk for out performance knowing that I’d then almost certainly be handing any gains back due to personal lack of attention.
Good points.

Active investment is totally unsuitable for me. Woodford exemplifies what can go wrong in this industry.

Derek Chevalier

3,942 posts

175 months

Monday 21st October 2019
quotequote all
Derek Chevalier said:
NickCQ said:
Phooey said:
Probably a daft question, but if everyone starts investing into passive/ETFs, can they become oversubscribed with too much money going into them?
The risk is more that the higher the percentage of passive money in the market, the less efficient the market will be at absorbing information and incorporating it into share prices.
The people that genuinely have an edge, such as

https://en.wikipedia.org/wiki/Jim_Simons_(mathemat...

will ensure that markets are broadly efficient.
This will hopefully be an interesting read and put the "skill" of "star" fund managers in context.

https://www.amazon.co.uk/Man-Who-Solved-Market-Rev...


FredClogs

14,041 posts

163 months

Monday 21st October 2019
quotequote all
I'm a finance numpty and my forays into the stock market haven't exactly led to untold riches and I'm largely invested in tracker funds but even I understand without those brave or diligent enough to properly evaluate the market and put their money where their mouth is we don't have a market, we have a zombie market... And I also feel the same as that Christian bale character out of the big short - at some point the weight of zombie money in the global equity market is going to cause a crash in equitues that makes the 2006 crash look like a cake walk.

Wings

5,819 posts

217 months

Monday 21st October 2019
quotequote all
Woodfords and the secretive world of fund managers on Panorama tonight

Derek Chevalier

3,942 posts

175 months

Monday 21st October 2019
quotequote all

FredClogs said:
but even I understand without those brave or diligent enough to properly evaluate the market and put their money where their mouth is we don't have a market, we have a zombie market
There will/should always be a market of sorts, with market makers and/or HFT funds providing some sort of liquidity and (hopefully) making money on the spread.

FredClogs said:
And I also feel the same as that Christian bale character out of the big short - at some point the weight of zombie money in the global equity market is going to cause a crash in equitues that makes the 2006 crash look like a cake walk.
You could be right, but we've had horrible markets in the past and recovered - as long as you are taking the appropriate levels of risk and are in it for the long term it's just noise.

Derek Chevalier

3,942 posts

175 months

Monday 21st October 2019
quotequote all
Wings said:
Woodfords and the secretive world of fund managers on Panorama tonight
Be interesting to hear what they say - I fail to see how star fund managers are in any way secretive.

FredClogs

14,041 posts

163 months

Monday 21st October 2019
quotequote all
Derek Chevalier said:
Wings said:
Woodfords and the secretive world of fund managers on Panorama tonight
Be interesting to hear what they say - I fail to see how star fund managers are in any way secretive.
https://www.ft.com/content/732bcd09-7fa2-4a85-9acf-f98480e4f57c



V8mate

45,899 posts

191 months

Thursday 24th October 2019
quotequote all
Glad that the winding up that was being threatened has been avoided.

Any views on the staged fee structure they have negotiated?

https://www.cityam.com/schroders-to-take-charge-of...

FredClogs

14,041 posts

163 months

Thursday 24th October 2019
quotequote all
Well done to the brave ones who believed the NAV and took a punt on WPCT, I'd get out now though, I don't believe the NAV.

V8mate

45,899 posts

191 months

Thursday 24th October 2019
quotequote all
FredClogs said:
Well done to the brave ones who believed the NAV and took a punt on WPCT, I'd get out now though, I don't believe the NAV.
We were in from that start at a quid. We have to continue to believe...

CaptainSlow

13,179 posts

214 months

Thursday 24th October 2019
quotequote all
V8mate said:
Glad that the winding up that was being threatened has been avoided.

Any views on the staged fee structure they have negotiated?

https://www.cityam.com/schroders-to-take-charge-of...
What does this mean for investors? When will they have access?

V8mate

45,899 posts

191 months

Thursday 24th October 2019
quotequote all
CaptainSlow said:
V8mate said:
Glad that the winding up that was being threatened has been avoided.

Any views on the staged fee structure they have negotiated?

https://www.cityam.com/schroders-to-take-charge-of...
What does this mean for investors? When will they have access?
It's a plc - you can buy and sell shares whenever you like.

CaptainSlow

13,179 posts

214 months

Thursday 24th October 2019
quotequote all
V8mate said:
CaptainSlow said:
V8mate said:
Glad that the winding up that was being threatened has been avoided.

Any views on the staged fee structure they have negotiated?

https://www.cityam.com/schroders-to-take-charge-of...
What does this mean for investors? When will they have access?
It's a plc - you can buy and sell shares whenever you like.
Are you saying investors in the Woodford fund will have their holdings converted into Schroders' equity? I don't think this is correct.

NickCQ

5,392 posts

98 months

Thursday 24th October 2019
quotequote all
If I'm understanding the article rightly, WPCT is being taken over and WEIF (the closed fund) is probably still being liquidated.

NickCQ

5,392 posts

98 months

Thursday 24th October 2019
quotequote all
CaptainSlow said:
Are you saying investors in the Woodford fund will have their holdings converted into Schroders' equity? I don't think this is correct.
Schroders is just taking over as manager.

CaptainSlow

13,179 posts

214 months

Thursday 24th October 2019
quotequote all
NickCQ said:
If I'm understanding the article rightly, WPCT is being taken over and WEIF (the closed fund) is probably still being liquidated.
ok thanks