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Weekend reading: Look who’s back

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What caught my eye this week.

Hard to believe it’s more than ten years ago that I wrote – slightly tongue-in-cheek – about how I was betting against Neil Woodford.

The then-lauded fund manager had just handed back the reins of the Edinburgh Investment Trust – one of several funds he ran as Invesco’s superstar manager – because he was opening his own fund shop.

Edinburgh’s share price fell from a 5% premium to trade at a discount to NAV in response.

But I reasoned:

Sure, a few [other] income investment trusts are on a discount, but my point is it’s clearly possible to run an income trust and be well-regarded enough for investors to pay more for shares in your trust than the value of its assets, even if your name is not ‘Neil Woodford’.

And my bet – and the reason I bought the shares after the sell-off – is I believe the same will likely be true of the Edinburgh trust at some time in the future.

In fact, I wouldn’t be surprised if the premium even comes back before Woodford has left in April!

Okay, it took until August – but I was right and it was a nice little trade.

However I kind of missed the wood for the trees.

Woodford’s stock

Most readers will know Woodford’s new venture went on to collapse within just a few years. It left a trail of broken-hearted followers in its wake. As well as a legal kerfuffle that was still dragging on this year.

Here’s a podcast recap from A Long Time In Finance. Or take your pick of two books written about Woodford’s rise and fall.

I can’t say I predicted this disaster in my 2013 piece. Although to be fair, who honestly could have?

The scale of the drama, anyway.

Me, I even admitted I thought Woodford had as good a claim as any to investing edge.

Although thankfully – and more on-brand – I said we couldn’t be sure. Even 25 years of outperformance at Invesco – which had made him the darling of middle-England savers – wasn’t definitive evidence of skill versus luck.

Also, I wrote:

I don’t think you should spend your time looking for the next Woodford though, any more than I think you should bet your two-year old grandson is going to be the next David Beckham.

Some scant few of us are touched by the gods of fortune, but you surely don’t want to gamble your retirement on it.

That second line is pretty portentous in light of what happened next.

Hey brother, can you spare a follow?

One person who is definitely not looking for the next Neil Woodford is… Neil Woodford.

Because the fund manager this week relaunched himself as a financial influencer.

Writing on his new blog, Woodford says:

My name is Neil Woodford. I am 64 years old, and I live in southwest England. I have worked in the investment industry since the early 1980s. You may remember me as the fund manager who avoided the dot-com bubble and the banking crisis and delivered index-beating performance for over 25 years, or perhaps as the ‘disgraced’ fund manager who presided over Woodford Investment Management’s collapse in 2019. Others may not have heard of me at all. Whatever your perspective, you may be curious about what I have to say about a wide range of economic, social, and political issues that impact our everyday lives.

Unfortunately, much of the commentary I read about the UK economy is long on opinion but critically short on data. It is often factually wrong, perhaps because established narratives are too willingly accepted. What is clearly severely lacking is data-supported information and analysis.

The economic analysis and commentary in Woodford Views will focus on relevant facts and data without censorship from editors, pressure to toe a particular line or consensus thinking.

Well you’ve gotta admit the lad’s still got chutzpah coming out the Wazoo. There’s even a dose of 2024-style post-truth anti-mainstream posturing in there.

Only 93 followers so far on Instagram though. The struggle is real.

Glass fund houses

We can surely guess how those who’ve pursued Woodford in the courts feel about this development. Or those who lost money with his funds. Or, worse, who waited for years just to get their money back.

Me? I’m a complicated soul.

While it’s abundantly clear in hindsight that Woodford’s mixing of private and public assets was ill-advised in open-ended vehicles, it’s not like that hadn’t been done before. It still goes on today.

He was criticised too for loading up on unlisted holdings with his closed-end Patient Capital trust. But many investment trusts are languishing on discounts today in part likely because of their illiquid private assets, including giants such as Scottish Mortgage and RIT Capital Partners.

And while it’s now far harder to make the case for Woodford’ stock picking prowess in light of the disastrous run at his second venture, there is probably even another universe where economic circumstances turned differently and his contrarian bets were rewarded.

Not need to type angry comments at me! I know he earned millions selling himself as someone who could avoid such landmines but was ultimately paid for failure, given this disastrous outcome:

Source: Guardian

I’m just saying it’s a truism we only live through one reality but many other things could have happened.

If you like fund managers when they outperform, then you must at least acknowledge that such outperformance was possible because they – and you – took a risk that things would turn out far worse.

Sympathy for the devil

Even the likes of Buffett could have been wiped out in an alternative universe where, say, the US went to war with Russia in the mid-20th Century, or if his legal troubles of the early 1970s hadn’t been amicably resolved, or if a couple of key decisions during the Salomon Brothers scandal of the late 1980s had gone differently. And nobody’s track record is as a good as Buffett’s.

So yes, I too have read the stories of hubris and yes-man-ning in the Woodford Investment Management days. It all seems very off. I also agree it was ill-advised for him to go investing in blue sky nano-caps after making his bones – and his brand – as a large-cap fund manager.

But I can’t quite bring myself to write an apoplectic and hyperbolic op-ed about Neil Woodford the ‘finfluencer’ that would easily write itself.

(My co-blogger in contrast would surely have a field day.)

I don’t know, perhaps I think everybody deserves at least a chance of redemption.

I also recognise someone who can’t let go of a love of markets and the game. A fellow sufferer, perhaps?

Maybe it’s just the sheer brass balls of the man refusing to go quietly.

Or perhaps I pity anyone trying to make money from a new blog these days.

Why go there?

To be crystal clear, I understand anyone who splutters angrily at Woodford’s new venture. It’s almost surreal.

And I obviously don’t think anybody needs to invest money with Woodford or any other star manager.

Invest via a global tracker fund – or some other passive index funds – and you’ll never face being embroiled in fund manager drama ever again.

Have a great weekend!

From Monevator

Our updated guide to help you find the best broker – Monevator

25 years of a family investment club – Monevator

From the archive-ator: How to protect your portfolio in a crisis – Monevator

News

Note: Some links are Google search results – in PC/desktop view click through to read the article. Try privacy/incognito mode to avoid cookies. Consider subscribing to sites you visit a lot.

Bank of England talks up rate cuts as inflation eases to 3.2% – This Is Money

Coventry BS and Co-Op Bank agree takeover terms – BBC

Brussels proposes return to pre-Brexit mobility for UK and EU young people – Guardian

Hunt urged to launch inheritance tax raid on unspent pension pots – Telegraph via Yahoo

London listing looms for Zopa as fintech turns in first annual profit – Yahoo Finance

The parents caught out by the child benefit charge – Which

How much have UK prices risen in the past two years? – Observer

Rare Bitcoin from ‘Satoshi era’ moves after 14 years of dormancy – CoinDesk

Historic Copenhagen stock exchange goes up in flames… – BBC

…even as neighbour Sweden’s becomes the envy of Europe [No paywall]FT

Are shared ownership schemes really making up for new social housing? – Sky News

Products and services

The struggle to choose the right mortgage [Search result]FT

Will letting your flat on AirBnB breach your insurance policies? – This Is Money

Paying monthly for insurance could cost you dear – Which

Sign-up to Trading 212 via our affiliate link to claim your free share and cashback. T&Cs apply – Trading 212

Not chipping your cat could affect your pet insurance – Which

London-based Nothing’s earbuds set a new standard for budget quality – Guardian

Open an account with low-cost platform InvestEngine via our link and you could get up to £2,500 as a cashback bonus (T&Cs apply. Capital at risk) – InvestEngine

Top ten credit card hacks – Be Clever With Your Cash

New ISA rules starting this month, explained – This Is Money

Get £100 worth of free trades when you open an ISA or trading account with Interactive Investor. Terms apply – Interactive Investor

Garden centres stockpile plants before new Brexit checks… – Guardian

…though it seems UK will not ‘turn on’ post-Brexit checks of EU goods for fear of border delays [Search result]FT

Homes for sale that have had an eco overhaul, in pictures – Guardian

Comment and opinion

Invest for the decades, not the years – Of Dollars and Data

More people in the UK are downsizing to save money – Guardian

Should governments tax the great boomer wealth transfer? [Search result]FT

Why wealthy American families are creating ‘passport portfolios’ – CNBC

Investing earlier in the tax year could be better for your ISA – Vanguard

The limit does not exist – or does it? – Money With Katie

Should you pay off your mortgage or invest your savings? – Morningstar

“Please stop asking me when I plan to retire”Herb Greenberg

The realities of retiring [rich] early [Podcast] – Money Wise via Apple

What are you willing to give up in pursuit of an all-weather portfolio? – Random Roger

Knowledge doesn’t change behaviour – A.W.O.C.S.

A dirty business – Humble Dollar

Why is it so easy to disregard behavioural finance? – Behavioural Investment

Use your time wisely mini-special

Time is a thief – Joy Levere

The 67-hour rule – The Atlantic via MSN

Naughty corner: Active antics

Will the growth of indexing lead to its downfall? – Wisdom Tree

Challenging the process – Novel Investor

These financial tidbits could give you an edge when picking funds – K.O.I.

The market size mistake in venture – Tom Tunguz / Tobi Lutke

Let’s hear it for the FTSE 100’s magnificently unglamorous seven [Search result]FT

Stocks and flows – Capital Gains

The optimal allocation to managed futures [Slightly old]Price Action Blog

Kindle book bargains

How to Read Numbers by Tom Chivers –£0.99 on Kindle

The Dip: Knowing When to Quit by Seth Godin – £0.99 on Kindle

The Pathless Life by Paul Millerd – £0.99 on Kindle

The Deficit Myth by Stephanie Kelton – £0.99 on Kindle

Environmental factors

Seven countries now generate 100% of their energy from renewables… – Independent

…while new wind installations hit a record last year… – Reuters

…and two new offshore Norfolk windfarms approved to double capacity – BBC

Wooden turbine towers could make wind energy even greener – CNN

Nature officially becomes a musician, earning royalties – BBC

Exploring kelp forests – Hakai

No birdsong: how a haven for nature fell silent… – Guardian

…except in New Zealand’s big cities – Guardian

Greece becomes first European country to ban bottom trawling in marine parks [By 2030]EuroNews

Robot overlord roundup

The AI race is generating a dual reality [Search result]FT

Is there enough text to feed the AI beast? – Semafor

UK rethinks AI legislation given growing risk concerns – Taylor Wessing

All are punished culture wars mini-special

From Intellectual Dark Web to Crank Central – The Bulwark [h/t Abnormal Returns]

What is ‘lived experience’? [Social science nerdy]Aeon

Off our beat

The cloud under the sea – The Verge

Amazon is filled with garbage eBooks. Here’s how they get made – Vox

Everyone in finance is getting ripped – Bloomberg via Wealth Management

Americans are still not worried enough about the risk of world war – Noahpinion

Welcome to mass-market mountaineering – The Walrus

And finally…

“Ten minutes, once gone, are gone for good. Divide your life into ten-minute units, and don’t waste even a minute.”
– Richard Branson, Screw It, Let’s Do It

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{ 40 comments… add one }
  • 1 Nearlyrich April 20, 2024, 11:07 am

    August 2025
    Neil Woodford contributes his first article after joining the Monevator team….

    …but don’t bet your pension on it!

  • 2 Rhino April 20, 2024, 11:12 am

    Just working my way through the ‘pathless path’. It’s not very good but hey ho only 99p. To summarise, corporate jobs are a bit shit, so try geo arbitrage and freelance consultancy. Dress it up like it’s some neo-religious move. That’s it in a nutshell. No humour, novelty or real insight.

  • 3 miner2049er April 20, 2024, 11:17 am

    As someone who bought a book about Nick Leeson which I found interesting it was as an observer wanting an insight as to what went on.

    Early into my investing journey I had some woodford funds and managed to cash out at a modest low £k loss before it all collapsed before folks got monies stuck. Mr Woodford has had any money I may have for him either directly or indirectly and I thank him for making me go it alone and research passive strategies and find monevator of which I’m delighted with and pay my subs an I’m due to fire later this year 🙂 in advance of any superstar projections

  • 4 B. Lackdown April 20, 2024, 11:24 am

    Handed back the reins not reigns … equestrian metaphor appropriately

  • 5 ermine April 20, 2024, 11:40 am

    @Rhino Thank you for saving me the time. And the 99p, but its the time I’d miss 😉 Kind of gels with the Vox link:

    Amazon is filled with garbage eBooks. Here’s how they get made

    although I have to say that I don’t observe the problem myself, never had that much of a hard time identifying the correct Kindle version of a book, which probably indicates my reading is a bit off.

  • 6 Rhino April 20, 2024, 12:21 pm

    @ermine – it’s not awful, just not good. Certainly not worth your time. Also re reading four thousand weeks which by contrast is really good. Burkeman is a great writer. Plenty of humour, humour can get you a long way.

  • 7 xxd09 April 20, 2024, 12:28 pm

    Learnt my lesson with Equitable Life many years ago which thanks to the Motley Fool my wife and I exited with capital intact-long before Woodford!
    The “Woodfords” of this world have their place as a salutary warning to active stock pickers of the perils out there and another lesson to the rest of us passive investors why we are where we are
    No pain,no risk ,no outperformance-just be aware of your investment choices
    Human nature being what it is -ie greedy,inquisitive and wanting to be ahead of the rest -there will be more Woodfords
    From Hillstreet Blues-“ Be careful out there!”
    xxd09

  • 8 Raheem April 20, 2024, 1:02 pm

    So I lost a few £k via Woodford’s Patient Capital Trust. I was attracted to the private assets (which I also like in SMT) and thought that private assets and a ‘proven’ fund manager would be a winning combo. Wrong!

    I put it down as a learning experience. It was always going to be a small % of my stash.

    What I always find crazy and sad re Woodford and other financial products that have imploded down the years is how some people just go all in on something. Sometimes it’s a scam
    and sometimes it’s just a product that goes wrong. But inevitably there will be some people that invested their life savings in it. I suppose it comes down to a lack of financial education.

  • 9 ChesterDog April 20, 2024, 1:03 pm

    I remember the Accumulator’s comment to his mother (pretty sure I have both parties correctly identified) at the time of the launch of Woodford Investments.

    Having schooled her in the merits of passive investing, he was immediately discomforted by her attraction to the star manager’s new project.

    I recall his assertions of the likelihood of reversion to the mean were heeded.

    If the good lady is still with us, I’d be interested to know her feelings on the matter.

  • 10 PC April 20, 2024, 1:06 pm

    Thanks for the Neil Woodford update.

    I’ve never given him any money and wouldn’t now but it’s interesting to read what he has to say. I like to seek out people I disagree with. I was a habit I picked up years ago.

  • 11 dearieme April 20, 2024, 1:26 pm

    It is a truth rarely acknowledged that Neil Woodford is an anagram of Elon Musk.

    Though not in the Latin alphabet, I’ll grant you. But on their native planet it’s unmistakable.

  • 12 Brod April 20, 2024, 1:43 pm

    Well, I made money out of Woodford Investment Management.

    I put £10k (the max at launch?) into each of the Equity Income fund and the max again into the Patient Capital trust . I got out (I think after reading TI’s article which brought me back to the One True Faith) with 10% gain in the first and a tiny loss on the second.

    Never again!

    On a brighter note, my retirement portfolio is set. 20% rising to 30% over the next few years in VHYL in the ISA and cash in premium bonds (cos the upside is great (but unlikely) and the downside negligible after tax) plonking dividends and winnings into our joint account to spend and a SIPP portfolio containing 30% FTSE world tracker, 10% commodities, 10% gold and 10% inflation linked short(ish) bonds tracker (GISG). I’m hoping that the mix of defensive assets will see me through to 67 when I pick up the state pension and a small DB pension leaving equities untouched. Just need to pull the trigger… But maybe OMY?

  • 13 KISS April 20, 2024, 1:48 pm

    I made a nice little profit buying into Woodford Patient Capital before launch, and sold at a premium a week or so after it went public.

    I didn’t remain patient though, the investments were more like I’d expect in a VCT, such as very early biotech, and the good ideas seemed to be spread very thinly as the fund grew well beyond the initial planned size. Some of the holdings seemed completely reckless, I recall cold fusion start ups or similar. And was very different to the large value strategy that had made his name.

  • 14 Delta Hedge April 20, 2024, 4:26 pm

    Sympathetic to WEIF investors as Link, Woodford and FCA let them down (and HL too, for those lured in by flattering puff pieces put out out almost until the end). An OEIC was an unsuitable vehicle, and the investments strayed from the advertising, if not the mandate. Less sympathy, tbh, for those in WPCT, as that was clearly going to be a much higher risk proposition than anything NW had ever done at Invesco, especially as he’d no experience in speculative nano caps and early stage unlisted. It was like an accomplished goal keeper winging it as a striker. Likely to not end well. If you’re really looking at the extreme end of the equity risk spectrum, which early stage and unlisted are, then perhaps you should instead be looking at SEIS, if you’re an AR taxpayer, as for every £100 of shares subscribed then with both tax relief (50%) and loss relief (at highest nominal rate) the effective economic cost of suffering a total loss on investment reduces to £27.50p. I see that INOV, as successor to WPCT, is at less than 12p now. At the start in 2015, IIRC, WPCT had gotten up to 120p, as investors drove it up to a 20% premium to NAV before NW had made any of his ill fated investments. An £800 mn closed end was always going to struggle to deploy capital efficiently as they’re aren’t that many decent opportunities out there in that space.

  • 15 mr_jetlag April 20, 2024, 6:15 pm

    another WPCT victim here… I sold off most before too much damage was done but kept a slice partly out of morbid interest and through the transfer to Schroders.

    89% down as of writing… thanks Neil, for putting me off active funds for life.

  • 16 Maj April 20, 2024, 6:32 pm

    I did very well with Woodford’s income funds when he was with Perpetual, back in the days of PEPs; probably before you lot were born.
    Later, when he re-emerged, I wasn’t tempted thankfully. Every dog has it’s day and all that.

  • 17 weenie April 20, 2024, 6:47 pm

    I was a fan of Woodford’s but got out with a small profit just before it all imploded. Just lucky timing really and partly thanks to Monevator as I just happened to reorganise my portfolio and switch from active funds to passive trackers.

  • 18 BBlimp April 20, 2024, 8:40 pm

    Wow, turns out can have some aspects of EU membership without the restrictions and huge membership fee. Paper tiger/ shopping superpower buckling almost as quickly as it did on Horizon.

    Are there lots of jobs in the EU for young Brits to go to ?

    ‘Youth (aged 15-24) unemployment is a major issue in many developed economies at present. In Q4 2023 the youth unemployment rate was 28.8% in Spain and 28.1% in Greece. It was 11.6% in the UK.’

    https://commonslibrary.parliament.uk/research-briefings/sn02800/

  • 19 DavidV April 20, 2024, 10:17 pm

    @xxd09 I was actively contributing via NI rebates to Equitable Life from 1989 to 2000 as my SERPS opt-out personal pension. I also read what Motley Fool had to say on the matter, but decided to stay. I stayed on until the bitter end in early 2020 when the with-profits fund was wound up and divi’d up between the remaining policyholders via the insurer Utmost (quickly transferred out to my SIPP).
    Including the compensation paid, my overall annualised IRR on the policy was 5.56% nominal. So about 2.26% real – not fantastic but not a total disaster either as most like to think about Equitable Life.

  • 20 xxd09 April 21, 2024, 12:48 am

    Well done -that was another way out-a bit long and very worrying!
    I had learnt another hard investing lesson-avoid insurance companies for savings of any sort ! Proceeded then on my merry investing way via Investment Trusts to end in Index Trackers where I have been for a very long time
    Made it to a comfortable retirement-so far !- so all’s well that ends well
    Glad you made it out with some amount of growth of your capital -it was even more shark infested waters in those far off days
    xxd09

  • 21 ExCity April 21, 2024, 7:34 am

    “Me, I even admitted I thought Woodford had as good a claim as any to investing edge.

    Although thankfully – and more on-brand – I said we couldn’t be sure. Even 25 years of outperformance at Invesco – which had made him the darling of middle-England savers – wasn’t definitive evidence of skill versus luck.”

    No edge, just factor exposures

    “However, we find that this alpha becomes statistically insignificant
    when controlling for exposure to several systematic investment styles.”

    https://www.aqr.com/Research-Archive/Research/White-Papers/More-Superstar-Investors-Neil-Woodford-and-Terry-Smith

  • 22 Ducknald Don April 21, 2024, 9:07 am

    I never invested in any of Woodford’s funds but I did make a ton of money contracting for Invesco whilst he was there. I guess this is the modern day version of selling picks and shovels. Thanks guys.

    @BBlimp you seem to be clutching at straws trying to make your precious Brexit look good. Remember your team won, get over it.

  • 23 BBlimp April 21, 2024, 9:28 am

    Really Ducknold, because a trawl through comments in 2019 shows you having the genius opinion you couldn’t have any benefits of being in the EU without following all the rules and paying the membership fee. Quite a few other regular contributors had his view. How’s it feel to be wrong?

    First horizon, now they offer this. Anything that benefits them will be offered over the next decades and anything that benefits us will be accepted. Don’t a need a one in all in policy. Funny how 17.2 million people could see what you couldn’t. Perhaps, just perhaps, repeating everything Simon Coveny said as immutable fact didn’t make you as superior as you thought you were ?

  • 24 The Investor April 21, 2024, 11:56 am

    @BBlimp — I’m just going to start deleting you soon, soft spot though I have for you. Nobody wants these comments to deteriorate into a troll-fest.

    And before you shout sour grapes, one mooted deal (on the back of weakening the incompetent initial Brexit deal you lauded, after the Windsor Framework was agreed and made things slightly less terrible) hardly makes Brexit a triumph.

    Reminder for neutrals:

    https://yorkshirebylines.co.uk/news/brexit/

    Also:

    https://monevator.com/day-three-in-the-big-brexit-house/

  • 25 The Investor April 21, 2024, 5:37 pm

    Apologies to others who want to talk Woodford, but just to follow-up with the rather sweary person whose comment I have not approved, to reply to the bit that wasn’t swearing — no I don’t believe I do live in an echo chamber, though I do accept I’m biased when reading the news, of course.

    From the tone of your comment I am certain you’re biased too (in the other direction) and to be honest I believe it’s pretty much a truism that anyone who uses the ‘echo chamber’ line of attack spends most of their time in echo chambers!

    The whole reason the conversation above was even happening on Monevator is because I included the news of the Youth Mobility potential proposal as a link! 🙂 Contrary to the echo chamber complaints of a (very small) minority of Monevator regulars, I do read pretty widely, by 2024 standards, at least as much as paywalls will allow, and when there have been truly meaningful and *genuine* Brexit benefits — or even just less bad news — I’ve tried to link to them, as above with the EU proposal.

    Of course the paucity / availability of such links over the past eight years tells its own story IMHO.

    Alongside the comment about the EU being ready to talk mobility, we also have a link above to news that the UK is effectively pausing border checks for the fifth time because they are still not ready to deploy without risking significant pain. Checks the EU had set-up for UK imports in… 2021.

    Guess which story was highlighted by a certain poster above?

    There are some regular commentators from whom I’d take accusations of bias seriously and with a straight face. There are others… not so much.

    I think please let’s leave Brexit/politics here this week. We had a good ding-dong last week and it’s boring to quite a large percentage of readers anyway.

    Thanks in advance.

  • 26 The Investor April 21, 2024, 5:53 pm

    @nearlyrich — Don’t think we have the requisite stabling!

    @Rhino — Thanks for the pop review. The Amazon reviews were good, often with the Kindle links I’ve not read them myself so I try to find relevant books for our audience but do have to lean on third-party opinions.

    @miner2049er — Thanks so much for subscribing, and congratulations on your imminent FIRE! 🙂 (Should we have a FIRE-side chat?)

    @B. Lackdown — Ack, cheers. Regular error for me, that one.

    @ermine — I think it’s more of a problem when you get into more obscure books. But that said, Nick Maguilli of “Just Keep Buying” fame was talking to someone on Twitter the other day who spotted typos in his copy of Nick’s book, that aren’t there in the real one. They were reading some kind of semi-AI-d copy-pasta.

    @xxd09 — I suppose every generation does need its sacrifices to prove the point. Yours was Equitable, 20 years later we had Woodford. Wonder who is waiting in the wings now?

    @Raheem — Totally agree about asset allocation. I am extremely tolerant of people trying all kinds of different things in their portfolio without me calling them names, but going ‘all in’ on anything once you’re over about 25 has me reaching for me labels I’m afraid.

    @ChesterDog — Great memory, you’ve just reminded me of that too! I can’t find the comment, yet I have a feeling @TA wrote a post about Woodford. Serves him right for not tagging it properly haha.

    @PC — That is a great habit.

    @Brod — Congrats on getting to a point where you feel set. My hunch is this is not a bad time to pull the plug generally (not personal advice!) Think I’ll write a George Constanza Bizarro world version of my article from early 2022 warning it was not a great time, by contrast (https://monevator.com/is-your-early-retirement-under-threat-from-an-unlucky-sequence-of-returns/)

    @KISS — Ah, stagging investment trusts that launched on unwarranted premiums. Those were the days!

    @Delta Hedge — Yikes, I’d lost track of what happened to the Schroders PCT inheritance, INOV. They talked a good game at points too. Actually wondering whether to have dive in. Hard to imagine a more unloved asset class right now then UK private equity previously owned by Woodford…

    @mr_jetlag — Expensive lesson but it’ll probably pay you back!

    @Maj — Yes, I met a lot of private investors back in the day that lauded the man.

    @Weenie — Phew!

    @DavidV — Interesting, we don’t often here that side of the Equitable Life story.

    @ExCity — It’s a valid counter, but I’m not besotted with these post-hoc factor exposures. I remember the hoo-hah about Buffett’s a few years ago (covered somewhere on this site). Since then I’m pretty confident Berkshire has outperformed the Quality and Value factors + leverage his success was chalked up to, IIRC. (Ready for egg on my face if that hunch is wrong though…)

    @Ducknold Don — That’s one way to do it haha.

  • 27 Delta Hedge April 21, 2024, 8:15 pm

    @TI @ExCity – I think the Buffet factor breakdown (and takedown) was this one from 2018/19 (covered by AQR at the time IIRC):

    https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3197185

    I’d be cautious toe dip investing in INOV. Schroeders changed name from SUPP for a reason, i e. it’s still going rather badly. When I looked at the investments held by WPCT in 2019 I had the same reaction as recently reading the two line summaries of investee companies from my SEIS Investment Manager – namely I laughed out loud. INOV definitely not for the faint hearted, and no tax breaks to boot. Also, whilst the EMH is somewhat overstated (how can securities prices always be right and what does it even mean for them to be correct?); following Francis Galton et al, the market is probably the best possible guess most of the time. And the market thinks that INOV is worth no more than 12p just now.

  • 28 The Investor April 21, 2024, 8:28 pm

    @Delta Hedge — Thanks for the further thoughts. To be clear “looking into” does not mean “toe dip” for me or even close at this point. Just amazed the story has gone quite so badly, and where there’s a lot of smoke and noise there’s sometimes something hidden…

  • 29 Naeclue April 22, 2024, 10:27 am

    Woodford had 25 years demonstrable success at Invesco – cannot possibly have happened by random chance can it? He must have an edge so I will invest. A good lesson that retail investors would take on board one might have thought? Roll on a few years and look at the fantastic returns of ARKK! Wood is clearly a genius.

    ARKK 5 year annualised return -2%, S&P 500 +13% and you really don’t want to know about the risk adjusted returns.

  • 30 Naeclue April 22, 2024, 10:44 am

    Regarding the IFS’s proposed inheritance tax “raid” on unspent pension pots, I think this will likely happen at some point and is one of the reasons we restarted drawing from our SIPPs. Large ISAs are likely to be in the firing line as well IMHO.

  • 31 DavidV April 22, 2024, 11:52 am

    @Naeclue (30) I am intrigued that I have never seen the idea of US-style Required Minimum Distributions (RMD) floated by politicians or think-tanks here as a means of the government tapping into hitherto unspent pension pots. It would hit me as I currently have no need to take an income from my SIPP, yet I am at the age where RMDs would probably be mandated, and they would almost certainly push me into higher-rate tax.

  • 32 Delta Hedge April 22, 2024, 12:00 pm

    Reflecting some more on WEIF and NW’s time at Invesco: it’s the same problem for all so called stock pickers – it’s a type of cult; a belief in the heroic, sage/prophet like manager who can reliably foretell which stocks will turn out good.

    Buffett, Lynch, Train, Smith, Woodford – names change but the problem remains.

    They don’t have an edge in picking individual stocks.

    The future is and remains unknowable.

    Instead they each have a system to play the odds as best as they can be guessed; i.e. (most notably for Warren B and Terry Smith) being long low volatility, wide moat, established, liquid stocks with high historic returns on invested capital (with the use of smart leverage for Berkshire); or, say, being long mean reversion with a credible catalyst (value).

    Typically these systems anchor on to an enduring behavioural support – e.g.
    – people overpay for lottery stocks and underpay for quality compounders; or,
    – under reaction is likely followed by over reaction (herding) leading to momentum and, in doing so, setting up the conditions for mean reversion.

    People believe in the star manager just like they believe in any charismatic leader. They believe because they want to, they need to.

    It’s inherently human to simplify and to delegate our judgements to, and channel our understanding through, a leader of some sort. But the dynamical investing world, at some level, defies simplification and comprehension.

    I hope a quick tryptic of Frank Herbert quotes captures this:

    “I had this idea that charismatic leaders ought to come with a warning label on their forehead: May be dangerous to your health.”

    “Deep in the human unconscious is a pervasive need for a logical universe that makes sense. But the real universe is always one step beyond logic.”

    “Does the prophet see the future or does he see a line of weakness, a fault or cleavage that he may shatter with words or decisions as a diamond-cutter shatters his gem with a blow of a knife”

  • 33 Random Coder April 22, 2024, 12:15 pm

    I also was going to say to have a look at ARKK, which is now just coming to Europe for anyone feeling the need for a hugely volatile product that very conceivably could end with greater capital losses. To be fair though, at least her products are clearly designated as being in a niche areas and such, so most her investors will be reasonably sophisticated and know what they are getting into. I hope so anyway.

    If you consider accountability in a workplace to mean: (a) having clear, unambiguous, documented/stated, ideally, target based outcomes to which performance can be compared; (b) being compared against said outcomes at designated points that were agreed in advance; and (c) the consequences of not meeting them lead to negative/failure results being delivered, then, active fund management is one of the least accountable industries in existence, especially if you are investing in large cap, highly traded stocks where the index likely will win after fees over even a moderate period of time.

    Interestingly, Neil Woodfords case is a bit nonstandard and points to the likely main cause of his predicament – he ultimately was trading mostly illiquid stocks under a product that investors seemed to believe was holding fairly liquid and mainstream stocks, and it appears it drifted over the life of the fund more towards problematic assets as people sold out. If his fund was clearly flagged as higher risk, niche, and understood to be mostly in stocks that were not easy to sell, then he may have been in a stronger position to argue right now, as most investors would have known what they were getting involved in. My view of the source of the problem was he appealed to the limited knowledge/least interested investors but ended up with a product for specialist/more interested investors.

    I have some sympathy for active fund managers *clearly* trading niche or specialised thematic areas – as long as it is crystal clear to everyone that this is happening and what the risks involved are – in such cases, poor performance against a large cap developed world index say, is not reason enough to finish, or immediately criticise a manager, it is just the nature of the beast. This is the area where active management can contribute a lot, even with funds losing(!) against large indexes – by design, themed niche products reflect the performance of the theme. If your in ARKK, say, you probably believe crypto, AI, etc etc is going to completely change the world, and fairly soon. If you lose a lot of money it was likely your belief/desire to back those areas that was responsible for most of that loss, not the fund manager – they just made it a bit more painful with higher fees along the way.

    In active fund management, the classic “I’m investing for the long term’ line continuously pushes accountability points further into the future that never come around, this is my first issue, but most grating for me is the fact even when/if it goes bad with huge loses, they almost always blame external factors, never their role (they just needed more time of course it…).

  • 34 The Investor April 22, 2024, 1:52 pm

    In active fund management, the classic “I’m investing for the long term’ line continuously pushes accountability points further into the future that never come around, this is my first issue, but most grating for me is the fact even when/if it goes bad with huge loses, they almost always blame external factors, never their role (they just needed more time of course it…)

    Like a lot of things in life, I think the problem is this is both the (agreed, infuriating) line used by those on the path to failure AND it is actually true of those who do possess/demonstrate true skill (/persistent luck 😉 ).

    Almost all the great (vanishingly few) stockpicking active investors (versus a quant like Renaissance, say) had multiple periods in their history where they suffered big drawdowns. Often in terms of outright losses, but especially versus the market or their benchmark.

    So sticking with any active manager means going through the rough patch while they tell you to judge them for the long-term.

    It’s only after that long-term that you will know whether you had an excuse or a reason (excluding luck/counterfactual history etc) on your hands. 🙂

  • 35 Mr Optimistic April 23, 2024, 9:15 am

    £99 for a pair of earbuds and that’s a bargain ?!
    Bring back National Service and get a haircut.

  • 36 ermine April 23, 2024, 4:57 pm

    @MrOptimistic £99 for a pair of earbuds and that’s a bargain

    well, they are a third of the price of the benchmark Apple product.

    It wasn’t the smashed avocado. It wasn’t the lattes. It was the smartphone ecosystem that stopped people saving money.

    I’m not going to bother generationalising it. I couldn’t afford to feed the Apple beast. The number of subscription-based must haves is growing like Topsy. No wonder people can’t save money any more

  • 37 Al Cam April 25, 2024, 9:37 am

    @Naeclue (#30):
    Re: “Large ISAs are likely to be in the firing line as well IMHO.”

    FWIW, I think this is more likely to come in the form of some sort of limit on further contributions. I say this because HMG has already had its pound of flesh from the ISA contributions – which are tax paid upfront.
    I see the issue around the SIPPs as primarily being related to HMG not yet having had any tax on that money and being increasingly impatient to get some of it. I also do not think the SIPP IHT dodge will permanently deny HMG some tax (as IMO in most cases somewhere along the succession line somebody will probably draw it down) but has probably pushed forecast likely SIPP tax receipts* way out beyond when HMG expected them.

    *which curiously never seem to feature in any discussion about pensions tax relief

  • 38 Delta Hedge April 26, 2024, 1:46 pm

    What Woodford’s “Reasons to be Cheerful, Part 1” piece misses is that people don’t experience national GDP growth. They’re exposed to per capita changes. So whilst the UK (after a massive fall in GDP in 2008/9) may indeed have managed to eek out 2% p.a. GDP growth in 2010-19 (as against 2.8% p.a. over 1998-2007 and 2.4% p a. over 1950-2023), as Woodford quotes, the per capita performance has been dire. The latest MoneyWeek paints the lived experience: in 2007 GDP per capita in real 2023 terms was £32,500 and in 2023 it was for all practical purposes no higher at just £33,200. Over 15 years with no increase in living standards in aggregate is certainly no ‘reason to be cheerful’.

  • 39 Delta Hedge May 10, 2024, 4:38 pm

    It’s actually worth reading Woodford’s blog. Although I don’t agree with all of his posts (see my 26/4 comment #38), they are, for the most part, quite well argued. The latest covers the structural problems created for UK equities by mark to market accounting. Speaking as a Remainer it’s fair to say that far from all of the problems of relative UK equity market underperformance stem from Brexit alone or really begin in 2016 (although Brexit clearly made them significantly worse, and there was a distinct further derating from 2016). In any event, here’s the link to Woodford’s latest:

    https://www.woodfordviews.com/post/a-quarter-century-of-damaging-reforms

  • 40 BBBobbins May 17, 2024, 1:19 pm

    Sorry latecomer to the debate having redirected from @ermine’s site when catching up.

    The debate on RMDs and future of ISAs is interesting. But as someone who has decided this week that , barring catastrophe in the next few months, he is at No More Years my die is largely cast.

    I have enough in ISA and GIA I hope to ride out the next 10+ years without drawing from SIPP (bar ensuring I fill personal allowance). My thinking though is to take max PCLS before an incoming government think about capping it at a lower “fair” amount (though you can see some political complexity there if it starts impacting public sector workers). That’s going to largely chuck those funds into GIA plus an annual fill of ISA as long as they still exist for funding. I’m going to end up paying tax on GIA anyway (and this will clearly increase that) though maybe that helps me be a bit sanguine about market downturns while staying largely invested in the SIPP.

    I don’t believe the SIPP IHT perk will survive my lifetime, though that of course is tempting fate on the length of that lifetime so the reward of a long and hopefully healthy life is sufficient hedge.

    So I’m left fearing RMDs but given a minimal future DB + state pension I have headroom to HRT. Hopefully if introduced they only become a post 75 problem aimed at encouraging the elderly asset rich to pass money down to continue supporting an inflated housing market or somesuch. I can see at that age, should I reach it, being more relaxed about the delta between IHT and my suffering some HRT before gifting the cash on to beneficiaries (actually an outright exemption from IHT for gifts of some of the RMD might be a way of selling it politically).

    So I’m not all in on anything. I still curse myself for not filling ISA allowances when younger even if it had just sat as cash but better come to the optimisation game late than not at all. Hopefully it provides some degree of contact with the enemy. Of course there is nothing that politicians cannot make worse by some degree of meddling like e.g. Hunt’s whizzo idea to scrap individual NI entirely that you could see someone picking up as justification to put up basic rate tax and drag retirees into it.

    Now just to go and worry about how much of my current position to start hedging into cash and gilts so a crash won’t feel too painful. Anyone ever liberated cash at a possible toppy point to feed back into equities over time (i.e. generate spending power to buy the dip if it comes or indeed live off while sitting out a long trough)?

    Sorry for the ramble. Just felt like a decent place to voice some concerns and get some virtual comfort that I’m not mad.

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