The knives are coming out for poor old Woody.

[OZYU]

So, let's get this right, a fund manager, like Rob alias NotHimAgain, who does not seem to know that IRR and Acc unit both attempt to measure TR can freely post erroneous statements and he can't be taken to task for the ignorant investor he is?

It is fine for a private investor not to know these things, imho, but not acceptable from a professional, not very successful so far, commenting on another seasoned professional like WOODY.

If that is so, then PLEASE delete my account today.

Ozyu

[melonfool]

Anyone can post ignorance - no rules against that. And no special status for being a 'fund manager'.

Argue politely - the rules are against name calling etc.

Mel

[OhNoNotimAgain]

The issue with Woody is the same as we saw with Peter Lynch, Anthony Bolton, Nick Train, Crispin Odey and a host of others.

The simple question is whether one manager can beat the index consistently over a long period of time when the alterative is a simple fund using a rules based process or algorythm based on mkt cap or some other measure.

There are two caveats to this. One is that the 8 years since QE started has totally distorted all sorts of valuations ranging from classic cars to bonds to small caps. That experiment is still running and no one really knows how it will end, althought the evidence from history of countries debasing their currency is not encouraging.

The second caveat is the tobacco response. There was overwhelming evidence for decades that smoking was bad for your health. However, there was a vast industry involved in it, not just the growers, but marketing, advertising and not least states who all took a slice. Their collective approach was to cast doubt on the data rather than challenge it outright.

The same applies to active management. It is not just the active managers that want to perpetuate the myth that they can outperform, but the brokers, the marketing men, the IFAs, the trade mags and a host of websites. They adopt the same technique as tobacco did; cast doubt on solid data and play to people's hopes of optimism that they can find the one guy who will beat the market or not contract cancer.

As Upton Sinclair said in the 1930s" It is very hard to believe one thing when your salary depends on believing the opposite"

[scotia]

Still waiting patiently................

I have been reluctant to continue this discussion, since it seems to be getting over heated, however I hope the following contribution may be helpful.
Have a look at HSBC FTSE 250 Tracker.
I can't find any Small Cap trackers - but there are lots of small cap active funds.
Over the past decade Woodford may have, at times, just outperformed the lumbering giants that make up the majority of the FTSE All Share - but he is not constrained to choose these. I can't measure how he previously performed - i.e. two decades ago, since I can't find the relevant statistics.

[Dod101]

Woody did pretty well at Invesco but since he has gone off on his own he has gone well off the rails. To compare him to Buffet is ridiculous. No fund manager is going to get it right every time but Buffet has done much better than most and over a very long period. The size of Berkshire Hathaway must now be a hugely inhibiting factor as indeed must Buffet's age. As for Buffet and Tesco, well plenty on these Boards were buying into Tesco around the same time Buffet was and were mostly I suppose resident in the UK with the opportunity for first hand experience of Tesco and a good look at the culture, something which I do not suppose Buffet took advantage of. I have never held Tesco, for much the same reason I never held RBS, the culture. Does that make me a better investor than Buffet? Of course not.

I suspect that Woodford is finding life a lot more difficult that he thought without his colleagues at Invesco, but I have never really rated individual fund managers, although I like Bruce Stout at Murray International and James Anderson at Scottish Mortgage.

The adulation that Woodford has got over the years for his success in investing in what? Tobacco and Pharmas. Two of the most obvious 'good buys' around at least for the income investor.

Dod

[OhNoNotimAgain]

Interesting to note that indeed, Woody's Income fund is a 4th quartile performer. But he still beats the index. I guess it simply doesn't suit some people to admit they were wrong about an index fund beating him?

2 of the top 10 stocks are not in the index, and the fact sheet is from almost 2 months ago. Even on the data quoted an outperformance of 2.78% over more than 3 years is hardly a ringing endorsement of the all the work he and and his team have put in over that time and the extra risk (unquoted stocks) incurred.

[hiriskpaul]

Interesting to note that indeed, Woody's Income fund is a 4th quartile performer. But he still beats the index. I guess it simply doesn't suit some people to admit they were wrong about an index fund beating him?

2 of the top 10 stocks are not in the index, and the fact sheet is from almost 2 months ago. Even on the data quoted an outperformance of 2.78% over more than 3 years is hardly a ringing endorsement of the all the work he and and his team have put in over that time and the extra risk (unquoted stocks) incurred.

The question is, what is a reasonable index to compare against? Just a finger in the air, but how about 80% FTSE allshare, 10% FTSE 250 (to reflect the mid/small cap tilts) and 10% MSCI Developed World ex UK (to reflect the foreign investments). HL give the following 3 year performance figures for accumulating trackers following these indices (up until 25/10):

CF Woodford Equity Income Z Acc GBP                    29.25%
iShares UK Equity Index (UK) D Acc                     34.23%
iShares Mid Cap UK Equity Index (UK) D Acc             43.31%
Vanguard FTSE Developed World ex UK Equity Index A     60.26%

So a 80/10/10 weighted benchmark return would be about 38% over 3 years, compared with Woody's 29%. Not great, but hardly disastrous.

Over the last 3 years Woody has not been far away from the FTSE 250, at times outperforming and at others underperforming. It is just the last few months where most of the large underperformance has appeared. As such I find the attitude of Chatfeild-Roberts peculiar. If someone believes that it is worthwhile paying for active fund management, as Chatfeild-Roberts clearly does, why dump him after just 4 months poor performance? In the past Woody has looked wrong for years and then eventually come good. Chatfeild-Roberts behaviour is similar to that of inexperienced retail investors who panic and flee at the wrong time and then go on to repeat the same mistake.

[hiriskpaul]

p.s. HL do not give "From Launch" figures, but reading the charts it looks like CF Woodford Equity Income 30%, iShares UK Equity Index 27%, iShares Mid Cap UK Equity Index 36%, Vanguard FTSE Developed World ex UK Equity Index 65.00%. So he is still just ahead of a FTSE allshare tracker since launch, but just behind a 80/10/10 blend at 32%. The first few months of performance after launch has helped him.

[scotia]

I'm straying a bit off-topic, but I have problems considering the FTSE All Shares to be a sensible balanced index of UK companies. If I remember rightly, it contains 600 companies, but the top 10 make up about 37% of the value. I usually benchmark performance versus the FTSE 250 - although it has the opposite (and possibly beneficial) problem of not containing any of the lumbering giants that weigh so heavily in the All Share Index. And it doesn't contain the smaller companies, which recently have been performing remarkably well. So from my own UK investment perspective, I agree with Hiriskpaul that a weighted mixture of indices makes sense - although I would place much less weight on the All Share than he proposed, and I tend to use active funds for the small cap exposure.
But as I started off by saying, I'm probably straying a bit off-topic, so in amelioration I would add that I have had no problem in keeping up with a certain "Star" fund manager using such an approach. And its a much easier task than my usual one as a consulting engineer.

[hiriskpaul]

I'm straying a bit off-topic, but I have problems considering the FTSE All Shares to be a sensible balanced index of UK companies. If I remember rightly, it contains 600 companies, but the top 10 make up about 37% of the value. I usually benchmark performance versus the FTSE 250 - although it has the opposite (and possibly beneficial) problem of not containing any of the lumbering giants that weigh so heavily in the All Share Index. And it doesn't contain the smaller companies, which recently have been performing remarkably well. So from my own UK investment perspective, I agree with Hiriskpaul that a weighted mixture of indices makes sense - although I would place much less weight on the All Share than he proposed, and I tend to use active funds for the small cap exposure.
But as I started off by saying, I'm probably straying a bit off-topic, so in amelioration I would add that I have had no problem in keeping up with a certain "Star" fund manager using such an approach. And its a much easier task than my usual one as a consulting engineer.

I was not intending the weights I used to be in any way sensible, just a rough benchmark for the Woodford fund to try to take account of the overweght mid/small caps and foreign shares. I weight 90% to overseas listed equities, 10% to UK and within the UK I put roughly 50% in the FTSE 100, 40% in the FTSE 250 and like you, use active management for the small caps - there are no FTSE small cap trackers anyway. Completely agree with you about the FTSE allshare, a very poorly diversified index. FTSE World is so much better in comparison, although a bit too heavy IMHO in US shares.

[OhNoNotimAgain]

Ignoring the fact that he uses an index that is not representative of his portfolio he has charged investors over £200m since launch to deliver a return that is not statistically significantly different from the return an index tracker would have given, and less than a blend of passives that reflected the asset alocation would have.

Not sure many engineers would trust someone who says "Give me your money, I know something about these companies no one else does, but I can't tell you how I do it" over someone who says the evidence from many Nobel prize winners is that given enough time relying on compound interest and efficient markets gives a better and more reliable return than stock picking"

[nmdhqbc]

Ignoring the fact that he uses an index that is not representative of his portfolio he has charged investors over £200m since launch to deliver a return that is not statistically significantly different from the return an index tracker would have given, and less than a blend of passives that reflected the asset alocation would have.

Not sure many engineers would trust someone who says "Give me your money, I know something about these companies no one else does, but I can't tell you how I do it" over someone who says the evidence from many Nobel prize winners is that given enough time relying on compound interest and efficient markets gives a better and more reliable return than stock picking"

Charges are taken into account. So that does not matter to investors.

Such short term thinking. How many times do commentators etc. say investing is all about the long term. See chart in web page below. Does that look like it's "not statistically different" from the index?

http://www.hl.co.uk/funds/fund-discount ... e/research

[hiriskpaul]

Not sure many engineers would trust someone who says "Give me your money, I know something about these companies no one else does, but I can't tell you how I do it" over someone who says the evidence from many Nobel prize winners is that given enough time relying on compound interest and efficient markets gives a better and more reliable return than stock picking"

Sure, but that is just facts. It is wrong to say there is no chance of any particular active manager outperforming, just more likely than not they will underperform. Many, if not most people would still prefer to make a punt on an active manager that gives a chance of outperformance, even if the evidence and probability of success indicate this is not necessarily a rational thing to do. Of course most retail investors still don't even recognize they are being irrational, though that proportion is I think slowly decreasing.

I have nothing against retail investors behaving irrationally as it helps make the markets more efficient for those who prefer to invest rationally. However, the amount the active management industry as a whole charges investors is truly usurious, and that does annoy me.

[Lootman]

Interesting to note that indeed, Woody's Income fund is a 4th quartile performer. But he still beats the index. I guess it simply doesn't suit some people to admit they were wrong about an index fund beating him?

2 of the top 10 stocks are not in the index, and the fact sheet is from almost 2 months ago. Even on the data quoted an outperformance of 2.78% over more than 3 years is hardly a ringing endorsement of the all the work he and and his team have put in over that time and the extra risk (unquoted stocks) incurred.

I find it hard to believe how any value investor could possibly have beaten the usual global benchmarks in recent years. And simply because of the massive increase in market cap of just a few non-value names like

Amazon
Apple
Netflix
Google
FaceBook
MicroSoft
SalesForce

and so on, including some non-value biotech names as well.

Against that onslaught how could Woody out-perform, with his endless switching back between ponderous UK tobacco, drugs and utility shares?

He is the right guy for the wrong time.

[OhNoNotimAgain]

Take your pick

http://www.hl.co.uk/funds/index-tracker ... ctorid=101

Although HL make it harder by only showing growth rates over individual years and not cummulative which would favour less volatile funds.

HL has made it very hard to find that page now, which tells you something.

[Stonge]

This whole business is truly puzzling. I thought Woodford was an exceptionally skilled investor?

His words were a little bit reassuring about Brexit as well.

I think I need a stiff cup of tea. A cream tea would be nice but I'm not in the West Country today. Life eh! Sigh, full of disappointment and unfulfilled hopes, dreams and yearnings.

[OhNoNotimAgain]

I thought Woodford was an exceptionally skilled investor?

His words were a little bit reassuring about Brexit as well.

That is what his marketing department want you to think. Otherwise the evidence might convince you otherwise. Reassuring words are always a good way of persuading people to leave their money where it is rather than make a rational decision decision based on evidence.

Inertia is the fund manager's best friend.

[hiriskpaul]

Take your pick

http://www.hl.co.uk/funds/index-tracker ... ctorid=101

Although HL make it harder by only showing growth rates over individual years and not cummulative which would favour less volatile funds.

HL has made it very hard to find that page now, which tells you something.

What use is posting a list of all the UK All Company tracker funds?

I conclude your assertion that cheap trackerfunds beating Woody Income since launch is completely untrue. Woody beat his benchmark. How can a fund tracking Woody's benchmark index beat him? It can't.

Either you are making a mistake or you are using this false assertion to put forward an agenda that we don't know about.

You are simply wrong in your assertion. Have you the cojones to admit it? Or have you made an honest mistake but can't admit it? Or shall I draw my own conclusion about your agenda?

One of the tricks of the fund management trade is to pick an undemanding benchmark. Instead of accepting the benchmark that Woodford wants you to, look at how he has actually invested and build a benchmark on that. I had a go with 80% FTSE allshare tracker, 10% FTSE 250 and 10% FTSE World ex UK tracker, but it was a stab in the dark. He failed to beat that by a few percent, but did beat his own benchmark by a couple of percent. 2-3% difference over 3 years is well inside random noise anyway and you cannot really tell anything about performance after only 3 years, so all a bit pointless.

Lootman made a very good point about the market not really being ideal for his style.

[OhNoNotimAgain]

This is relevant to the discussion

Earlier this week, the Wall Street Journal featured a long article arguing that Morningstar’s star ratings for mutual funds were a “mirage.” Since these ratings exert a powerful influence over fund flows, their usefulness is obviously of keen interest to investors. To its credit, Morningstar, although arguing that its ratings are a “worthwhile starting point,” acknowledges that they are backward-looking and were not designed to be a predictive model of future performance. Morningstar’s own analysis argues that the ratings are most powerful when used to select allocation or taxable-bond funds, while they “exhibit less predictive power” for U.S. equities.

Given the burden of empirical evidence, one is left to wonder why investors continue to include past performance as a factor in their decision making. I suspect that it’s deeply and fundamentally behavioral – we human beings are conditioned to believe that the past predicts the future. And in much of life, the past is a useful guide. Because investment management is an exception, not the rule, confusion about the importance of historical performance is likely to continue.

http://www.indexologyblog.com/2017/10/2 ... pay-for-2/

[nmdhqbc]

So if you think Woodfords past performance has been so abysmal maybe now's the time for you to invest. Did you actually look at the chart of Woodfords career? I'd be pretty happy with that.