Ask Money: aren’t we overdue a Woodford wake-up call?

One Money Observer reader has five pertinent questions in the wake of the Neil Woodford fiasco.

October 16, 2019

Money Observer articles on the subject of Neil Woodford in the doghouse and the importance of liquidity (September issue) have led me to reflect on questions to be asked in the wake of the Woodford fiasco.

As the story behind Woodford continues to evolve, and it becomes easier and cheaper to manage investments on platforms, the following questions are pertinent.

• Is it advisable to be suspicious of personality cults and avoid placing blind faith in any individual or firm?

• Is it wise to we be wary of ‘disruptors’ and to try before we buy? For example, one might conclude from a user perspective that Atom Bank is not a challenger to banks, but just an app for savings. Is it ‘cutting edge’ or peripheral? If the latter, why would a fund (such as Woodford’s) invest so heavily?

• Should we review the performance of funds more regularly, challenge the wisdom of the ‘buy and hold’ strategy and move to the ‘sell and buy’ alternative?  

• Is it time to lobby regulators to set new standards of clarity around the relationships between individual funds and fund platforms?  

• Should we be seeking to hold individuals to account, and support the wider prosecution of those who mislead – by using the Trade Descriptions Act to pursue those who have failed to deliver on their promises, for example?
Raoul Pinnell, by email

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The Woodford failure

The reason for failure is almost laughable if it was not so serious. The problem of recovering cash in unlisted companies !!! It is basic.
Where were the supervisory bodies when Woodford piled into so many
risk situations?

Why is anyone shocked?

Woodford did what he said he was going to do until he started cross holding between vehicles and trying to finesse the rules.

Why anyone gave a large cap value fund manager money to invest as a VC in small unlisteds is beyond me. Why someone who was previously pretty sane decided to invest in Industrial Heat is another matter.

Not only are unlisteds illiquid, te very nature requires continuous inflows of cash for them to grow. I wonder where Woody thought that money was coming from

Investing in sub-prime lenders is always risky and in some views unethical. Everyone know HMG will be looking sternly at people charging very high rates of interest to those with least money.

brexit really didn't help him either.

I didn't invest with him or Mark barnett. i saw them interviewed and just heard ego.

he had some decent holdings but when everyone knows you need to sell life is going to be tough. I was buying NRR at 160 as he was selling. It is now 220 ish. When you try and offload 20%+ of a even a liquid company you are going to attract attention.

he bought 25% of Kier. The wheels fell off that and his sales into a falling market nearly killed the company as credit insurers took fright from the plunging stock.

High risk playing. If it wins you are a genius.

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