Coverage of the Woodford fund suspensions continued in the national Sunday newspapers. Initial analysis as the news first broke last week focused on what was happening and what it meant for those invested in any of the three Woodford funds. As the dust began to settle a little the focus has now shifted to what it means for all investors. What does it mean for confidence in the fund management industry as a whole?
Rupert Neate writing in The Observer addresses the implication that might be dawning on investors and the industry. In his story Fall of fund management’s star player puts future of industry under scrutiny Neate writes that the disaster at Woodford Investment Management ‘has plunged rival fund managers into crisis mode as they try to salvage the reputation of an industry that finds itself under the scrutiny of regulators and politicians.’ Talking to stockbrokers and financial advisers Neate hits on the real danger of all of this being: ‘a near fatal blow to the public’s confidence in the star fund manager investment model and could lead people to stop investing for their retirement entirely.’
The industry has a job and a challenge on its hands to build that confidence back up again. A start, Neate reports, could be what comes out from an inquiry by the cross-party Treasury committee investigating ‘fund charges, transparency of stock holdings’ but also considering ‘new rules forcing fund managers to reveal the proportion of money held in iliquid assets.’ Stable doors and horses of course, but there you go.
The Mail on Sunday published a four page special report on the Woodford debacle – following months of campaigning by the paper on behalf of ‘thousands of investors (readers) who had entrusted their money to the former ‘star’ manager.’ Editor Jeff Prestridge explores the idea espoused by Peter Hargreaves, joint founder of the platform Hargreaves Lansdown (he stood down as an executive long before the Woodford Equity Income Fund (WEIF) began to be heavily promoted) that Woodford ‘knew he was toast and took as much money as he could anticipating the demise of his business.’ This in relation to the management charge still levied on investors after the fund was suspended. Having called for the fees on the fund to be waived from that time the MoS Wealth team is calling for the £8,710,000 ‘earned’ by the fund since its suspension be paid back. Rely on Prestridge and his team not to let this one go away.
In her story in The Sunday Telegraph The Oracle of Oxford has gone form star to black hole, so who can investors trust? Harriet Russell provides an interesting read into why and how fund managers can be elevated to ‘star’ status and profiles five key ones: Warren Buffett, Terry Smith, Nick Train, Anthony Bolton and Mark Barnett. The last word goes to Buffett and his two rules: One: never lose money. Two: never forget rule one.
The Sunday Times, in Revealed: the plot to shut down Woodford states that evidence suggests that Link Fund Solutions ‘began laying the groundwork for the closure of (WEIF) as long ago as July.’ The grievance for investors being the charges which were taken over that period. Journalists Ali Hussain and Sabah Meddings cite a ‘presentation prepared by Woodford, seen by The Sunday Times, told of progress in reducing liquid assets. Part of the presentation showed that as of October 11, 23.2% of the fund was invested in the most illiquid stocks – down from the 33% Woodford disclosed to MPs in June. It’s holdings in liquid assets had increased from 37% to 61.7%. However, Link dismissed Woodford before he could present the information.’
In further coverage in the paper Meddings and Peter Evans explore whether we will see the trend from active to passive fund investment accelerated and Hussain looks at the situation for fund manager Mark Barnett who took over the management of the funds Woodford ran at Invesco before he left to set up on his own – the Invesco Income and High Income funds. Again, a very interesting read for investors – whether Woodford ones or not.
Finally, a story absolutely not to be missed – in his Personal Account column – is the brilliant Ian Cowie who writes about his investment in Patient Income Trust, the other Woodford trust suspended last week. If you are a Woodford investor take heed and heart from the sensible and honest account Cowie gives of his experience.
Further reading: Woodford in the FT analysis a must read