CF Woodford Equity Income Fund

[PaintYorkClaretnBlue]

Can anybody with any knowledge of the financial industry please give me their opinion of the above fund? If performed well in its first year but the last two have been disappointing. Am I right in thinking that it is worth holding in the medium to long term?

[dsr]

Basically, every share and every fund on public sale have a value that reflects what the financial world as a whole thinks of its value. The current price of any asset represents the value at which approximately equal numbers think it's worth buying as there are think it's time to sell. In outline.

So the next conclusion is that any individual's view isn't worth anything, unless you know they're likely to have better knowledge than "the market as a whole".

[Walton]

It's a fund we use, but there's been disappointing performance over the last year or so, as you say. It's on the watch list, and it was interesting to note that Aviva have ceased to carry it on their platform. That's a big move from them.

If you already hold the funds, then stick with it, otherwise you'd be selling low. 12 month return of 4% is way behind sector average of 14%, but it's not a loss at least.

Someone with Woodford's track record can and should get it back on track.

If I was going into UK Equities now though, I'd be looking at JOHCM UK Equity Income, MI Chelverton Equity Income and Unicorn UK Income.

[CrosspoolClarets]

Depends whether you think Woodford’s approach will bear fruit in the medium to long term or whether a different style will. Woodford is risk averse and hasn’t seen the gains some have following QE and a low interest rate environment which have caused asset prices to skyrocket.

I know my own view but I’m loathe to steer anyone down a particular path when savings are at stake.

[PaintYorkClaretnBlue]

Thanks all! Crosspool, I’m interested in all views and am aware that any decision that I make is mine and mine alone.

[Spike]

Woodfords launch was well and truly in the middle of this bull market.
He is defensive and would he have bought such expensive stocks if he wasn’t starting from scratch?

You have to ask yourself is the fund really bad enough to suffer selling and buying costs for something new. If ,however, you review your portfolio and think that you require a different asset mix then that is a totally different scenario.

If it’s part of a larger portfolio and with Brexit upon us you may want Defensive strategies.
Think carefully about forking out dealing costs every few years

[Hendrickxz]

I was in Woodford Funds but got shut and reinvested in Lindsell Train and Fundsmith. I haven't regretted it so far. LT are interesting because they have a core of quality companies they keep adding to but very rarely introduce a new stock into the fund. If you are going to pay fund manager premiums you want to know that they are performing, but Woodfor seems to be in the middle of a very big hiccup looking for direction.

[PaintYorkClaretnBlue]

Cheers spike. I have some cash which is invested in four or five funds including cf Woodford but I also have a regular saver which includes that fund. It is that which I am considering changing to a different fund. I don’t mean selling what I already have, just changing what I buy in the future.

[PaintYorkClaretnBlue]

LT Global Equity is one that I am looking at Hendrick.

[Spike]

Woodford has , unlike the consensus, moved strongly into domestically focused UK companies, moved into bank stocks for first time in a decade and has a new position in British Land
If you are buying monthly with a medium to long term investment horizon then you can gain from pound cost averaging by getting more for your brass when things are down
Buying Woodford when things are lower may make sense

[kaptin1]

Woodford has suffered some casualties in his fund of late which have damaged performance, not least Provident Financial which he owned around 20% of and has seen it fall from well over £30 to well under £10 this year, as well as suspending dividends. He is now seeing redemptions which are never healthy for a fund manager as it means they can become forced sellers of stocks to finance these. He is a good fund manager, but struggling at the moment.

[PaintYorkClaretnBlue]

Long term you think that he’ll come good though kaptin?

[dushanbe]

I’ve got a fair chunk in this fund, but to be honest it just proves to me that you can’t beat passive funds over the long term.

[kaptin1]

Long term you think that he’ll come good though kaptin?

As I say, he is regarded by many as a good active fund manager but beating the market on a sustainable basis is incredibly difficult to do, so I couldn't say with confidence that he will regain his stripes.

[kaptin1]

I’ve got a fair chunk in this fund, but to be honest it just proves to me that you can’t beat passive funds over the long term.

On average I think that is true as the average active fund will underperform the average passive fund over time simply due to the fact that charges of the former are higher. By nature, the outperformance of one active manager must be offset by underperformance of another, so while individual fund managers can do well, the aggregate of them all can't beat the market and therefore passives, once charges are taken into account.

[clarethomer]

Personally, if you don't have the tools to really track these investments and have a strategy, I would steer towards index trackers - fairly simple to understand, low cost etc and in a strong market will do well.

Actively managed may seem a little more exciting but very rarely does anyone consistently beat the market but they can be better in a poor performing market.

In fact the regulator is looking very closely at the way these funds charge so when I look at actively managed funds, costs are key because unfortunately you don't get what you pay for in many cases.

I think if you take an approach of having enough money for emergencies on access and then for the money you want to invest a little longer term then keep it simple - spread your eggs into many baskets. You should therefore have some of your portfolio performing and some not but over time see steady growth.

[PaintYorkClaretnBlue]

For every £10k say, how many different funds should you have do you think?

[clarethomer]

It depends on the funds PYCB.

When looking at my funds, I try and get a good spread across different geographical locations and then I look to spread across investments which have a good spread of different assets such as equities, fixed interest, bonds etc.

[dushanbe]

This is an excellent site, admittedly geared to passive investing but it does give guidance on how to split asset classes.

http://monevator.com/" onclick="window.open(this.href);return false;

[clarethomer]

I wouldn't also underestimate the use of using your tax wrappers also as part of your investing if you are still working.

For example for those still working and looking to put away for the longer term beyond their 55th birthday - maximising pension contributions with employer matching could give you a far better return even by sticking it in cash. If you give your pension £100 and your employer will put £100 in - so a 100% return instantly! I bet that will benefit you more than some fancy investment fund manager.

Outside of employer matching, your pension contributions can still be beneficial of a 25% uplift on what you invest with up to 45% tax relief available.

Using a LISA is another example for those under 40 - Invest in cash and get a guaranteed cash return on 25% every year that you can invest.

Regardless of whether all of these tax wrappers are available or not - Investing can be made to appear very complicated by getting into fund mix/asset allocation and whether one fund is better than another.

Often simple strategies like index trackers/passive investing with low cost approach and maximising the right tax wrappers such as your ISAs and personal allowances will get you well on the right track.

[levraiclaret]

If I was going into UK Equities now though, I'd be looking at JOHCM UK Equity Income, MI Chelverton Equity Income and Unicorn UK Income.

If you were looking to mitigate the impact of Brexit what would you be looking at right now?

[Walton]

If you were looking to mitigate the impact of Brexit what would you be looking at right now?

Evening.

That's the million dollar question!

I think it's just a case of being well spread to be honest

Generally in a 50-60% equity portfolio we'd be putting about 20% of the 100 into UK equities, probably across those 3 funds I listed because there's little overlap, and they're all good funds. Another 6% or so in a good Continental European fund, a chunk in a US tracker, and then a couple of global and asian funds covering a few bases.

One stock the Cont Europe fund should hold is RELX, they'll do very well out of Brexit I think.

[PaintYorkClaretnBlue]

Thanks to all who have contributed to this thread.

My next question would be, where is the best place to find an independent financial adviser, what qualifications should they hold and how much should one cost? I’m not sure whether to get advice or to go it alone at this moment in time.

Thanks again.

[kaptin1]

Thanks to all who have contributed to this thread.

My next question would be, where is the best place to find an independent financial adviser, what qualifications should they hold and how much should one cost? I’m not sure whether to get advice or to go it alone at this moment in time.

Thanks again.

Depends how much you have to invest. Unless it’s well over £100k and you are self employed or a higher rate tax payer then a financial advisor probably isn’t worth the cost.

[PaintYorkClaretnBlue]

Depends how much you have to invest. Unless it’s well over £100k and you are self employed or a higher rate tax payer then a financial advisor probably isn’t worth the cost.

Unfortunately it isn’t so much!! Cheers kaptin!

[kaptin1]

Unfortunately it isn’t so much!! Cheers kaptin!

In which case, maybe try a robo-advisor like Scalable Capital. They offered partly tailored solutions for investors with smaller amounts to invest but who still want some basic advice.

[clarethomer]

Thanks to all who have contributed to this thread.

My next question would be, where is the best place to find an independent financial adviser, what qualifications should they hold and how much should one cost? I’m not sure whether to get advice or to go it alone at this moment in time.

Thanks again.

The minimum requirement for a financial adviser to operate these days is level 4 diploma qualification. So they will typically have DipPFS or DipFA after their names.

I work in the industry so know most of how the main large firms work who are more likely be prepared to consider smaller investments because they can ride the costs of advice far easier than the smaller IFAs. hence why many wont look at less than £100k.

If you have investments over £20k, go and speak to Skipton Building Society as they will have Advisers that will look at smaller investments for you. Nationwide who are a building society would probably see you too if you have £50k but I know their offering is more restrictive in comparison.

Any of the Banks - stay well clear as they are genuinely only bothered about what they can make from people.

[PaintYorkClaretnBlue]

Cheers, is the skipton not restricted to certain products?

[PaintYorkClaretnBlue]

In which case, maybe try a robo-advisor like Scalable Capital. They offered partly tailored solutions for investors with smaller amounts to invest but who still want some basic advice.

Thanks bud, I’ll look into that.

[clarethomer]

Cheers, is the skipton not restricted to certain products?

Its quite a fun game that firms play with investors and what they make of the term independent v restricted appear attractive/not attractive depending which ever they are. Both Nationwide and Skipton will offer 'restricted' advice. In reality many IFAs will only work with a small number of products/solutions that they like for their typical client.

Given you want advice on a the fund you have mentioned, Skipton would be well placed to review and if deemed appropriate to change given your circumstances would recommend a similar type investment that they deemed suitable.

They have a pretty good reputation for looking after mass market clients who have relatively straight forward circumstances so if you are comfortable with investing in these types of funds, I think you will be fine.

[clarethomer]

Just be mindful, you won't get financial advice with Scalable - what they offer is a good way of investing given the principles I have mentioned earlier but if you want someone to tell you whether to stick or twist with this fund, you won't get that there by the looks of it.

[PaintYorkClaretnBlue]

Thanks clarethomer, that’s appreciated.

[dushanbe]

Don’t play the financial advisor game. Invest passively and for an all round diversified fund the Vantage range of Lifestrategy funds are ideal, will more than likely beat an active fund and cost you a whole chunk less.

[charlyt]

Woodford seems to have lost his way atm.
Get into emerging markets, there are plenty around.
The financial wizz kids say 'Get out of UK trusts and funds'
The market is attracting investment into trackers, they tend to do well in the long term and are less expensive to run.

[Walton]

We’ve had a guy from Woodford in the office this morning, discussing the equity income fund and explaining their thinking at the moment.

Their main pointer is that the growth seen in 2016 and 2017 primarily came from just 7 companies, with all 7 being highly exposed to Chinese credit growth. 80% of global credit growth came from Chinese spending. They’re foreseeing a big tipping point soon in China, as China’s original borrow and big spend on infrastructure was with an aim on proving itself as hitting targets traditionally seen as markers for growth, to sell itself as the place to invest because look at all this growth. Since then however, they have continued with big borrowing to spend on what are now seen as superfluous infrastructure projects. They’re no longer building A-to-B roads and bridges, and the feeling is that they’re doing this to artificially raise profile further, however the country is at a point now where around 30% of GDP is debt. For context at the time of the 2008 crash the US had debt of 12% of GDP.

The annual congress statements had previously been trumpeting their rise in GDP etc, however within the last one that had all gone, to be replaced with talk of sustainable energy etc. They think China is realising that their spending is unsustainable and will rein in all the spending soon, so they’re positioning themselves so that the inevitable bubble burst doesn’t affect them.

Because Woodford had been avoiding these China-exposed companies, the fund lost out on all that growth.

They’ve got a very UK-facing-in approach, as they feel that the strong exports in the last year have purely been driven by exchange rates, and that when they normalise, exports cannot be banked upon.

Naturally, they believe they’re positioned well going forward. They’re delighted with AstraZeneca’s pipeline, and came out of GSK because they just couldn’t see the same on GSK’s horizon. Despite the top 10 not looking very big on pharma, they’ve got their fingers in many small life sciences pies and can see huge growth long term with them.

They’re backing housebuilders at the moment, as well as aggregate/brick companies. I was on a call with Henderson last week and they’re also going in strong with housebuilders. It’s obvious why with the government and general thinking being behind a big push to get homes built. Crucially for Henderson they see Labour supporting this aim too, so political uncertainty doesn’t wash with them in this respect.

Regarding Provident Financial they believe the worst is behind the company, but Woodford thinks that the market and media reaction to PF has been overblown. They could fully understand the initial dip on the profit warning after they deposed of the old CEO, because the business model had changed to a much poorer model, however they feel that the reaction to the FCA warning was unwarranted. They have changed back to a similar business model with regards collection agents rather than call centres, and this had seen collection rates back up to 78% after they’d fallen to 50ish%. The old model had a 90+% collection rate. They think there is still a good company there on that basis and will be supporting it.

[CleggHall]

An interesting take that, we might all catch a cold/take a hit if China reins back. So much of the world's growth in recent decades has come from China with gdp growth rates of 8-10% per annum. Or is Woodford merely rationalising/excusing his own funds' underperformance? Agree house building in the UK looks a promising investment sector with both major political parties committed here. Whatever a good post that Walton, it got me thinking.

[Hipper]

I had part of a pension fund that was managed by Neil Woodford in the early 1990s. I don't know much about these things but it did not perform as well as other pension funds at that time, a time of the dot com boom. Their explanation was, if I recall correctly, that the dot com boom was going to burst anytime soon, which of course it did. However, in an active fund I would have thought the idea was that they would use their superior knowledge on these matters and time their entry and withdrawal into these markets to maximise the gains. Other investors were doing it so why wasn't Woodford?

It sounds to me we are hearing the same story again re China.

[PaintYorkClaretnBlue]

Thanks for that Walton, I’m still holding it at the minute, I can’t make my mind up whether to move it somewhere else!!

[kaptin1]

We’ve had a guy from Woodford in the office this morning, discussing the equity income fund and explaining their thinking at the moment.

Their main pointer is that the growth seen in 2016 and 2017 primarily came from just 7 companies, with all 7 being highly exposed to Chinese credit growth. 80% of global credit growth came from Chinese spending. They’re foreseeing a big tipping point soon in China, as China’s original borrow and big spend on infrastructure was with an aim on proving itself as hitting targets traditionally seen as markers for growth, to sell itself as the place to invest because look at all this growth. Since then however, they have continued with big borrowing to spend on what are now seen as superfluous infrastructure projects. They’re no longer building A-to-B roads and bridges, and the feeling is that they’re doing this to artificially raise profile further, however the country is at a point now where around 30% of GDP is debt. For context at the time of the 2008 crash the US had debt of 12% of GDP.

The annual congress statements had previously been trumpeting their rise in GDP etc, however within the last one that had all gone, to be replaced with talk of sustainable energy etc. They think China is realising that their spending is unsustainable and will rein in all the spending soon, so they’re positioning themselves so that the inevitable bubble burst doesn’t affect them.

Because Woodford had been avoiding these China-exposed companies, the fund lost out on all that growth.

They’ve got a very UK-facing-in approach, as they feel that the strong exports in the last year have purely been driven by exchange rates, and that when they normalise, exports cannot be banked upon.

Naturally, they believe they’re positioned well going forward. They’re delighted with AstraZeneca’s pipeline, and came out of GSK because they just couldn’t see the same on GSK’s horizon. Despite the top 10 not looking very big on pharma, they’ve got their fingers in many small life sciences pies and can see huge growth long term with them.

They’re backing housebuilders at the moment, as well as aggregate/brick companies. I was on a call with Henderson last week and they’re also going in strong with housebuilders. It’s obvious why with the government and general thinking being behind a big push to get homes built. Crucially for Henderson they see Labour supporting this aim too, so political uncertainty doesn’t wash with them in this respect.

Regarding Provident Financial they believe the worst is behind the company, but Woodford thinks that the market and media reaction to PF has been overblown. They could fully understand the initial dip on the profit warning after they deposed of the old CEO, because the business model had changed to a much poorer model, however they feel that the reaction to the FCA warning was unwarranted. They have changed back to a similar business model with regards collection agents rather than call centres, and this had seen collection rates back up to 78% after they’d fallen to 50ish%. The old model had a 90+% collection rate. They think there is still a good company there on that basis and will be supporting it.

I suspect the Home Credit business can be turned around but the investment case for Provident also hinges very heavily on the outcome of the FCA’s review into the Repayment Option Plan (a PPI-like product) that was sold by Vanquis Bank. Market expectations are that this could result in significant customer redress (hundreds of millions of pounds). This would, more than likely, mean the company would have to raise equity from the markets by way of a rights issue.

[CrosspoolClarets]

I’ve had 75% of my investments in cash for years, and most of the rest in gold.

Turns out it was a horrendous call. Me and Woodford have something in common. Ditto other “value” investors. We have missed out because the gains in recent years seemed illogical. The old rules of investing seem to have been broken by QE and low interest rates, and the other semi-fraudulent ways that the establishment are making themselves richer at the expense of ordinary working people.

There are some fairly micro level permutations discussed above, and whilst I respect them I feel nowadays that the macro events like the global economic cycle holds the most sway, so when the global economy dips, everything dips etc (just to differing degrees). The trouble with these funds, they are duty bound to be close to fully invested in most cases, and they often know things are set to collapse but invest anyway.

It feels like Mr Market is about to have his revenge. He can’t be bucked forever. I sure as hell ain’t going back in now, but in sensible times, Woodford would be a good one.

[Walton]

Kaptin - that's what they feel garnered an OTT response from the market and media, the repayment plan.

PF are insistent it was drawn up in line with FCA guidelines, and is written as an entirely optional, separate entity which has to be requested and opted into. They're confident it will pass all scrutiny.

The FCA are looking at it, but the Woodford and PF view is that this is the kind of thing which happens to many, many companies, yet doesn't attract headlines. As I say, they're confident it holds up.

[kaptin1]

Kaptin - that's what they feel garnered an OTT response from the market and media, the repayment plan.

PF are insistent it was drawn up in line with FCA guidelines, and is written as an entirely optional, separate entity which has to be requested and opted into. They're confident it will pass all scrutiny.

The FCA are looking at it, but the Woodford and PF view is that this is the kind of thing which happens to many, many companies, yet doesn't attract headlines. As I say, they're confident it holds up.

That’s old news, the story has since moved on...

[Spike]

Woodfords fund has lost some of its stars in the re_rating exercise today

[barba]

Neil Woodford's "bad luck" continues. AA shares which account for £60m of the UK Equity Fund have dropped by 28% today on a dividend cut.

That said people should know his contrarian investment style and his view of UK domestic stocks. He's had periods of under performance previously and has bounced back. Tends to be a small part of some the portfolios I use so I don't foresee why i'd crystallise a loss after a sluggish 12 months

[Walton]

Provident Financial up 72% as we speak.

They've announced a rights issue and settled the fines and compensation from the Vanquis arm.

[Horsfop_91]

My aunt is a financial advisor and will ask her and let you know about this. It is because of her that I got to know about Risk Profiling and took it seriously. There have been times when a person gets confused whether to make a certain investment or not and that’s when it is helpful.

[Bordeauxclaret]

Hmmm

[aggi]

Who wouldn't me tempted by a company called Good Moneying. I'm sold.

[Herts Clarets]

Who wouldn't me tempted by a company called Good Moneying. I'm sold.

Wasn't founded by the guy out of 'Allo 'Allo was it?

allo.jpg (10.05 KiB) Viewed 5102 times

[Blackrod]

This thread proves ' a little knowledge is a dangerous thing'.