The Week: Is Woodford a victim?

Amid the clamour, there are a number of quieter voices suggesting that Neil Woodford has been poorly treated. If investors had only been willing to be more patient, they argue, it would have come right in the end. The press has been unfairly vitriolic, spooking investors and helping create the crisis.


  • As a contrarian, Woodford was always likely to have periods of underperformance
  • But is being right eventually, the same as being right?
  • The refusal to compromise on fees may do the most damage to his reputation

There is some truth in this. Those who invested with Neil Woodford should have understood his position as a contrarian, that he was always likely to have periods of significant underperformance. He is a conviction investor, who believes that the stocks in his portfolio are significantly undervalued. If this is the case, he would have been vindicated eventually.

He said in a letter to advisers: “Every asset in the portfolio has a fundamental value that significantly exceeds its share price…in my judgment, the gap between value and price is as wide as I have ever seen in more than 30 years of public equity market investing.”

This demands two questions: is being right eventually the same as being right? Tony Dye is the case that’s often trotted out, but William’s Littlewood’s long-term bond market short in the Artemis Strategic Assets funds might be another relevant example. It might come right one day, but surely there is a point when it’s less a vindication of the manager’s decision and simply the inevitable turning of the market cycle?

At the same time, should investors be exposed to this type of binary decision making? A fund manager may have high conviction in a position, but should also have some protection in the portfolio should events go against them. Fund managers should be aware that they’re not going to be given limitless time.

The media has undoubtedly made hay with the story. Financial stories rarely make it to the front page and no doubt some journalists have seen it as their moment in the sun. Why has Woodford received a worse press than some of his peers who have performed equally badly? Here, it is the refusal to compromise on fees that is likely to be most damaging in the long-term.

Where other high profile businessmen have seen similar situation, they have committed their own wealth to resolving the problem. Luke Johnson putting his own capital to support Patisserie Valerie, Jamie Oliver to support his restaurant chain. In both cases, it may have failed, but both are likely to emerge with their reputations in tact. It’s difficult to see the same fate for Woodford.