Separating the wood from the trees

Woodford is hitting headlines once again. Does the name ring a bell?

Back in 2019 one of the UKs most respected and praised fund managers, Neil Woodford, had his flagship fund – the Equity Income Fund – suspended after a long period of poor performance and increased client withdrawals left many unable to access their own money – more on that story here.

Over the past couple of weeks there’s been press coverage of his new venture, WCM Healthcare Partners. Sales documents sent to potential investors have claimed it will triple investors capital over three years.

So, how is this allowed to happen?

There’s an ongoing FCA investigation into what happened with the funds he previously managed and many investors still haven’t been repaid in full.

In an interview earlier this year Woodford boldly argued he could’ve saved investors’ money at the time had the fund not been forced to close. We’re not sure any of those still left in the dark would have been willing to take the risk…

Despite the ongoing matters, Woodford has been able to set up a company in the Caymans, although he is yet to apply for approval for his fund from the Cayman Islands regulator.

It’s also worth noting UK regulators have stated it would be very difficult for Woodford to get the green light to trade in this country and Jersey rebuffed his attempts to set up business there.

What can we learn from this?

Shock factors aside there’s some really important lessons to be learnt from this episode:

– It’s a tough world out there – if someone is offering you a quick fix, that seems too good to be true, then that’s probably the case. Take a long-term approach to achieving financial freedom and avoid getting caught in traps that over promise and often underdeliver.

– Emotions play a huge part – it’s been a tough year for investors and living through a pandemic hasn’t been easy. Don’t let these factors affect your ability to make sound judgement calls – call in reinforcements if you’re struggling to know what’s right for you.

– Risk and return are related – that much is true. But taking huge, unnecessary risks could leave you exposed to losing more money than you need to. By understanding how much risk you need to take to make your goals a reality, you can work backwards to a sensible investment approach.

We could go on. They’re just a handful of the lessons and this is just one example of how some people working in the industry will stop at nothing to chase down their next high, bringing unexpecting investors along for a bumpy ride.

If you can’t see the wood from the trees when it comes to your personal financial situation, always ask for support from a trusted professional – emphasise on the worded trusted; for peace of mind a quick Google search tends to throw up any red flags you might want to be aware of!

Get in touch if we can help.

Past performance can’t guarantee what investments will do in the future. The value of a portfolio can go down as well as up, so there’s a chance you’d get back less than you put in. This communication is for general information only and is not intended to be individual advice. You are recommended to seek competent professional advice before taking any action.