Investment Views Update from Woodford Asset Management
The financial media has been covering the 10th Anniversary of what is seen as the definitive commencement of the global financial crisis – Lehman Bros failure – where the financial markets commenced the position of “the markets having nowhere to trade and ‘lay off’ risk” which, in turn, led to the credit crunch. The Emerging Market falls remind us of the risks and cyclical nature of investment markets and the need for balance and always taking the long term view.
Following on from our previous communication in relation to ‘Investment Markets suffer falls across the globe’ – published on 6/9/18, where I explained that we were meeting with Woodford Asset Management in order, primarily, to gather (Neil) Woodford’s thoughts and his justification for his underperformance against peers over the last 12 months, and the action he is taking and the outcome Woodford expects to develop. We can now provide a detailed summary of the views of Woodford funds.
In order that Woodford Asset Management builds and present their views, the context to Woodford Funds calls are best contextualised, which is easiest to understand, if one reads the background to (Neil) Woodford’s past investment calls in the context of his long term risk adjusted returns. (We have been given permission to provide the commentary and updates, which are not for consumer use – investment professionals only, based upon providing context to the views and ensuring that we point out that the views are not intended to represent ‘Advice’. Advice must be provided by a suitably qualified adviser – which we are; please therefore understand that the information is to be seen as the views of Woodford Asset Management with no specific consumer investment advice in mind). If you require advice relating to this communication, or in general, simply make contact with us.
We held a detailed (and long) meeting, discussing how Neil had underperformed over the last year and the reasons for the underperformance, and his history of making major economic calls in relation to the way he manages money since the very early days – please read Article 1 for more information relating to the following:
- 1992 – ERM ‘Economics of the madhouse’
- 1998 – 2000 Tech Bubble that Burst!
- 2009 – 2010 Dash for Trash
and, wait for it……. the 2016 – 2017 period in question which is described by Woodford as ‘the product of the biggest monetary policy experienced in history’.
Neil Woodford and his team at Woodford Funds are confident that their view of markets will play out, which will deliver the results Woodford has become renowned for producing.
Article 2 – Personal email from Kristian Penttila at Woodford Funds to Richard Harry
Article 3 – An update from Neil dated 31 July 2018
Article 4 – Mid-Year Observations
A large amount of detail to read but very worthwhile for the financially informed.
Neil Woodford remains consistent with his economic views, regardless of the investment markets’ behaving (during the period of underperformance) differently to Neil Woodford’s expectation. Nevertheless his conviction with his views and underlying valuation, based upon stock picking, delivered, ultimately correcting a period of under-performance, in previous economic cycles and environments. Woodford is clearly very confident that his investment discipline will ‘play out’ well again in this current economic environment.
Neil Woodford attracts a huge amount of press coverage, generally due to his long term investment results, so we felt it imperative to gather his up to date ‘thinking’, based upon the detailed research and analysis he and his team carry out.
Woodford Funds (Neil’s view) is that the economic outlook is at a crossroads in relation to the extraordinary monetary policy employed following the global financial crisis. In the US, the Federal Reserve (Fed) is pursuing its programme of Quantitative Tightening (QT), draining money from the financial system at an accelerating rate this year as it reverses the policy of Quantitative Easing (QE) which substantially boosted US money supply over the past decade.
Meanwhile in Europe, the European Central Bank (ECB) has also reduced its asset purchase programme (similar to QE in its aims) and has the intention to withdraw later this year.
Neil Woodford and his Woodford Funds see the ‘several tightening forces’ acting in concert, creating a contraction of the global markets, where Emerging Markets have been the first to experience the impact.
‘Warren Buffet’ is often quoted as using the phrase “only when the tide goes out do you discover who has been swimming naked”. This quote is ‘playing’ out once again at present.
The explosion of debt, due to rates being so very low for so long, has fuelled personal and corporate indebtedness – so when the supply and cost of money tightens, the ‘exposed’ are the ones seen as ‘swimming naked’.
We as a firm have committed to keeping the fund under review and will need to see a further development of the funds results, which means we must be cognisant of his views when constructing investment models moving forward. We will watch and measure results and report to our investors in relation to what action is recommended over the course of the next couple of months, based upon the full detail of the meeting held with Woodford funds.
We/I very much trust that the detail attached to this communication is of benefit to those who have asked specifically about the Woodford Asset Management fund.
If an investor wants to discuss the mix of assets within the construction of their holdings, or wants to change the nature of the risk (i.e. increase or decrease), it is important that contact is made as we cannot do this without ‘advising on the suitable risks to meet ones needs’.
if you require advice, simply get in touch.