Superstar Neil Woodford suspends redemptions. What risk management mistakes did he make?

Discussion in 'Risk Management' started by helpme_please, Jun 5, 2019.

  1. Neil Woodford was regarded as a superstar value investor money manager in UK. He had nicknames like Oracle of Oxford, Warren Buffett of UK. Today, these nicknames is an insult to the real Warren Buffett because he suspended redemptions and denied investors return of their money. Failed money managers close down their funds. Rarely does one hear about money redemption being denied to investors.

    What risk management mistakes did he make to be reduced to this state, given his stellar multi-decade track record in the past?

    The decision to freeze redemptions is a shocking reversal for the money manager, who had built up a reputation over many decades as a stellar stock picker.

    By 2013, when Woodford announced he was striking out on his own after two decades at Invesco Perpetual, he had accumulated an almost cult-like status among investors, and their money followed him. In his first full year on his own, Woodford’s flagship fund returned 16%, beating all 50 of its peers tracked by Bloomberg. That has all changed, with the fund down 7% this year through May 31 and down 18% in the past 12 months.

    “No one fund manager has the secret sauce to outperform forever no matter how big the reputation or how good of a track record,” said Ryan Hughes, head of active portfolios at AJ Bell. “What’s different here is the fact Woodford suspended the fund. That takes it to another level.
    Last edited: Jun 5, 2019
  2. Yea this has been out few days ago... Liquor and Margin, two things that will bring you down in this business
    murray t turtle likes this.
  3. zdreg


    Nah! Only margin will be your downfall.:)
    Last edited: Jun 5, 2019
  4. d08


    I wonder if this is all because new machine learning techniques are being used in other funds. Every 10 years or so there is a cataclysmic shift in the markets, last one was 2009, it's about time.
    Wide Tailz and murray t turtle like this.
  5. He has frozen redemptions because he has hard to sell illiquid unlisted assets in a fund with daily redemptions. Which is just silly.

    hmcp, Wide Tailz and helpme_please like this.
  6. Good point. Liquidity mismatch is one of the risk management mistakes he made. I wonder if he breached certain rules regarding the maximum percentage that unlisted assets can occupy in his portfolio. He can be sued by clients unless the fund prospectus clearly state the risk faced by clients regarding his strategy to invest in illiquid unlisted assets.
  7. AFAIK he hasn't broken the rules. The rules are wrong.

  8. He has been hired by Chinasilver asset management in hk