2016 has been tough on celebrities, and that includes celebrity fund managers. The most famous of all, Neil Woodford, is physically haleand hearty but the same cant be said for his funds, which have suffered an annus horribilis.
Fame, fame, fatal fame
Woodfords performance has been so impressive over the last 25 years or so that its easy to forget even he can slip up from time to time. The last 12 months will number amongthose times.
His flagship fund, CF Woodford Equity Income attracted, record-breaking funds following launch in June 2014, and is already worth more than 9.5bn. It would have been worth a fair bitmore than that if it hadnt just suffered a horribleyear or horrible by Woodfords high standards.
Soul mining
And we must hold himto high standards, because those are whatinvestors expect, and his eponymous asset management company Woodford Investment Management lives and dies bythem. Hisdie-hard fans would have a expected a better return than 3.12% over the last 12 months, in a year when the HSBC FTSE 100 Index tracker returned 17.5%.
The main reason is the lack of commoditystocks in his portfolio, particularly the miners, with big FTSE 100 names such as Anglo American and Glencore rising 300% and 200% respectively this year, and BHP Billiton, Rio Tinto and Fresnillo closebehind.
Be patient
This doesnt worry me.The commodity sector is unlikely to repeat this years blazing recoveryso Woodford could easily swing back in favour, as hes always done in the past. More worryingly, hes been hit by individual stock-picking flops, notably outsourcing specialist Capita (down 60%, the FTSE 100s worst performer) and retailer Next (down 30%). But we all have some of those.
The great man has another self-named fund, investment trust Woodford Patient Capital Trust (LSE: WPCT), and this has also performed badly, falling 10% over the past 12 months. The portfolio hasalso included some bad calls, notablyNorthWest Biotherapeutics, downmore than 90%.
Hell be back
Woodford hasalso beencriticised for his decision toscrap staff bonuses, claimingthey coulddangerously distort behaviour, encouraging misconduct and short-termism.He isnt picking staff pockets, theyll be given higher salaries instead. But it does look odd given that hesjust handed himself7.2m in profit share after company profits trebled to 35.5m in the year to March 2016. He may not have lost hisinvestment touch, but his feel for public relations has gone awry.
I hold units in CFWoodford Equity Income and while Im disappointed by this years underperformance, I will NOTbe selling. Woodford has fallen out of favour before, during the technology and banking stockrallies, butthe world has always swung round to his way of thinking. If you want a fund that keeps up with the market year after year, then buy a low-cost tracker.
In fact, a passive tracker and active Woodford make a good mix. TheHSBC FTSE 100 Index may have thrashed himover the last 12 months, but over the previous 12 months it fell 2.25%, while Woodfordsfund rose 16.8%. Thats what diversification does for you. The great man will be back: 2017 could be his year.
Most investors will forgive Woodford the odd mistake as nobody’s perfect. However, you don’t want to make life harder for yourself by makingtoo many slip-ups.
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Harvey Jones holds CF WoodfordEquity Income and HSBC FTSE 100 Index, but has no position in any shares mentioned. The Motley Fool UK has recommended Rio Tinto. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.