News about Woodford and Industrial Heat

    Hi All,


    Personal letter from journalist to Woodford:


    "Dear Neil,


    Sorry to have to write to you, but I'm at my wits' end. I really am.

    As you well know, I've requested on numerous occasions to speak to you since dealings in your flagship investment fund Woodford Equity Income were controversially suspended back in June.

    A fund that thousands of readers of The Mail on Sunday have money tied up in.

    I've even taken the liberty of driving up the M40 from London at the crack of dawn to see if you would spare me a few minutes of your time at your Oxford offices (by the way a very nice building, from the outside at least, and I did like the look of those comfy chairs on the ground floor, which I am sure I would find great difficulty in extracting myself from if I were ever able to get past your rottweiler of a receptionist/gatekeeper).

    But you have stonewalled me on every occasion. All at odds with the way you welcomed me when Equity Income was being launched in 2014 and you needed some free publicity. But, of course, you are not legally obliged to see me – your right – and I respect that.

    Equally, I'm well within my rights to pursue you – to the ends of the Earth if necessary – to get some idea as to how the Equity Income debacle you created through some crass investment management (apologies for the bluntness) is going to end. Tears or cheers? I can feel the tears welling up already.

    With every day that passes and every slide in the value of Equity Income's underlying assets, the despair of those with money tied up in the fund ratchets up another level.

    They feel ostracised, forgotten, betrayed and – increasingly – angry. In short, they want their money back and to get on with their lives. They want to invest their money elsewhere – or to spend what is left of it. Wishes you are not allowing them to fulfil. It is a form of financial torture. Financial death by a thousand cuts.

    Since the fund's dramatic suspension more than four months ago, I've received hundreds of emails and letters from your investors who are worried sick about the money they entrusted to you.

    Indeed, when I came knocking at your office door in late July, I brought along a selection of the correspondence for you to see with your own eyes – in the hope of shocking you into understanding the pain and stress caused by the suspension of investor dealings in Equity Income.

    I did this because, as with the press, you don't like talking to investors, preferring instead to speak to the financial advisers who have backed you ever since you founded your own investment management company more than five years ago. Alas, you chose not to see the letters, preferring instead to hide away in your eyrie like some holed up fugitive. Shame on you. Shyness? Arrogance? Whatever, it was not good enough.

    Only today, Neil, I received a copy of a letter from reader Jill Stone, a delightful 62-year-old part-time book-keeper (yes, I spoke to her), who bought your fund via platform Hargreaves Lansdown – as you well know, a business that slavishly supported Equity Income from the day it was launched right up to when the shutters went down on June 3. She has an investment of £5,000 in Equity Income, plus other exposure to it via some of Hargreaves Lansdown's multi-manager funds (she sold out of your Woodford Income Focus fund in June – at a 20 per cent loss).

    In the letter, written to Hargreaves Lansdown, Jill, from just outside Colchester in Essex, does not mince her words. She is all fire and brimstone. 'Neil Woodford continues to take extortionate fees and is plainly arrogant and his behaviour disgraceful,' she says. 'I feel let down, disillusioned and betrayed and cannot see a way out of this situation without incurring losses.'


    Jill is actually a salt-of-the-earth person who wouldn't usually say boo to a goose, but I could detect the bile rising in her throat the more I probed her on her exposure to your funds. You've made an enemy for life, that's for sure. And she's not alone. They are massing on the borders of Oxfordshire. Woodford extinction rebellion.

    I have a file full of similar outpourings of anger from investors, many of whom I have spoken to. If you want to see them and read them, do let me know and I will come to Oxford and – provided the rottweiler allows me in – watch you absorb their content while I sit back in one of those comfortable chairs. Maybe then, you will get a better idea as to the misery you have caused through your investment mismanagement.

    The point of this letter is not to criticise or embarrass you. Far from it. On behalf of investors, it is a genuine plea for information and answers to some simple questions to get a sense as to where all this is going to end.


    So, to the key questions:


    First, why have you not offered Equity Income investors some form of 'recompense' for the fact they are trapped in the fund? It is invidious that while investors are forced to watch from the sidelines as the value of their holdings slides – losses of nearly 20 per cent since the fund was suspended in June – you (Woodford Investment Management) continue to take fees from the fund. Fees that amount to £455,000 a week. Some £8,645,000 of value sucked out of Equity Income in fees since June.

    Of course, I understand that staff, office rent and bills must be paid. But a cut in fees, however small, would have gone a long way to placating many investors.

    By refusing to do so, you have fed accusations that you and Woodford Investment Management don't really care. You're out for what you can get.

    Many will say you've missed your chance to show some much needed compassion. But I don't agree. You could still announce a waiving of fees – even backdate it – especially if the £2.9billion fund remains shut beyond December: the date your fund's overseer (Link) has led us all to believe Equity Income's doors will reopen. It would show you are prepared to listen and still have a bit of heart left inside you.


    Second, please help me understand the rationale behind the changes you are making to Equity Income's portfolio – one that back in June was too illiquid (stuffed full of hard-to-trade shares) to meet a surge in investor redemptions.

    Yes, on one level, it's logical that you are now repositioning the fund so that it is predominantly built around undervalued FTSE 100 and FTSE 250 stocks – exactly the kind of stocks you held for asset manager Invesco Perpetual in the 1990s, when every other fund manager was chasing technology stocks (only to get their fingers burnt in the tech crash of early 2000).


    But this repositioning looks to me as if it's being done without any thought as to what is likely to happen when Equity Income eventually reopens its doors – namely that the Jills of this world are going to redeem their holdings as soon as they can and run for the proverbial hills (or in Jill's case, the sea at Clacton).

    To meet these redemptions, cash is going to be needed – cash that can come only from the selling of stocks, many of which may have been held a matter of months and could still be seriously undervalued. You will not be selling stock on your terms – to crystallise profits for example – but on those set by the number of investors wanting out.

    You will be at the mercy of the stock market – a market jittery about all kinds of issues (geopolitical risks, recession – both here and globally – and political uncertainty in our own back yard).

    Surely, a better strategy would be to stockpile cash now (not buying more shares from the sale of illiquid holdings) that can then be used to fund the inevitable run on Equity Income when dealings recommence. It's what property funds (structured in the same way as Equity Income) did in 2016, when, in response to a mass of redemption requests in the aftermath of the Brexit vote, they were forced to suspend dealings.


    Through the quick fire sale of selected properties held within their portfolios, they then amassed sufficient cash to eventually give want-away investors their money.

    Maybe, Equity Income's current rules prohibit this, but these are extraordinary circumstances and investors' best interests should be paramount. Any such rules should be temporarily lifted.


    Finally, do you not think it is time to think the unthinkable and consider winding up Woodford Investment Management?

    This could be either by allowing the management of Equity Income, its sister fund Income Focus and the (seriously distressed) investment trust Woodford Patient Capital to be taken over by rival asset managers. Such managers might be able to resurrect the fortunes of these funds by bringing fresh ideas to the table and not being under the intense spotlight you have found yourself blinded by in recent months.


    Or, more drastically, is it time to simply liquidate the three funds and share the spoils among investors? It would bring to an end the failed experiment that is Woodford Investment Management (you must know, by now, in your heart of hearts, that it has been an abject failure).

    Investors would have closure, the wider investment industry could seek to rebuild its reputation harmed by your overambition – and you could spend the rest of your days enjoying country life in the Cotswolds without a care in the world, other than ensuring you have enough to pay the occasional tax bill that comes your way.


    Yours sincerely,


    Jeff"


    Cheers,


    JB

    Yes, its Game Over for Woodford.

    Very hard to believe that he went from being the best UK fund manager, over decades, to the worst for the last few years.

    I mean a dip in performance is one thing, even a return to mean, but to go to from the top to the bottom needs a large amount of hubris and recklessness.

    Clearly once he left Invesco Perpetual to set up on his own he became totally out of control.


    Unfortunately Woodford was the only route I am aware of for the ordinary investor to buy into the possibly bright LENR future via Industrial Heat.


    So now the attention turns to Industrial Heat.

    It was stated that they will be launching another round of funding in the near future, but it looks like Woodford's funds will need to dump their IH shares.

    So this could potentially have a negative effect on the valuation of any funding round that IH want to launch.

    Quote from ZenoOfElea

    Yes, its Game Over for Woodford.


    W.ford was a gambler.


    The red flag was when they rocketed up the valuation of IH to$4Billion based on a $50mi raise. If you invest on the back of Brad Pitt throwing cash in - you are investing in a popularity contest

    Before you invest, ask them if they've tested for hydrino off-gas. Also, get an independent valuation of their patent book. Our team is willing to advise on that.

    Does 'your team' give independent valuation advice about all cold fusion companies or just IH? Aren't all investments in this field a total gamble until some product is brought to market, so what can you really base this advice on? Probably just gut instinct which brought Woodford to his knees in the end.

    Quote from Dr Richard

    Does 'your team' give independent valuation advice about all cold fusion companies or just IH? Aren't all investments in this field a total gamble until some product is brought to market, so what can you really base this advice on? Probably just gut instinct which brought Woodford to his knees in the end.


    I think you are simplifying down venture investment into "everything is a gamble until a product is on the market." We don't share that opinion and most of the venture world doesn't. In fact, even if a product is on the market the situation altogether changes yet. Financial success is built on many many layers - and especially relationships.


    There are numerous factors to invest in something, time horizon, risk appetite, purpose for investing, diversification, hedging other positions --- the list goes on and on -- and then analysis of patents is it's own sub-space. A strategic advisory in this space requires a lot of skills. Physicists - and scientists - in general tend to be reductionist and miss the complexities of business, people and the real world and planning for future outcomes. Put another way, it requires a lot of bayesian outcome and visionary thinking.


    Don't assume cause someone is a famous investor like Woodford they think about all these things and go deep. Cause I know for a fact they don't.

    Well that's obvious because of his complete failure (although he comes out of it £millions on top!). My suspicion of investment advice in any field is simply that they pretend its not really gambling when really that's all it is. Gambling on future clean energy is however a worthy gamble.

    Quote

    The red flag was when they rocketed up the valuation of IH to$4Billion based on a $50mi raise. I

    Woodford did that? I think not. I would guess that is simply more idiocy from Sifferkol's unquenchable supply of stupid posts going back ten years, most about how great Rossi is.


    I do remember Woodford raised IH's valuation to less extreme but still silly levels. So I guess we're just arguing about how ridiculous the evaluation got. I remember commenting at the time, on how bizarre this was,and getting roundly criticized by the usual suspects on the forum then.

    Quote from Navid

    W.ford was a gambler.


    The red flag was when they rocketed up the valuation of IH...


    For me it was his investment in IH and Rossi in the first place. I was concerned about a potential lack of due diligence and sold his equity fund soon after I heard about the link to Rossi. Unfortunately I didn't know that a friend of mine had quite a lot in his fund until too late.

    Quote from seven_of_twenty

    Woodford did that? I think not. I would guess that is simply more idiocy from Sifferkol's unquenchable supply of stupid posts going back ten years, most about how great Rossi is.


    I do remember Woodford raised IH's valuation to less extreme but still silly levels. So I guess we're just arguing about how ridiculous the evaluation got. I remember commenting at the time, on how bizarre this was,and getting roundly criticized by the usual suspects on the forum then.

    Hi seven_of_twenty,


    Don’t think. Just look at the facts available. Torkel is certainly not an idiot in this respect.


    Cheers,


    JF

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