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Neil Woodford picked an auspicious week to attempt a resurrection. The previous UK fund supervisor, whose eponymous funding boutique collapsed in 2019, introduced plans for a brand new “funding technique platform” — dubbed “W4.0” — on Holy Monday.
Woodford was as soon as accused by regulators of getting a “faulty” understanding of his tasks for managing liquidity dangers. It’s for greater powers to determine whether or not he deserves forgiveness. Irrespective, this pitch for a brand new service providing “followable funding methods designed by Neil Woodford, you could act on via your present account”, presents some apparent flaws.
The emphasis on letting clients make modifications and execute trades via their very own brokers appears to differentiate W4.0 from regulators’ formal definition of “copy buying and selling”, however the fundamental attraction is identical. Beginner traders really feel like they’re getting steering from somebody educated, whereas nonetheless having extra company than if they simply caught their cash into an index tracker.
There may be clearly a requirement for this. EToro, the market chief in copy buying and selling, grew from about half 1,000,000 accounts in 2019 to greater than 3mn in 2024. However simply because it’s in style doesn’t make it sensible. EToro says about 35 per cent of its “in style traders” — the accounts that common customers can select to repeat — beat the S&P 500 in 2024, however doing so persistently is way more durable. EToro’s hottest dealer has solely crushed the US index in two of the previous 5 years.
Woodford seeks to place himself because the mature various to reckless, gambling-like methods. However copy buying and selling can create perverse incentives to make wild bets or transact extra commonly. Why trouble paying a month-to-month subscription payment for a portfolio that appears similar to everybody else’s, or which stays the identical for prolonged durations?
W4.0’s unique sin is the assertion, proper at first of the net submit introducing the platform, that “the monetary merchandise most individuals are supplied nonetheless look so much like they did 30 years in the past: inflexible, opaque and costly”. It’s true that the majority retail investments nonetheless undergo traditional-looking constructions — even alternate traded funds could possibly be seen as a variation on an previous theme — however the development of ETFs and index trackers has nonetheless given shoppers way more choices than they used to for affordable, clear and efficient investing.
There may be proof that traders are fairly proud of the change. The share of retail property below administration in index-tracking funds surged from 11 per cent in 2015 to 25 per cent in 2024, in accordance with the Funding Affiliation.
Woodford complained on a current podcast that he by no means had the chance to restore his efficiency after the prolonged interval of losses that led to the collapse of his boutique. However even a profitable W4.0 wouldn’t have the ability to reverse the decline of the “star supervisor” tradition he as soon as epitomised. The meeker funds are already inheriting the earth.
nicholas.megaw@ft.com
