Woodford did what?

The troubled investment trust once run by Neil Woodford has been forced to slash the value of its investment in cold fusion firm Industrial Heat for a second time, in another blow for its long-suffering savers.

Woodford Patient Capital Trust cut the valuation of Industrial Heat – which is focused on next-generation energy technology viewed sceptically by most scientists – on the advice of the custodian Link Fund Solutions, a company tasked with ensuring the trust follows the rules.

Patient Capital first reduced the value of its £67m holding in Industrial Heat in August. The new cut on Monday means the stake’s estimated worth has dropped as much as 83pc and is less than £10m, according to analysts…

Sure, I know, “value” and “how bloody much money did he put in?” aren’t the same thing. But seriously, a fund investing in cold fusion?

Whut?

16 thoughts on “Woodford did what?”

  1. An extreme example of how VC investors bet on tech firms. Throw a billion dollars at a hundred firms and hope one is the next Alibaba.

  2. As far as I can tell, when you strip out the con men and the swivel eyed loonies, most of the funding for cold fusion research comes from the US military. My first thought was “WTF?” but after a bit it made sense. The cost is circa (maybe less than) a million a year, peanuts given the US military budget, and in the unlikely event it ever works, the military advantages are huge. However, for an investment fund to do the same is bizarre – I’d value any cold fusion firm at the second hand value of its equipment.

  3. It’s fine if you’re Bill Gates or Jeff Bezos tossing a few $m of your own money at speculative moonshots. But it’s not acceptable for a mainstream fund manager to gamble clients’ money.

    There’s probably a grey area for specialist high-risk funds, but Woodward didn’t advertise himself as such (as far as I’m aware).

  4. I have had dealings with Woodford. He started as a humble, hard working fund manager really grinding out performance to becoming a “god like” presence where he really believed he was infallable and beyond corporate governance. His arrogance knew no boundary. Going forward litigation will hound him until his dying day. I wouldn’t be surprised if a lack of corporate governance and asset / liability mismatch as the grounds for litigation turned into something more sinister. There is no evidence as such in the public domain but there is plenty of digging to be done between his personal finances and the start up firms he backed with customer funds.

  5. I haven’t seen Industrial Heat’s books. I don’t know their business model.

    Processing millions of government money is a good business model.

  6. Industrial Heat allegedly has a portfolio of “innovative technologies”, of which “cold fusion” is one. Woodford was taking a bet that one of the several technologies would be developed. The “cold fusion” bit hit headlines because the “inventor” of “cold fusion” sued Industrial Heat for failing to pay him royalties on his “invention”.
    Woodford was not throwing many £millions at “cold fusion”. In fact it was 1.5% of his portfolio at end-2016 and its apparent size grew because it was re-rated upwards when other people invested new money subsequently – if he had sold in 2018 he would have more than quadrupled his money.
    When I have to defend Neil Woodford, there is something massively wrong with the journalistic coverage of the facts.

  7. Caveat emptor. When the fund opened I spent 10 minutes of study – was not for me. In the 90’s a friend of my worked with Woodford and I remember him waxing lyrical of Woodford’s skills in market analysis and how smart he was.

  8. Yeah but…

    As Richard srd Murphy pohy tells us only THIS MORNING the fault lies not in the investment but in the accounting. If we had sustainable cost accounting, for which he argued brilliantly, then all that load, that wrote-down, becomes PROFIT.

    Now who’s joining me investing in Spud Capital?

  9. Usually it is the job of the administrator of the fund to put pressure on the fund manager and challenge any mark to market /NAV valuations the fund manager tries to slip in. Illiquid investments should be marked very conservatively. It is not Woodford that signs off the monthly NAVs.

  10. I’ve just invested the local Old Folks Christmas Club money in a company planning the first wind farm on Alpha Centauri.

  11. Bloke in North Dorset

    In the mid ’90s when my pension started to resemble something worth worrying about I started to take an interest in how the investment industry works. I had an IFA, partly paid for by the company I worked for, and wanted to make sure I at least understood what I was being advised and why, even though I had no intention of being active.

    I can’t remember the exact details but one article that stood out was that if you’d invested in the best performing fund of the best performing company the previous year fund would have grown by X, if you’d invested in the company your fund would have grown by something like 4X. I’m not sure what lesson it taught me but it struck me as being instructive.

    The main thing I learned was diversity, diversity and yet more diversity. Closely followed by don’t go swapping the funds around chasing last year’s performance.

  12. @BIND

    Speaking of which, I only noticed yesterday the reason Johnny Elichaoff committed suicide:

    https://www.dailymail.co.uk/news/article-3312109/Trinny-Woodall-s-former-husband-Johnny-Elichaoff-fell-death-shopping-centre-lost-lot-money-oil-investments.html

    With the kind of money he had, he could just have sat on it and lived very comfortably off the returns of suitably diversified portfolio. Instead he chased the dream and made some gambles and it didn’t pay off. What a bloody waste.

  13. MBE, there were some very interesting ‘connections’ between Mr Elichaoff and a number of other high profile jumping ‘suicides’ that all seemed to lead to the Russian mob. On Woodford, he was a good stock picker who prospered because he took benchmark risk – in particular he didn’t stick 14% of his fund in Vodafone in 1999 just because that was ‘it’s weight in the index’. As a result he did really well in the early 2000s and it made his long term track record look fantastic. Problem was when he set up his own shop he started taking liquidity risk instead. When you are a big buyer in a small pond it becomes self reinforcing (and opens up possibilities of feathering your own nest as the Capital manager Mark Denning has just been accused of). Conversely when You have funds being withdrawn and you become the big seller, it’s limit down time. Hargreaves Lansdowne and its Head of Research Mark Dampier – who cashed out and retired just before this really hit the fan – have a lot to answer for here imho

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