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Muddy Waters and the Burford Big Short

Editor's Views: The shorting of Burford Capital provided high drama this week, how ESG funds are holding their own and why there's a financial adviser shortage

Holly Black 9 August, 2019 | 10:53AM

editor

The Burford Capital episode this week could almost have been a film, the plot was so perfectly executed. It had all the makings of a Hollywood blockbuster: shock, suspense, and an all-star cast including Neil Woodford, Mark Barnett and a hedge fund firm with a name straight out of a John Grisham novel. 

We’ve spoken to lots of industry folk about the situation this week and opinion is divided between it being the perfectly executed short attack and admiration for Muddy Waters raising some legitimate concerns. 

Either way, I don’t think this is the last time that one of Woodford’s holdings is going to experience this sort of thing in the coming months.

No Excuses to Avoid ESG

I’ve long had a soft spot for ESG funds – one of my first assignments as a financial journalist *cough* years ago was to write about them. At the time, ESG wasn’t really a thing. Instead, funds were labelled as either dark or light green depending on how strict their ethical screening was, and managers were only just starting to explore the use of positive screening in their investment process. 

What struck me most at the time was how well the funds were performing. And, as our article this week can attest, the same is true today. The top performing ESG fund over the past year has returned a very respectable 17% - and that’s a year which has included a major stock market sell-off, a new Prime Minister and a plunge in the pound.

It’s a pretty fantastic annual return regardless of a fund’s remit and the fact that an ESG fund can achieve this surely puts paid to the myth that investing sustainable means compromising on your financial returns. 

I remember commentators telling me while I was writing that first ESG article that the funds were just having an uncharacteristically good run - that they’d been boosted by not holding banks in the depths of the financial crisis and had avoided oil prior to the Deepwater Horizon spill.

But doesn’t this just prove the very ethos behind ESG investing? It means avoiding businesses that are not sustainable and industries that are prone to major turmoil.

Ten years on from those events and ESG funds are still holding their own. Surely the naysayers are starting to run out of excuses?

Adviser Shortage

A worrying stat this week: apparently there are just 26,600 financial advisers across the whole country. Assuming a population of 60 million people, that means there is just one financial adviser per 2,255 people. Research from Octopus Investment suggests that 15,000 of these advisers will retire in the next 10 years, too. 

Financial advice is a valuable tool in any investor’s armoury but increasingly the onus is falling on each of us to take responsibility for our own financial future. Do let us know how we can help.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

About Author

Holly Black  is Senior Editor, Morningstar.co.uk

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