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Despite Woodford, It's a Good Time to be an Investor

The Woodford Equity Income saga may have put many people off, but it's a good time to be an investor, says Morningstar head of manager research Jonathan Miller 

Jonathan Miller 17 June, 2019 | 9:58AM

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The liquidity profile of the Woodford Equity Income fund was pushed to its limits and the issues around this have been well-documented. It's clearly bad news for unit holders, even though circumstances were such that the suspension was probably in their best interests.

As a result of the furore around the fund's suspension, we are likely to a see post-mortem on the use of unquoteds in an open-ended fund structure and the regulator's role in the debacle will be closely examined.

But as well as all of the legitimate questions which have been asked over recent days, inevitably, it feels as though there has been a relentless desire to hone in on the fall from grace of a star manager. When an investment story appears on the front page of the BBC website, you realise just how mainstream this whole episode has become.

The issues clearly warrant airtime but in the eye of the storm, I believe the media frenzy will have dented the psyche of Joe Public on how they use funds to invest for their future. And that is truly concerning.

The perception for many investors who have had their savings tied up in a fund they can't buy or sell, or even for those who have watched events unfold from afar, will be that of a breakdown in trust.

And if people feel trust has been broken, how will they have confidence in asset management professionals or that advisers are looking out for their best interests? As we sit here reflecting on the aftermath, this seems like a huge setback to some of the progress this industry has made in recent years. 

Because, focusing on the wider picture, it is important to remember that much has been achieved over the past few years on important issues such as transparency, fees and increasing competition, all of which has served to benefit investors. That has all easily been forgotten amid "the Woodford saga".

Yet the reality is, it has never been a better time to be an investor and that’s a message that should be made clear to the public.

That is not an attempt to be flippant about anyone whose assets are currently stuck in the Woodford Equity Income fund - I imagine they would never have anticipated such an outcome and I hope they have a diversified portfolio which will help them weather the storm. But it would be a shame if the fate of one high-profile manager put an entire generation off of investing for life. 

If nothing else, recent events should serve as an opportunity to remind investors how to build a diverse portfolio and how to use skilled active fund managers alongside passive investment options. Many people are still not aware that you can buy a ready-made diversified portfolio these days for less than 0.3%, or that you can track the U.S. or UK stockmarkets for an annual charge of less than 0.1%. Many investors might also not realise that there are some genuinely good active fund managers out there. 

Increased competition has brought fees down while technological innovation has brought investing to the masses. Throw in the benefits of compounding, tax-free Isas and pension tax relief and investors really are actually in a good place. 

Amid this setback, let's make sure we focus on education and what saving and investing can provide. We need to use this as an opportunity to rebuild trust and help people achieve their future goals. 

 

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

Jonathan Miller  is Director of Manager Research, Morningstar UK

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