Neil Woodford, one of the UK’s most successful fund managers, has spoken out against his own industry by criticising managers for simply “following the herd” while charging extortionate fees.
Woodford claims that many fund managers conform to major indexes such as the FTSE 100 rather than actively selecting stocks for investment based on their own convictions.
This means that investment behaviour becomes increasingly homogenised, increasing the risk of bubbles forming and causing promising start-ups to suffer.
“The industry has overcharged in many aspects. It’s quite clear, in the banking industry and my own industry, that too often, the industry has been charging active fees for index performance or worse,” Woodford told the BBC’s Today programme.
“Retail clients in particular are waking up to the high charges that we’ve seen in the industry and I think, with some support from the regulator, we’re going to see those charges come down.”
Woodford’s own reputation is largely owing to his habit of taking long-term views on investments whilst remaining suspicious of short term spikes. He famously refused to invest in the dotcom boom that saw many internet technology companies and investment firms make brief fortunes from hugely overpriced stocks before being devastated by the crash of 1999-2001.
Daniel Godfrey, Chief Executive of the Investment Management Association (IMA) responded to Woodward’s comments by saying: “The IMA recognises that improvements in simple disclosure of costs and accountability are needed and is committed to a number of measures that will deliver that.”
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