The Daily Telegraph - Your Money - - YOUR MONEY - Richard Evans

If Neil Wood­ford’s woes teach us one thing, it’s that ‘quoted’ doesn’t mean ‘open’

Last week Neil Wood­ford, Bri­tain’s most prom­i­nent fund man­ager, recorded a video in which he apol­o­gised to in­vestors for the re­cent poor per­for­mance of his Wood­ford Eq­uity In­come fund.

This was a wel­come devel­op­ment and one that oth­ers who man­age our re­tire­ment sav­ings would do well to em­u­late when in­vestors have cause to be dis­ap­pointed. But for me, the most in­ter­est­ing part of the video was not the apol­ogy but a re­mark Mr Wood­ford made about how well fund man­agers can get to know the busi­nesses in which they in­vest.

It was in con­nec­tion with Prov­i­dent Fi­nan­cial, whose dras­tic share price fall prompted a flurry of crit­i­cism for the fund man­ager. In the video he was asked whether Prov­i­dent’s man­age­ment had given, at one of their meet­ings with Mr Wood­ford, any in­di­ca­tion that things were as bad as they turned out to be.

He replied: “Lots of peo­ple are say­ing ei­ther the man­age­ment lied to you, or you are naive, or you weren’t lis­ten­ing. But as an in­vestor in the pub­lic mar­kets, you have to ac­cept that there will al­ways be some fog be­tween you and what’s go­ing on in a pub­licly quoted business. The reg­u­la­tions that sur­round what I do en­sure that there is a dis­tance. There isn’t a com­plete and open flow of in­for­ma­tion from a listed eq­uity to an in­vestor.”

He de­scribed this as a “frus­tra­tion” and added: “It may be a sur­prise to our in­vestors. But it is the fact of life that the reg­u­la­tory en­vi­ron­ment that sits around pub­lic mar­kets en­sures that I can’t know all the things that I would want to know, cer­tainly in a case like Prov­i­dent Fi­nan­cial at a re­ally im­por­tant time like this.”

He’s right about it be­ing a sur­prise, to me at least. I’d al­ways be­lieved that be­ing a quoted com­pany meant that peo­ple out­side the com­pany knew a lot about you, thanks to the de­tailed ac­counts that have to be pub­lished and the need to come clean in a timely man­ner with any in­for­ma­tion that might af­fect the share price. Pri­vately owned busi­nesses, I thought, could get away with say­ing very lit­tle.

In fact, Mr Wood­ford said, it is the other way around, at least for those who own sig­nif­i­cant stakes in the firms in­volved. “In un­quoted busi­nesses, we have a much closer re­la­tion­ship,” he said. “There is no reg­u­la­tion of the flow of in­for­ma­tion from un­quoted business to a share­holder. So we at­tend board meet­ings. We see man­age­ment ac­counts. We know ev­ery­thing that’s go­ing on in the un­quoted busi­nesses that we in­vest in. It doesn’t mean we won’t make mis­takes, but it ab­so­lutely does mean that we have a much more in­ti­mate knowl­edge of ev­ery­thing that’s go­ing on in that business.”

What’s the les­son for those of us who in­vest our Isas and pen­sions in funds? Clearly we can’t all make a whole­sale shift into un­quoted in­vest­ments. But for me, Mr Wood­ford adds a com­pelling voice to the ar­gu­ment that we should at least have some ex­po­sure. We have al­ready re­ported stud­ies that have found that, over the long term, “pri­vate eq­uity”

As PR dis­as­ters go, it’s hard to beat los­ing the per­sonal de­tails of 143 mil­lion peo­ple. But Equifax, the Amer­i­can-based credit scor­ing agency, has man­aged to com­pound this calamity by its fail­ure to tell peo­ple in Bri­tain whether they were af­fected, too. As last week’s

went to press, we were chas­ing the com­pany for this in­for­ma­tion. A week later we are still none the wiser. Ut­terly shame­ful.

Scot­tish Mort­gage has a hold­ing in Spo­tify, the mu­sic stream­ing ser­vice to which Tay­lor Swift re­cently re­turned

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