From Anthony Bolton to Nick Train, we review public apologies and assess whether performance improved.
The consensus view is that fund managers cannot be expected to outperform all the time – they are human after all, so mistakes will be made. In addition, there will also be periods when their style will fall out of favour.
Kyle Caldwell, Collectives Specialist, interactive investor says: “Normally when a fund manager underperforms, they hide and hope their investors haven’t noticed. It is rare that the opposite plays out, and even rarer that as well as offering up an explanation for the spell of poor performance there’s also an apology.”
In an interview with The Sunday Telegraph over the weekend, Neil Woodford said he was “sorry” for his mistakes on the Woodford Equity Income fund at the same time that he announced his comeback to fund management.
“I'm very sorry for what I did wrong. What I was responsible for was two years of underperformance - I was the fund manager, the investment strategy was mine, I owned it and it delivered a period of underperformance,” Woodford told the Telegraph.
This is not the first time Woodford has apologised. In September 2017, he said sorry for a spell of underperformance, which ultimately was not turned around. At the time he even responded to critics who asked whether he had ‘lost it’.
“Investors are free to believe I have lost it,” he said, “but I don’t believe I have lost it. I believe I have the right portfolio [and] the right strategy to deliver the right returns to our investors over the medium and long term.”
A handful of other fund managers over the years have also made a public apology. Below, Kyle Caldwell explains and assesses whether performance improved. Performance figures quoted below are sourced from FE Analytics.
Regarded as one of the best investors of his generation, Anthony Bolton steered the Fidelity Special Situations fund to annual returns of around 19% during his 28 years at the helm. Bolton stepped down in 2007 before returning to fund management in April 2010 to run the Fidelity China Special Situations (LSE:FCSS) investment trust – a market he had not previously invested in.
However, Bolton struggled to replicate his stock-picking success overseas, leading him to issue an apology to investors in November 2011. At the time he told shareholders that his optimism on China had been “severely tested”.
What happened next? Fidelity Special Situations managed to just about turn a profit by the time Bolton retired at the end of March 2014. Since Bolton’s departure performance has improved, but to put this into context, it should be noted that China’s stock market has for large periods been buoyant, whereas under Bolton’s stewardship overall market conditions were much trickier. Since Dale Nicholls took over on 1 April 2014, the trust is up over 400%.
Prior to 2010, Tom Dobell, manager of the M&G Recovery fund, outperformed the stock market for 10 consecutive years before performance took a turn for the worse. In October 2014, he issued an apology to investors, stating: ‘We are very aware the fund has lagged the market in recent times, and I am sorry for that.’
Dobell, however, insisted he would not change his investment style, which is to buy out-of-favour shares that are ‘unloved’ by the market.
What happened next?
The underperformance continued. Last September it was announced that Dobell would step down from the fund and leave M&G at the end of 2020.
Rhodes is another manager from M&G’s stable who took the unusual step of apologising, writing an open letter to investors. He has overseen the M&G Global Dividend fund since its launch in July 2008. In the letter, dated January 2015, he noted that “open admission of failure in this industry is rare” and offered up four reasons why the fund underperformed in 2014 – including the ‘speed of the decline in the oil price’.
What happened next? Performance has been more steady than spectacular. Since the start of 2015, the fund is up 82.3%, while the average global fund (the sector it sits in) is up 100.1%. It has, however, outperformed income-oriented global funds. The Investment Association’s (IA) global equity income sector has returned 62.8% over the same period.
During the financial crisis Carl Stick’s Rathbone Income fund was one of the worst performers among UK funds, losing 34% in 2008. He was not alone in losing money that year, but he does stand out in being one of the few fund managers who have spoken candidly about the mistakes made and vowed to learn from the experience.
In short, Stick admitted that too many of his holdings were highly leveraged and promised to take a more risk-based approach in future – buying quality businesses at the right price.
Reflecting on the credit crunch in an interview with former trade title Fund Strategy in October 2012, Stick said: ‘I’m sorry we lost that money, but you learn by experience.’
What happened next? Rathbone Income has outperformed the IA UK Equity Income sector over the past decade, returning 95.6% versus 74.8%.
Regarded as one of Britain’s finest stock-pickers, Nick Train held his hands up in 2017 by apologising directly to shareholders when one of his biggest holdings – Pearson (LSE:PSON) – fell heavily after moving to cut its dividend. At the annual general meeting for the Finsbury Growth & Income (LSE:FGT), Train said he was ‘sorry about the situation’.
What happened next? Train has retained his holding in Pearson, the education company. On a 10-year view Finsbury Growth & Income Trust is up 236.3%, while in contrast the average UK equity income trust has produced gains of 103.4%.
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Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.