Lady Godiva , Neil Woodford and Peeping Tom


I have taken to reading some of the commentary about what’s going on with this chap Neil Woodford because it’s generally guff and makes me laugh.

This blog makes me laugh (and cry) out loud. It’s entitled “Benefits of Segregated Mandates”

I print it in its entirety

The past few weeks have brought into sharp focus some of the benefits of managing money using segregated mandates for those that have the necessary scale. Alongside this is a need for oversight of governance not just the investment approach. And, research agencies need to do more to assess governance and liquidity.

Over drinks with an industry mate the other night, he referred to the benefits of segs as the 3 Ps: prescription, price and portability. SJP and Openwork client money isn’t locked in Woodford’s fund. Both firms swapped the manager and both restricted holdings in unlisted securities.

While segs come out looking good over the past couple of weeks they only work with the right governance and oversight. This requires scale, the right culture and the right people.

I hear from a lot of largish financial advice firms that they plan to introduce segregated mandates. There can be enormous benefits but it’s not a decision to be taken lightly. There are a lot of mouths to feed – the ACD, custodian, fund admin, depository, etc.

Scale is needed not just to negotiate on price but also to put in place the necessary oversight. Scale alone isn’t enough. There needs to be a culture that allows people to question decisions and the right people in place to ask the tough questions. Firms managing money using segs need people around the table with legal, investment and regulatory experience to provide the necessary oversight.

What about the customer

The people around that table need to have a keen focus on the reason they are all there. They have a regulatory responsibility to the customer. They also have a moral obligation. We think that too often the customer is forgotten.

Failure of research and ratings agencies?

As for firms not using segs, we need to push research and ratings agencies to evaluate and highlight the governance of funds not just investment approach and performance.

A lot of advisers hold Woodford in models they manage for clients. They will be looking to rebalance those models at the end of the quarter. A few weeks ago it would have looked sensible to hold Woodford. Heck, it had a Morningstar bronze rating in May! Who knew how illiquid an equity fund could be?!

This is exactly why the research and ratings agencies need to shine a light on governance. Advisers rely on third party research to short-list funds. Stress testing portfolios for liquidity seems like a good idea. Ratings can’t be just about investment performance.

I don’t know which of the people at Next Wealth wrote this. I know Clive Waller and Heather Hopkins and deserve like Peeping Tom – to be struck blind.

It needs to be said, this piece is guff of the first order.


I am laughing at the thought that St James Place and Openwork can be seen to be coming out of the last few weeks “looking good”,

The only perspective which allows us to see SJP as looking good, is one that benchmarks SJP’s next few weeks with those of Hargreaves Lansdown and other platforms awaiting the write downs to come and the dismal drop in price of Woodford Equity Fund units when they return to the market.

It may be that SJP’s customers are not so badly off as those directly investing in Woodford but that does not make SJP look good. SJP fund with “Woodford Inside” actually underperformed just about every other comparable fund, and underperformed Woodford’s Equity Fund too.

SJP may argue that because they didn’t include the Guernsey illiquids in their segregated mandate, they haven’t benefited from fictitious valuations on non-tradeable stocks (as WEI has).

It may be that when the gate is opened , SJP customers will win a prize for tallest dwarf but that is not in itself a cause for celebration. The customers have still had a bad time because Woodford was inside their funds and they have paid Woodford handsomely  for delivering nothing at all.

In terms of “value for money”, SJP’s employment of Woodford looks a total wash-out. SJP are not of course on the hook for Woodford, they may have got Woodford on the cheap (you get your own price in a segregated mandate), but the customers paid the going rate for SJP funds and all the price negotiation mentioned above benefited the SJP shareholders rather more than its policyholders.

The firms who offer “seg” mandate “need” plenty of lawyers, ACDs, fund admins, custodians and depositaries, or so the article tells us. But do the customers benefit from this army of flunkies who push up the total cost of management? It is almost impossible to work out from looking at SJP funds why they perform so badly , but the suspicion is that the yield drag from the “mouths to feed” is a major part of it.

In short, SJP’s fund governance failings over Woodford are every bit as heinous as everybody else’s and for the fund industry to pretend that “seg” mandates have ended up protecting customers is preposterous.

Segregated mandates are a vanity play of the first order

There is nothing new in segregated mandates. Defined Benefit schemes have been dishing them out to fund managers (under the advice of consultants) for donkey years.

They give trustees the illusion of better governance but in reality they provide jobs for the boys and very little added value for the people picking up the tab – the customers.

Of course the funds industry loves “seg”, it gives everyone something to do and allows fund marketing people to peddle the twaddle above.

Would the world be a lesser place for the loss of segregated funds – no!

Does the world need a fund universe full of actively managed pooled funds – no!

The entire funds industry exists for the benefit of those who serve it and not for the customer at all.

Most of the properly managed DB schemes find better ways to get exposure to markets than by dishing out segregated mandates, the biggest manage assets directly, the smartest go for cheap well governed Beta through passive pooled funds.

Wiping all these silly – self obsessed – institutional segregated mandates would be a step in the right direction

Wiping all these silly – self obsessed – wealth management DFMs would be another step in the right direction.

Retail or institutional , they could all be absorbed into LGIM, BlackRock and Vanguard’s maw and exchange their pokey cottage industry governance with some proper stuff that really managed the money for good.

I have said enough

I am going to be a judge on one of these industry award things run by Clive Waller. I expect he’ll be asking why I was ever allowed to darken the judging panel’s door.

The answer is of course that in the court of Godiva, I am the peeping Tom.


May I be struck blind.

About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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