The financial media’s over-emphasis on Woodford’s underperformance has wrongly impacted investor sentiment, according to Hargreaves Lansdown’s Mark Dampier (pictured), who continues to back the star manager after investing with him personally for more than 18 years. 
The head of research told FE Trustnet that a combination of conflicting messages from financial publications, increasingly low fund fees and greater transparency has contributed to investors wrongly trading funds as though they are stocks.
Given Neil Woodford is one of the most high-profile fund managers in the industry, Dampier said the manager is particularly vulnerable to criticism and sentiment swings during short periods of underperformance.
“He has had a horrible time and he’d be the first to admit it,” he said. “I do think the media spends a lot of time talking about how important it is to invest for the long term but spends its entire time looking at the short term. I do wonder whether that is a strange message to deliver to the clients reading it.
“A similar thing happened to [Fidelity’s] Anthony Bolton where it was virtually an identical re-run. I said to Neil at the start I wouldn’t be surprised if he suffered from that at some point.
“When Anthony retired from [Fidelity China Special Situations] – which he was always going to anyway – a lot of mainline journalists said it was a shame he retired on a sour note, but actually he had beaten his benchmark and they hadn’t realised.”
Over the last six months as well as the past year, Woodford’s CF Woodford Equity Income fund has found itself at the very bottom of the pile for its total return compared to its peers in the IA UK Equity Income sector, having lost 2.65 and 1.51 per cent respectively over these time frames.
Performance of fund vs sector and benchmark over 1yr
Source: FE Analytics
Since its launch in June 2014, however, the £9.8bn fund has managed to outperform its FTSE All Share benchmark and sector average by 4.16 and 4.37 percentage points respectively with a total return of 27.62 per cent.
What also may come as a surprise to investors is that, despite its bout of torrid performance over the last 12 months, its maximum drawdown (which measures the most money lost if bought and sold at the worst possible times) stands at 6.49 per cent since launch, compared to its average peer’s drawdown of 8.48 per cent and the FTSE All Share’s drawdown of 11.12 per cent.
“It’s ironic that the press go on and on about transparency, but they use it against him and so does the market in a way. It is quite hard to maintain the level of transparency that Woodford does,” Dampier pointed out.
“Unfortunately, the history of this country is that if you’re successful you become a target, so when you have a tough time everyone comes after you.
“What really frustrates me is the effect this has on clients, who tend to then think short term and sell out rather than consider buying some more. The more that is written in the press the more they question their conviction.”
Woodford famously publishes every single holding within his funds – as well as detailed monthly commentary – on his website and updates his list of holdings regularly. As such, it has been markedly easy for investors to pinpoint the factors which have caused the manager’s recent underperformance.
For instance, doorstep lender Provident Financial – which Woodford currently has a 4 per cent weighting within his Equity Income fund – saw its shares fall more than 19 per cent last week following the departure of chief executive Peter Crook and the announcement of its second profit warning within three months.
Performance of stock over 3months
Source: FE Analytics
Last month, the fund’s largest individual holding AstraZeneca (which accounts for 8.15 per cent of the portfolio) fell more than 15 per cent in one day following the failure of its lung treatment trial Mystic.
Meanwhile, Imperial Brands – which is the fund’s third-largest holding at 5.77 per cent – has struggled year-to-date due to plans from the US health watchdog to reduce the nicotine in cigarettes.
While this has indeed impacted CF Woodford Equity Income significantly, Dampier argued that investors and the press simply wouldn’t be interested if the fund wasn’t being run by such a high-profile manager.
“I just think there is way too much attention on the short term. No one would look at any of this at all if it wasn’t Woodford,” Dampier continued.
“I expect some people will become negative on the manager, it’s inevitable. It’s so much cheaper nowadays to buy and sell units.
“In the old days it was between a 5 and 6 per cent round trip to buy and sell so people thought twice about doing it, but now it’s almost as cheap as shares to buy and sell.
“People are trading funds and that’s exactly what they shouldn’t be doing. It will undoubtedly cause some problems, but dismissing a fund manager with 25 years-plus experience I find staggering.”
In terms of his personal portfolio, the research director is considering increasing his exposure to Woodford given his underperformance.
He argued that, if an investor has conviction in a manager, the optimal time to buy more of their fund is when they are underperforming.
“I’m not sure a lot of people have enough conviction because they get most of their conviction from the media, which has very little conviction at all,” he argued.
“I do blame journalism. I think since 2009 and particularly since the rise of the internet the, pressure on journalistic content has been so extreme that that content has inevitably deteriorated quite a lot.
“It’s just like satellite TV; when we had four channels the content was higher quality, now we have much better choice, no-one really appreciated that there wasn’t enough content for 100 channels.
“The deterioration since the financial crisis has been amazing – really quite shocking, actually. It’s a shame, it’s not that the press shouldn’t report things. But when somebody underperforms – especially Neil – you get shot at. None of the things that are performing well tend to get mentioned, either.”
Dampier started investing in Woodford during 1998 and, over the next 15 years, more than doubled his money when he would have made double-digit returns had he invested in a FTSE All Share tracker (FE Analytics’ data only stretches back to 2000, as shown in the below graph).
Performance of Woodford vs index 2000-2013
Source: FE Analytics
The research director particularly likes Woodford’s ability to remain true to his convictions and maintain contrarian positioning in the midst of short-term market noise.
“His contrarian position at the moment is that he likes the UK,” he continued. “I do as well and most investors – because of Brexit and because of the media – are sour on that too.
“The domestic UK is actually quite interesting. There is a lot going for it but I would say that, in my 32 years of experience, investors tend to slam their own economy very quickly and become less keen on it. But actually, the UK hasn’t been a bad place to invest over the years.
“Whether it's economies or fund managers, nobody discusses any of the positives. I find that more remarkable than anything else.”