Woodford: The future of long-term investing does not look bright; Investors Face Short-Termist Pressures

Neil Woodford, one of the UK’s best-known fund managers, has said that the future of “long-term investing” does not look bright in an industry where fund managers are under pressure to deliver short-term outperformance.

Woodford, who has raised £14.8 billion in assets since he set up his own firm, Woodford Investment Management, in 2014, wrote in an article for Financial News in its Future of Finance supplement hat there’s been little change since Professor John Kay’s review of UK equity markets and long-term decision making.

The Kay review, which was published in 2012, made several recommendations after concluding that the UK stock market wasn’t fulfilling its socially useful function.

But Woodford said the report has “sat gathering dust for four years and not a lot has changed.”

“The future of long-term investing does not look bright in an industry that is increasingly dominated by the twin forces of valuation-insensitive investment activity and the pressure on fund managers to deliver outperformance over every conceivable time horizon, no matter how short.”

He said “genuine long-term investors” appear to be an endangered species, partly because short-term strategies “are driven, in large part, by an obsession with price not value, with asset type or sector, rather than by the analysis of the fundamentals of a business, and by vanishingly short holding periods.”

“For me, investing has always been about a long-term focus on value, an endeavour that aims to exploit the valuation anomalies that will always exist in financial markets. It isn’t easy because it involves doing something different to the crowd, having the courage to back your convictions, the humility to constantly doubt them, and the persistence to test the “what if I’m wrong?” hypothesis every single day.”

He added that short-termism is all too apparent in other walks of life, “from the woefully brief average tenure of corporate executives to a political cycle that is way too short to allow for policies that deliver the real long-term needs of the economy.”

Read Neil Woodford’s full article in Financial News.

city@wsj.com

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