RUTH SUNDERLAND: Unfair pay for Woodford shows that the gulf between ordinary savers and the money managers is far too wide
Multi-millionaire fund manager Neil Woodford
Where are the customers’ yachts? This is the title of a book written back in 1940 and is a reference to a story about a visitor to New York who, looking at the yachts belonging to brokers and bankers on Wall Street, innocently enquired after their clients’ vessels.
Savers who have put their money with multi-millionaire fund manager Neil Woodford might ask themselves the same question.
As we report today, he and other well-known managers, Nick Train and Terry Smith, last year received tens of millions between them in pay and dividends, albeit the latter pair have to date performed well.
The gulf between ordinary savers and the money managers is far too wide.
Even if this comes as the rewards for success, it is still problematic, because taking home these sums makes Woodford and his ilk remote from ordinary investors.
This may be one reason for his indefensible decision not to waive fees whilst he has locked savers in his funds – he has become tone deaf to the concerns of the little people.
The whole point of investment funds is that they are supposed to democratise the stock market and make the returns from the City available to everyone.
Whether they have actually done that is debatable. There are thousands of funds to choose from, leaving lay individuals – and even knowledgeable savers – with a cold towel to the head.
Returns, as the Woodford debacle has shown, are uncertain. Where investment funds are entirely reliable, however, is as a vehicle for the enrichment of their managers.
‘Stars’, including Woodford, have been better rewarded than the majority of chief executives of FTSE 100 companies.
The fortunes made by fund managers threaten to create cynicism and disenchantment among the public at a time when there has never been a greater need to save. The risks and rewards of investing in funds are all skewed in favour of those who manage them, rather than those who invest.
Trainline’s float will be one of the big events on the London market this week
Trainline’s float may have been delayed for even longer than the 4.45 to Hull – it was first mooted four years ago – but it will be one of the big events on the London market this week.
The float will be priced between 318p to 360p, valuing the business at around £1.5 billion to £1.7 billion and putting a £43 million value on the stake held by its boss, Clare Gilmartin.
Big institutions are being lined up, including Baillie Gifford, which has signed up for £200 million as a cornerstone investor. On one level, this is a great British tech story. The app uses algorithms to find the best routes and fares, helping customers navigate a maze of different operators. There are opportunities for growth as it could expand into Europe and beyond.
As a user of the app myself, I couldn’t be more enthusiastic, but when it comes to the shares, I’d advocate caution. Trainline is currently owned by private equity firm KKR, which like all of its breed, will be looking to sell out at a rich price.
The troubles of some formerly private-equity backed firms, such as Saga and Debenhams, are enough in themselves to give pause for thought, although it would be unfair to tar all with the same brush.
Sales are growing quickly but it has been until recently making a loss. Leaping onto the Trainline wagon might pay off handsomely if its undeniable potential is fulfilled.
But it takes more than a brilliant piece of tech to translate into a great long term investment. Sometimes, it can be better to remain a simple customer and enjoy a great service – one that shareholders are kind enough to bankroll.