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Neil Woodford chose the auspicious week to try to revive. The former UK fund manager, whose name’s investment boutique collapsed in 2019, announced plans on Holy Monday called the new “Investment Strategy Platform” (W4.0).
Woodford was once accused by regulators of having a “flawed” understanding of his responsibility to manage liquidity risk. A higher power is to determine whether he deserves forgiveness. Regardless, this pitch of the new service, “followable investment strategies designed by Neil Woodford, capable of acting through existing accounts,” presents some obvious flaws.
The emphasis on making changes to customers and having them carry out transactions through their own brokers seems to distinguish W4.0 from the regulator’s official definition of “copy transactions,” but the basic appeal is the same. Although amateur investors feel like they are being mentored by knowledgeable people, they have more agencies than if they packed their money into their index trackers.
There is clearly a demand for this. Etro, the market leader in copy trading, has increased from around 500,000 accounts in 2019 to over 3 million in 2024. But just because it’s popular isn’t wise. Etoro has 35% of “popular investors” (accounts that regular users can choose to copy) beat the S&P 500 in 2024, but it’s far more difficult to do so consistently. Etoro’s most popular traders have only broken the US index in two of the last five years.
Woodford aims to position himself as a mature alternative to reckless, gambling-like strategies. However, copy trading could create reverse incentives to make wild bets or to trade more regularly. Why is it that paying monthly subscription fees for a portfolio that looks the same as others, or why is it that remains the same for a long time?
The original sin of W4.0 was revealed at the start of a web post introducing the platform, saying, “The financial products most people offer still appear to exist 30 years ago. It is true that most retail investments still go through traditionally-looking structures – even exchanged trading funds can be considered variations on old themes, but even the growth of ETFs and index trackers is still giving consumers far more options than they have used for cheap, transparent and effective investments.
There is evidence that investors are very pleased with the change. According to the Investment Association, the proportion of management assets in index tracking funds rose sharply from 11% in 2015 to 25% in 2024.
Woodford complained on a recent podcast that he had no opportunity to repair his performance after the long-term losses that led to the collapse of his boutique. But even the success of W4.0 cannot reverse the decline of the “star manager” culture he once represented. Meeker’s funds have already inherited the Earth.
nicholas.megaw@ft.com
