Edward Luce in The FT
“Nothing is fun until you are good at it,” said Amy Chua in her book Battle Hymn of the Tiger Mother. Eight years later the Yale professor continues to display her prowess.
This week Sophia Chua-Rubenfeld, Ms Chua’s daughter, was hired as a Supreme Court clerk by Brett Kavanaugh — the judge for whom her mother vouched during his stormy Senate hearings last autumn.
Ms Chua is a shrewd string-puller. A Supreme Court clerkship sets up a young lawyer for life. Whether she is enjoying the publicity is another matter. Overnight the Chuas have turned into emblems of what Americans distrust about their meritocracy.
There is much more where that came from. What Ms Chua did was brazen. The liberal academic offered a very public endorsement of the conservative Mr Kavanaugh. As the head of the Yale committee that steers graduates into highly-coveted clerkships, Ms Chua boosted his credibility with her endorsement.
But the apparent quid pro quo was legal. Actresses Lori Loughlin and Felicity Huffman, on the other hand, are accused of having broken the law.
The first is alleged to have paid $500,000 to fake athletics records that would help her two daughters enter the University of Southern California. The second has pleaded guilty to paying $15,000 to cheat on her daughter’s standardised admission test. Both Hollywood actresses, and one of their husbands, face likely jail in the “Operation Varsity Blues” scandal.
Americans would be forgiven for blurring the moral of these tales.
On pure arithmetic, the average American’s chances of entering a top university are tiny if they are born into the wrong home. Studies show that an eighth grade (14-year-old) child from a lower income bracket who achieves maths results in the top quarter is less likely to graduate than a kid in the upper income bracket scored in the bottom quarter. This is the reverse of how meritocracy should work. Children from the wealthiest 1 per cent take more Ivy League places than the bottom 60 per cent combined. Being born under a roof like Ms Chua’s — with two high-achieving parents obsessed with your success — is almost impossible to match.
That is how most of the world works. The US has erected three additional barriers. The first is legacy places. In contrast to most other democracies, America’s top universities credit an applicant if a parent, or grandparent, went to the school. A better name for this would be “hereditary preference”, which is antithetical to America’s creed. Roughly one in six Ivy League places are taken by children of alumni. This sharply reduces the places available to children of talent from disadvantaged backgrounds.
The second is affirmative action. The courts will soon rule on an Asian-American class action suit alleging that Harvard University discriminated against them. A significant — though artfully selected — share of places are reserved for children of Hispanic and African-American backgrounds. The fact that some of those are also legacy applicants adds a layer of irony. Whichever way it goes, the case is likely to end up in the Supreme Court. Mr Kavanaugh, who is a legacy graduate of Yale, could prove the decisive vote on whether affirmative action will survive. That prospect, too, is rich in irony.
The third barrier is brute wealth. If you endow a library, or a medical lab, the university will bend over backwards to admit your child. A prime example is Jared Kushner, Donald Trump’s son-in-law, whose poor SAT scores critics perceive may have been outweighed by his father’s $2.5m donation to Harvard. The US tax system even rewards such palm-greasing by making it tax-deductible. The fact that the best universities are richer than some countries (Harvard’s $38bn endowment is larger than the GDPs of El Salvador and Nicaragua combined) is no check on their ambitions. They always want more.
The most egregious figure in the college admissions scandal is William McGlashan, a former partner at TPG, the private equity firm. He allegedly offered a bribe of $250,000 to get his son into a top university. His job was to head TPG’s social impact unit — capitalism’s virtue signalling arm.
You do well by doing good, goes the saying. Which brings us back to Ms Chua. The best restraint on any elite is its sense of shame. Without that code, anything is possible. Everyone in America seems to know the system is rigged. The real distinction is whether you rig things from inside the law or outside.
Thursday 13 June 2019
How the British royal family killed off republicanism
The democratic case against the monarchy is clear, but even Labour knows it would be electoral suicide to make it writes Larry Elliott in The Guardian
‘There was widespread praise for the way in which the Queen handled Trump.’ Photograph: Pool/Reuters
But while this was happening, the House of Windsor provided other struggling businesses with a masterclass in how to reinvent themselves. First, it understood that the underlying strength of the brand meant there was no need to panic. Britain has always tended to be a conservative country wary of radical change, which is one of the reasons the vote to leave the EU came as such a surprise in 2016. Despite all its problems in the 1990s – including the bitter divorce between Prince Charles and Diana, and the row over the Queen’s tax bill – there was always strong residual support for the monarchy. Had there been a referendum in 2000 on whether to have an elected head of state, it would almost certainly have gone in favour of the status quo.
Second, there was a change in the management team, with the older members of the royal family being replaced in the public spotlight by William and Harry. This was a smart move. The Windsors didn’t want to end up with all its most avid supporters gradually dying out: it saw the need to appeal to a younger audience.
If that meant embracing social media then so be it; the royals embraced new technology. Whereas previous royal babies have been announced through the mainstream media, the Duke and Duchess of Sussex announced the birth of their son on Instagram.
Third, the royals have had the nous to avail themselves of the best image consultants and PRs that money could buy. The idea has been to show that the new generation of royals – William and Kate, Harry and Meghan – have the same commitment to public duty as the Queen, but with a bit more of the touchy-feely empathy demanded today.
If it all seems to have worked, that is in large part due to the weakness of the competition. Persuading Britain to dispense with the monarchy would be tough in any circumstances. Persuading Britain to choose a replacement for the Queen from the current crop of politicians, tarnished as they are by economic torpor, the expenses scandal and Brexit, would be a complete non-starter.
In his diaries, Tony Benn describes watching the establishment gather for the service in St Paul’s cathedral to mark the Queen’s silver jubilee in 1977. “We haven’t removed the grip of this crowd from British society, far from it, but on the other hand the public accepts it all and the press plays it up to divert people from unemployment and the cost of living and the EEC and so on. It is a very important ingredient in British life and it has to be thought about.”
It certainly does need thinking about, but there will be no referendum on the monarchy’s future any time soon. There was no mention of republicanism in Labour’s 2017 election manifesto and it’s hard to envisage the next one being any different. As things stand, it would be electoral suicide.
‘Trump’s appearance highlighted that the monarchy has made itself virtually impregnable and that the republican cause in Britain has rarely been weaker.’ Composite: AFP/Getty Images/Guardian design
From Harry Truman to Donald Trump, there have been 13 US presidents since the Queen came to the throne in 1952, so she has plenty of practice in hosting a state visit for the world’s most powerful man. Unsurprisingly, Trump loved the British establishment making a fuss of him – from the 41-gun salute to the British lamb washed down with vintage claret at the Buck House white-tie banquet. Both Downing Street and the White House considered the trip a great success, with talk – wildly premature – of a giant Anglo-American free trade deal.
But the real winner from the visit was not a lame duck Theresa May or Trump – who quickly moved on to other things – but the royal family. There was widespread praise for the way in which the Queen handled Trump, even using her speech at the banquet to big up the international institutions he so frequently derides. The occasion also showcased one of the UK’s few world-class industries: heritage. Tourists are money, as someone once said.
But there was more to it than that. Trump’s appearance highlighted that the monarchy has made itself virtually impregnable and that the republican cause in Britain has rarely been weaker.
Things looked rather different a couple of decades ago. When Princess Diana died in a Paris car crash in 1997, the Queen seemed ill-prepared for the national blubathon that followed. Her initial response to her daughter-in-law’s death was seen as cold and insensitive and – after what today would be called a social media storm – she was forced to go in front of the cameras to quell the public outrage.
Tony Blair, newly arrived as prime minister, was seen to have better captured the public mood with his depiction of Diana as the “people’s princess”. More significantly, Blair’s government was committed to a package of constitutional reforms, including devolution for Scotland and Wales. This created the opportunity to have a debate about whether Britain could really be modernised if it remained a monarchy.
As it happened, Blair was a royalist and would never have countenanced the idea of turning Britain into a republic, but that didn’t prevent the idea being canvassed. In 2000, this paper called for a referendum on what sort of head of state Britain should have after the Queen’s death. “People ought to be able to say whether they would prefer to have an elected head of state or to continue with a monarchy. Do they want to be citizens or subjects?” we asked.
The arguments in favour of turning Britain into a republic are no different from what they were 19 years ago. They involve democracy, power, governance, class and distribution of wealth. It is difficult, if not impossible, to have a proper discussion about tackling inequality while leaving the monarchy out of the equation. But in 2000 there was a realistic possibility of change. The royal family was rather like one of those long-established high street businesses that have fallen on hard times as a result of the retail revolution. The product looked a bit out of date; those in charge of running the business were old and stale; customers seemed less happy with the service they were getting.
But since then, two things have buttressed the monarchy’s position. First, external events have been helpful. At the turn of the millennium, the world economy was in the middle of a long boom marked by rising living standards, low inflation and falling unemployment. The absence of an economic crisis created the political space to think about other issues. But since 2007, Britain has been in a semi-permanent state of economic and political crisis, with the deep recession of 2008-09 followed by post-2010 austerity and Brexit. Even had there been a growing drumbeat of support among voters for a republic, Westminster would have had other priorities.
From Harry Truman to Donald Trump, there have been 13 US presidents since the Queen came to the throne in 1952, so she has plenty of practice in hosting a state visit for the world’s most powerful man. Unsurprisingly, Trump loved the British establishment making a fuss of him – from the 41-gun salute to the British lamb washed down with vintage claret at the Buck House white-tie banquet. Both Downing Street and the White House considered the trip a great success, with talk – wildly premature – of a giant Anglo-American free trade deal.
But the real winner from the visit was not a lame duck Theresa May or Trump – who quickly moved on to other things – but the royal family. There was widespread praise for the way in which the Queen handled Trump, even using her speech at the banquet to big up the international institutions he so frequently derides. The occasion also showcased one of the UK’s few world-class industries: heritage. Tourists are money, as someone once said.
But there was more to it than that. Trump’s appearance highlighted that the monarchy has made itself virtually impregnable and that the republican cause in Britain has rarely been weaker.
Things looked rather different a couple of decades ago. When Princess Diana died in a Paris car crash in 1997, the Queen seemed ill-prepared for the national blubathon that followed. Her initial response to her daughter-in-law’s death was seen as cold and insensitive and – after what today would be called a social media storm – she was forced to go in front of the cameras to quell the public outrage.
Tony Blair, newly arrived as prime minister, was seen to have better captured the public mood with his depiction of Diana as the “people’s princess”. More significantly, Blair’s government was committed to a package of constitutional reforms, including devolution for Scotland and Wales. This created the opportunity to have a debate about whether Britain could really be modernised if it remained a monarchy.
As it happened, Blair was a royalist and would never have countenanced the idea of turning Britain into a republic, but that didn’t prevent the idea being canvassed. In 2000, this paper called for a referendum on what sort of head of state Britain should have after the Queen’s death. “People ought to be able to say whether they would prefer to have an elected head of state or to continue with a monarchy. Do they want to be citizens or subjects?” we asked.
The arguments in favour of turning Britain into a republic are no different from what they were 19 years ago. They involve democracy, power, governance, class and distribution of wealth. It is difficult, if not impossible, to have a proper discussion about tackling inequality while leaving the monarchy out of the equation. But in 2000 there was a realistic possibility of change. The royal family was rather like one of those long-established high street businesses that have fallen on hard times as a result of the retail revolution. The product looked a bit out of date; those in charge of running the business were old and stale; customers seemed less happy with the service they were getting.
But since then, two things have buttressed the monarchy’s position. First, external events have been helpful. At the turn of the millennium, the world economy was in the middle of a long boom marked by rising living standards, low inflation and falling unemployment. The absence of an economic crisis created the political space to think about other issues. But since 2007, Britain has been in a semi-permanent state of economic and political crisis, with the deep recession of 2008-09 followed by post-2010 austerity and Brexit. Even had there been a growing drumbeat of support among voters for a republic, Westminster would have had other priorities.
‘There was widespread praise for the way in which the Queen handled Trump.’ Photograph: Pool/Reuters
But while this was happening, the House of Windsor provided other struggling businesses with a masterclass in how to reinvent themselves. First, it understood that the underlying strength of the brand meant there was no need to panic. Britain has always tended to be a conservative country wary of radical change, which is one of the reasons the vote to leave the EU came as such a surprise in 2016. Despite all its problems in the 1990s – including the bitter divorce between Prince Charles and Diana, and the row over the Queen’s tax bill – there was always strong residual support for the monarchy. Had there been a referendum in 2000 on whether to have an elected head of state, it would almost certainly have gone in favour of the status quo.
Second, there was a change in the management team, with the older members of the royal family being replaced in the public spotlight by William and Harry. This was a smart move. The Windsors didn’t want to end up with all its most avid supporters gradually dying out: it saw the need to appeal to a younger audience.
If that meant embracing social media then so be it; the royals embraced new technology. Whereas previous royal babies have been announced through the mainstream media, the Duke and Duchess of Sussex announced the birth of their son on Instagram.
Third, the royals have had the nous to avail themselves of the best image consultants and PRs that money could buy. The idea has been to show that the new generation of royals – William and Kate, Harry and Meghan – have the same commitment to public duty as the Queen, but with a bit more of the touchy-feely empathy demanded today.
If it all seems to have worked, that is in large part due to the weakness of the competition. Persuading Britain to dispense with the monarchy would be tough in any circumstances. Persuading Britain to choose a replacement for the Queen from the current crop of politicians, tarnished as they are by economic torpor, the expenses scandal and Brexit, would be a complete non-starter.
In his diaries, Tony Benn describes watching the establishment gather for the service in St Paul’s cathedral to mark the Queen’s silver jubilee in 1977. “We haven’t removed the grip of this crowd from British society, far from it, but on the other hand the public accepts it all and the press plays it up to divert people from unemployment and the cost of living and the EEC and so on. It is a very important ingredient in British life and it has to be thought about.”
It certainly does need thinking about, but there will be no referendum on the monarchy’s future any time soon. There was no mention of republicanism in Labour’s 2017 election manifesto and it’s hard to envisage the next one being any different. As things stand, it would be electoral suicide.
Wednesday 12 June 2019
Anyone who wants to be prime minister should have a course of therapy first
Our toxic political system rewards all the wrong traits and produces the worst possible leaders writes George Monbiot in The Guardian
I believe that anyone who wants to stand in a national election should receive a course of psychotherapy. Completing the course should be a qualification for office. This wouldn’t change the behaviour of psychopaths, but it might prevent some people who exercise power from imposing their own deep wounds on others. I’ve had two courses: one influenced by Freud and Donald Winnicott, the other by Paul Gilbert’s compassion-focused approach. I found them both immensely helpful. I believe almost everyone would benefit from such treatment.
The underlying problem is the system through which such people jostle. Toxic personalities thrive in toxic environments. Those who should be least trusted with power are most likely to win it. A study in the Journal of Personality and Social Psychology suggests that the group of psychopathic traits known as “fearless dominance” is associated with behaviours that are widely valued in leaders, such as making bold decisions and bestriding the world stage. If so, we surely value the wrong characteristics. If success within the system requires psychopathic traits, there is something wrong with the system.
In designing an effective politics, it could be useful to work backwards: to decide what kind of people we would like to see representing us, then create a system that would bring them to the fore. I want to be represented by people who are thoughtful, self-aware and collaborative. What would a system that elevated such people look like?
It would not be a purely representative democracy. This works on the principle of presumed consent: “You elected me three years ago, therefore you are presumed to have consented to the policy I’m about to implement, whether or not I mentioned it at the time.” It rewards the “strong, decisive” leaders who so often lead their nations to catastrophe. A system that tempers representative democracy with participative democracy – citizens’ assemblies, participatory budgeting, the co-creation of public policy – is more likely to reward responsive and considerate politicians. Proportional representation, which prevents governments with minority support from dominating the nation, is another potential safeguard – though no guarantee.
In rethinking politics, let us develop systems that encourage kindness, empathy and emotional intelligence. Let us ditch systems that encourage people to hide their pain by dominating others.
‘Toxic personalities thrive in toxic environments.’ John Bercow (centre) mediates during a Commons debate on the EU withdrawal bill. Photograph: Mark Duffy/AFP/Getty Images
Who in their right mind would want the job? It is almost certain to end, as Theresa May found, in failure and public execration. To seek to be prime minister today suggests either reckless confidence or an insatiable hunger for power. Perhaps we need a reverse catch-22 in British politics: anyone crazy enough to apply for this post should be disqualified from running.
A few years ago, the psychologist Michelle Roya Rad listed the characteristics of good leadership. Among them were fairness and objectivity; a desire to serve society rather than just yourself; a lack of interest in fame and attention; and resistance to the temptation to hide the truth or make impossible promises. Conversely, a paper in the Journal of Public Management and Social Policy has listed the characteristics of leaders with psychopathic, narcissistic or Machiavellian personalities. These include: a tendency to manipulate others; a preparedness to lie and deceive to achieve your ends; a lack of remorse and sensitivity; and a desire for admiration, attention, prestige and status. Which of these lists, do you think, best describes the people vying to lead the Conservative party?
In politics, almost everywhere we see what looks like the externalisation of psychic wounds or deficits. Sigmund Freud claimed that “groups take on the personality of the leader”. I think it would be more accurate to say that the private tragedies of powerful people become the public tragedies of those they dominate. For some people, it is easier to command a nation, to send thousands to their deaths in unnecessary wars, to separate children from their families and inflict terrible suffering, than to process their own trauma and pain. What we appear to see in national politics around the world is a playing out in public of deep private distress.
This could be a particularly potent force in British politics. The psychotherapist Nick Duffell has written of “wounded leaders”, who were separated from their families in early childhood when they were sent to boarding school. They develop a “survival personality”, learning to cut off their feelings and project a false self, characterised by a public display of competence and self-reliance. Beneath this persona is a profound insecurity, which might generate an insatiable need for power, prestige and attention. The result is a system that “consistently turns out people who appear much more competent than they actually are”.
The problem is not confined to these shores. Donald Trump occupies the most powerful seat on Earth, yet still he appears to seethe with envy and resentment. “If President Obama made the deals that I have made,” he claimed this week, “the corrupt media would be hailing them as incredible … With me, despite our record-setting economy and all that I have done, no credit!” No amount of wealth or power seems able to satisfy his need for affirmation and assurance.
Those who should be least trusted with power are most likely to win it
Who in their right mind would want the job? It is almost certain to end, as Theresa May found, in failure and public execration. To seek to be prime minister today suggests either reckless confidence or an insatiable hunger for power. Perhaps we need a reverse catch-22 in British politics: anyone crazy enough to apply for this post should be disqualified from running.
A few years ago, the psychologist Michelle Roya Rad listed the characteristics of good leadership. Among them were fairness and objectivity; a desire to serve society rather than just yourself; a lack of interest in fame and attention; and resistance to the temptation to hide the truth or make impossible promises. Conversely, a paper in the Journal of Public Management and Social Policy has listed the characteristics of leaders with psychopathic, narcissistic or Machiavellian personalities. These include: a tendency to manipulate others; a preparedness to lie and deceive to achieve your ends; a lack of remorse and sensitivity; and a desire for admiration, attention, prestige and status. Which of these lists, do you think, best describes the people vying to lead the Conservative party?
In politics, almost everywhere we see what looks like the externalisation of psychic wounds or deficits. Sigmund Freud claimed that “groups take on the personality of the leader”. I think it would be more accurate to say that the private tragedies of powerful people become the public tragedies of those they dominate. For some people, it is easier to command a nation, to send thousands to their deaths in unnecessary wars, to separate children from their families and inflict terrible suffering, than to process their own trauma and pain. What we appear to see in national politics around the world is a playing out in public of deep private distress.
This could be a particularly potent force in British politics. The psychotherapist Nick Duffell has written of “wounded leaders”, who were separated from their families in early childhood when they were sent to boarding school. They develop a “survival personality”, learning to cut off their feelings and project a false self, characterised by a public display of competence and self-reliance. Beneath this persona is a profound insecurity, which might generate an insatiable need for power, prestige and attention. The result is a system that “consistently turns out people who appear much more competent than they actually are”.
The problem is not confined to these shores. Donald Trump occupies the most powerful seat on Earth, yet still he appears to seethe with envy and resentment. “If President Obama made the deals that I have made,” he claimed this week, “the corrupt media would be hailing them as incredible … With me, despite our record-setting economy and all that I have done, no credit!” No amount of wealth or power seems able to satisfy his need for affirmation and assurance.
Those who should be least trusted with power are most likely to win it
I believe that anyone who wants to stand in a national election should receive a course of psychotherapy. Completing the course should be a qualification for office. This wouldn’t change the behaviour of psychopaths, but it might prevent some people who exercise power from imposing their own deep wounds on others. I’ve had two courses: one influenced by Freud and Donald Winnicott, the other by Paul Gilbert’s compassion-focused approach. I found them both immensely helpful. I believe almost everyone would benefit from such treatment.
The underlying problem is the system through which such people jostle. Toxic personalities thrive in toxic environments. Those who should be least trusted with power are most likely to win it. A study in the Journal of Personality and Social Psychology suggests that the group of psychopathic traits known as “fearless dominance” is associated with behaviours that are widely valued in leaders, such as making bold decisions and bestriding the world stage. If so, we surely value the wrong characteristics. If success within the system requires psychopathic traits, there is something wrong with the system.
In designing an effective politics, it could be useful to work backwards: to decide what kind of people we would like to see representing us, then create a system that would bring them to the fore. I want to be represented by people who are thoughtful, self-aware and collaborative. What would a system that elevated such people look like?
It would not be a purely representative democracy. This works on the principle of presumed consent: “You elected me three years ago, therefore you are presumed to have consented to the policy I’m about to implement, whether or not I mentioned it at the time.” It rewards the “strong, decisive” leaders who so often lead their nations to catastrophe. A system that tempers representative democracy with participative democracy – citizens’ assemblies, participatory budgeting, the co-creation of public policy – is more likely to reward responsive and considerate politicians. Proportional representation, which prevents governments with minority support from dominating the nation, is another potential safeguard – though no guarantee.
In rethinking politics, let us develop systems that encourage kindness, empathy and emotional intelligence. Let us ditch systems that encourage people to hide their pain by dominating others.
Tuesday 11 June 2019
How India could sidestep the Middle Income Trap
Rathin Roy - Economic Adviser to the Indian Government
It’s a fight between Hindus
THE assault by the Rashtriya Swayamsevak Sangh (RSS) on West Bengal Chief Minister Mamata Banerjee has roots in India’s pre-Partition intra-Hindu battle lines. While the most cited example of this bitter rivalry is Mahatma Gandhi’s murder by Nathuram Godse, the pre-Independence standoff continues to stalk Indian society just as menacingly writes Jawed Naqvi in The Dawn
The murders of Gauri Lankesh and her rationalist colleagues — allegedly by members of a Brahminical group suspected in Gandhi’s assassination — confirms this narrative. Theatre icon Girish Karnad who died of a prolonged illness on Monday was on the hit list of the group.
Banerjee is a Bengali Brahmin of a secular hue and the RSS is a Brahmin-led body of the Hindu right with origins in the intense intra-Brahmin rivalry that goes back to pre-Independence Poona, now Pune. It was here that nationalist leader B.G. Tilak took a violently hostile stance against M.G. Ranade’s social reformist interventions at annual Congress sessions. Tilak’s men would raid Ranade’s camps with sticks and stones, not dissimilar to the hooligans unleashed by the Hindu right today.
Given the spurious but all-pervasive critique of Indian liberalism under way, blaming them for the opposition’s rout by Narendra Modi, this equation between Brahmins and Brahmins (or Hindus and Hindus) needs to be clearly borne in mind. In today’s context, Prime Minister Modi is vocal about a Congress-free India, which in the Hindutva echo chamber may sound like Muslim-free India.
It is difficult to understand the grudge against Indian liberalism, when that is all one has to save and fight for.
But the real targets are reformist and secular Hindus. Tilak wanted a Ranade-free India. W.C. Bonnerjee, the socially regressive president of the Indian National Congress, would have preferred a Brahmo Samaj-free India. The Samaj was the progenitor of reformist Ishwarchand Vidyasagar, whose bust was razed by Hindutva hooligans in their anti-Mamata melee recently. Likewise, in ancient India, the nastiks or non-believers (from the Hindu fold) challenged Brahmin hegemony and suffered for it.
Gleaning from several recent reviews of the landslide Modi win, it appears to have become fashionable to accuse an imagined airy-fairy, unintelligent intellectual class, supposedly unconnected with the masses and allegedly confined to the upmarket Khan Market and British-built Lutyens’ Delhi, for the political debacle of the Congress and the left. The truth is that barring the excellent Bahri bookshop that still holds true to its intellectual purpose, Khan Market was transformed into a hub of flashy consumerism bereft of any thinking capacity from the 1990s, offering a fertile ground for the arriving right-wing menace to grow and prosper. As for Lutyens’ Delhi, that is where Hindutva leaders reside, including Prime Minister Modi, mostly in quarters vacated by assorted architects of Nehru’s India. It is difficult to understand the grudge against Indian liberalism, when that is all one has to save and fight for.
The flip side is just as true. The point apparently missed by Muslim votaries of Partition to everyone’s detriment in the subcontinent was that the more real fight had existed towards the end of British rule not between Hindus and Muslims, but between Hindus and Hindus and between Muslims and Muslims. Imagine if Jinnah had met Gauri Lankesh or Girish Karnad and joined their fight against regressive Hinduism. What if they had struck up an alliance with the Dravida social justice movement of southern India and other equally progressive Hindu (though some called themselves anti-Hindu ideologues)? The Muslim League might have had a different view about the future of a united India.
Just as there emerged regressive forces to disrupt Jinnah’s secular quest in Pakistan, the intense rivalry between Tilak and Ranade presaged the contest between a secular opposition and the RSS. Tilak represented British India’s reactionary impulses laced in narrow nationalism, which were to be co-opted by Hindutva forces.
Many of his heirs have lurked on in the Congress. They include those who bear hostility towards Dalit reformist Ambedkar and other progressive groups. Ranade, the reformist stalwart, embodied the best in India’s quest for social equality, an amalgam of progressive forces set into motion in Bengal by Ram Mohan Roy, and in Maharashtra by Jyotiba Phule and several others.
History is witness to this phenomenon on both sides of the border. Soon after the Quaid’s death, his dream of a secular state was smashed by those lurking in the shadows of Muslim revivalism. In India, Nehru, who dreamt like Jinnah of a parliamentary democracy with an egalitarian intent, was overwhelmed in his own cabinet by stubbornly regressive but powerful satraps. (Read Nehru’s desperate letters to the chief minister of Uttar Pradesh under whose watch the early Ayodhya-centric communal campaign was unleashed.)
Detractors of the Nehruvian worldview gained enormously from the rise of the Hindu right, which was spurred unwittingly by Manmohan Singh’s economic reforms, although he claims to be an ardent devotee of the first prime minister. Singh helped create a nouveau-riche middle class with definitive regressive and feudal social features. This new urban populace can hardly qualify as a liberal vanguard of anything. Rather it has swamped the main opposition Congress as much as it has spurred the consolidation of the RSS and its many arms, including the BJP.
It may disturb some in the left to be reminded that the neo-liberal consumer society did not spare their rank and file either. If after 70 years of struggle for the Orwellian sugar-candy mountain, all that the left have to show for their cultural legacy is the annual Durga Puja in Bengal, then it becomes easy to see how the cadres slip out occasionally to vote for the BJP or desert the party altogether. Worse, the left’s innate sectarianism does not allow for a pause to see that if Mamata Banerjee goes, the Hindutva sway over Bengal would be complete.
Rather than holding her alliance with Muslims responsible for the BJP’s victory in Bengal — a dishonest assessment — the left should make an existential accord with Mamata to stave off its own and ultimately India’s disastrous denouement.
Banerjee is a Bengali Brahmin of a secular hue and the RSS is a Brahmin-led body of the Hindu right with origins in the intense intra-Brahmin rivalry that goes back to pre-Independence Poona, now Pune. It was here that nationalist leader B.G. Tilak took a violently hostile stance against M.G. Ranade’s social reformist interventions at annual Congress sessions. Tilak’s men would raid Ranade’s camps with sticks and stones, not dissimilar to the hooligans unleashed by the Hindu right today.
Given the spurious but all-pervasive critique of Indian liberalism under way, blaming them for the opposition’s rout by Narendra Modi, this equation between Brahmins and Brahmins (or Hindus and Hindus) needs to be clearly borne in mind. In today’s context, Prime Minister Modi is vocal about a Congress-free India, which in the Hindutva echo chamber may sound like Muslim-free India.
It is difficult to understand the grudge against Indian liberalism, when that is all one has to save and fight for.
But the real targets are reformist and secular Hindus. Tilak wanted a Ranade-free India. W.C. Bonnerjee, the socially regressive president of the Indian National Congress, would have preferred a Brahmo Samaj-free India. The Samaj was the progenitor of reformist Ishwarchand Vidyasagar, whose bust was razed by Hindutva hooligans in their anti-Mamata melee recently. Likewise, in ancient India, the nastiks or non-believers (from the Hindu fold) challenged Brahmin hegemony and suffered for it.
Gleaning from several recent reviews of the landslide Modi win, it appears to have become fashionable to accuse an imagined airy-fairy, unintelligent intellectual class, supposedly unconnected with the masses and allegedly confined to the upmarket Khan Market and British-built Lutyens’ Delhi, for the political debacle of the Congress and the left. The truth is that barring the excellent Bahri bookshop that still holds true to its intellectual purpose, Khan Market was transformed into a hub of flashy consumerism bereft of any thinking capacity from the 1990s, offering a fertile ground for the arriving right-wing menace to grow and prosper. As for Lutyens’ Delhi, that is where Hindutva leaders reside, including Prime Minister Modi, mostly in quarters vacated by assorted architects of Nehru’s India. It is difficult to understand the grudge against Indian liberalism, when that is all one has to save and fight for.
The flip side is just as true. The point apparently missed by Muslim votaries of Partition to everyone’s detriment in the subcontinent was that the more real fight had existed towards the end of British rule not between Hindus and Muslims, but between Hindus and Hindus and between Muslims and Muslims. Imagine if Jinnah had met Gauri Lankesh or Girish Karnad and joined their fight against regressive Hinduism. What if they had struck up an alliance with the Dravida social justice movement of southern India and other equally progressive Hindu (though some called themselves anti-Hindu ideologues)? The Muslim League might have had a different view about the future of a united India.
Just as there emerged regressive forces to disrupt Jinnah’s secular quest in Pakistan, the intense rivalry between Tilak and Ranade presaged the contest between a secular opposition and the RSS. Tilak represented British India’s reactionary impulses laced in narrow nationalism, which were to be co-opted by Hindutva forces.
Many of his heirs have lurked on in the Congress. They include those who bear hostility towards Dalit reformist Ambedkar and other progressive groups. Ranade, the reformist stalwart, embodied the best in India’s quest for social equality, an amalgam of progressive forces set into motion in Bengal by Ram Mohan Roy, and in Maharashtra by Jyotiba Phule and several others.
History is witness to this phenomenon on both sides of the border. Soon after the Quaid’s death, his dream of a secular state was smashed by those lurking in the shadows of Muslim revivalism. In India, Nehru, who dreamt like Jinnah of a parliamentary democracy with an egalitarian intent, was overwhelmed in his own cabinet by stubbornly regressive but powerful satraps. (Read Nehru’s desperate letters to the chief minister of Uttar Pradesh under whose watch the early Ayodhya-centric communal campaign was unleashed.)
Detractors of the Nehruvian worldview gained enormously from the rise of the Hindu right, which was spurred unwittingly by Manmohan Singh’s economic reforms, although he claims to be an ardent devotee of the first prime minister. Singh helped create a nouveau-riche middle class with definitive regressive and feudal social features. This new urban populace can hardly qualify as a liberal vanguard of anything. Rather it has swamped the main opposition Congress as much as it has spurred the consolidation of the RSS and its many arms, including the BJP.
It may disturb some in the left to be reminded that the neo-liberal consumer society did not spare their rank and file either. If after 70 years of struggle for the Orwellian sugar-candy mountain, all that the left have to show for their cultural legacy is the annual Durga Puja in Bengal, then it becomes easy to see how the cadres slip out occasionally to vote for the BJP or desert the party altogether. Worse, the left’s innate sectarianism does not allow for a pause to see that if Mamata Banerjee goes, the Hindutva sway over Bengal would be complete.
Rather than holding her alliance with Muslims responsible for the BJP’s victory in Bengal — a dishonest assessment — the left should make an existential accord with Mamata to stave off its own and ultimately India’s disastrous denouement.
Saturday 8 June 2019
Bright star to black hole: the rise and fall of fund manager Neil Woodford
Rupert Neate in The Guardian
He was, the BBC declared in 2015, “the man who can’t stop making money”. He was the rock star of pensions and fund management, awarded a CBE for his services to the economy. But now, since Neil Woodford stopped investors from withdrawing their own money from his flagship fund, he is in the spotlight for all the wrong reasons.
His Woodford Equity Income Fund holds the pension savings and investments of tens of thousands of people. But it has been performing so badly that investors were withdrawing money at the rate of £10m a day.
-----Also read
It can be Hard to tell Luck from Judgment
-----
Last week, after 23 consecutive months in which withdrawals from the fund had been greater than the new money coming in, Woodford found he couldn’t realise cash quickly enough to meet the withdrawal requests – at least at a decent price. He closed the fund to withdrawals, leaving legions of investors angry and in limbo for 28 days.
In a YouTube video he posted on Wednesday to finally apologise to investors, he looked anything but the archetypal City fund manager, with his close-cropped hair and trademark casual jumper rather than suit and tie. In the video, filmed at his fund’s headquarters on an industrial estate near Oxford, Woodford said: “I’m extremely sorry that we’ve had to take this decision. We understand our investors’ frustration. All I can say in response to that is that this decision was motivated by your interests.”
Woodford said he had been forced to “gate” the fund because so many big investors were trying to pull money out that he wasn’t able to meet the demand. His funds hold unusually big stakes in smaller and early stage unlisted companies, which are hard to sell quickly.
The final straw had been Kent county council pension fund’s request to take out its £263m holding. The trustees of Kent’s pension fund – who had been trying to stem the losses Woodford had racked up for its 110,000 members – decided to pull out when it emerged at the end of last month that the flagship fund had shrunk by £560m to £3.77bn in just four weeks. At its peak the fund was worth more than £10bn.
Of the £560m lost, just under £190m was made up of withdrawals. The rest – more than £370m – represented yet further declines in the value of the investments held in the fund, which at the end of April was made up of stakes in 101 companies ranging from housebuilders such as Barratt Developments and Taylor Wimpey to logistics business Eddie Stobart and a large number of esoteric healthcare firms.
Under EU rules aimed at ensuring that funds which hold unquoted – and therefore potentially hard-to-sell – shares can retain their stability, these shares are permitted to make up no more than 10% of the portfolio. Woodford got around those rules, quite legally, by putting some of them into his separate, quoted Patient Capital investment trust – and taking Patient Capital shares into the main fund. He also listed some of them of the Guernsey stock exchange.
But the Kent fund had left it just too late: instead of getting its cash back, its request triggered Woodford’s suspension of trading in the fund.
The video apology, in which Woodford set and answered his own questions, followed months during which he had been dismissing the concerns of investors and financial experts about his fund’s prolonged poor performance.
In February, his Woodford Equity Income Fund was listed for the first time on a “Spot the Dog” list compiled by Bestinvest, which highlights underperforming “dog” funds. Bestinvest criticised some of his worst investments and described the fund as “a Great Dane-sized” new entrant to its list.
Just a few weeks later, Woodford told the Financial Times that the investors who were pulling out were making “appallingly bad decisions”, influenced by “a mountain of fake information and fake analysis” that “pisses me off”.
Neil Woodford apologises to investors in a still from his YouTube video last week. Photograph: Woodford Investment Management/PA
In December 2017 he said in an interview that they key to successful investing was to “have a sufficiently strong arrogant gene to back your judgment, back your conviction”.
That arrogance is now provoking widespread anger, not just from his investors but also among other fund managers, who say Woodford has tarred the whole industry with the same loss-making brush.
Last Wednesday the Financial Conduct Authority, the City’s watchdog, said it was considering a formal investigation into the fund, and the following day, Bank of England governor Mark Carney told an audience in Tokyo that funds such as Woodford’s (although he died not name him) needed closer scrutiny to lessen the risk of fire sales triggering market disruption. The Bank, he said, would start stress-testing funds to ensure they couldn’t threaten a system-wide crisis.
This is a staggering fall from grace for Woodford, who had been one of the UK’s very best and most reliable stock pickers. Anyone who invested £10,000 at the start of his quarter-of-a-century career at Invesco Perpetual would have seen their money grow to almost £250,000 by the time he left.
Mark Dampier, director of research at stockbroker Hargreaves Lansdown, declared in 2015 that Woodford was “arguably the best fund manager of his generation”. Just weeks ago, despite the growing cloud surrounding Woodford, Hargreaves told its clients “we retain our conviction in him to deliver excellent long-term performance” and reminded them that he had “built his career by investing against the herd” and “shown an ability to get the big calls right”.
Hargreaves’s customers had £2bn invested with Woodford at the end of March – roughly a fifth of all the money in his three big funds.
Only when the fund was gated did Hargreaves, which has heavily promoted Woodford at discounted fees, finally drop Woodford Equity Income from its influential “Wealth 50” list of favourite funds, which it marketed to its more than a million clients.
FacebookTwitterPinterest Bank of England governor Mark Carney has suggested that funds such as Woodford’s need more scrutiny. Photograph: Hannah McKay/Reuters
Asked if he regretted his support for Woodford and the controversial discount fee structure, Dampier said: “Our aim is to enable our clients to choose the best-in-class funds at lower fees. Our favourite fund choices have, for the most part, beaten their sector averages and benchmarks. Not every fund has, and we share our clients’ disappointment and frustration when they don’t.”
Other big backers have also deserted Woodford. St James’s Place last week took its clients’ £3.5bn to another manager. On Thursday another supporter, Openworks, did the same with its £330m.
Woodford fell into fund management by accident. He had never even heard of the business until he rocked up in London in the 1980s, sleeping on his brother’s floor while looking for a job. He had left school wanting to fly fighter jets but couldn’t pass the RAF’s aptitude test, and instead read agricultural economics at the University of Exeter.
In 1988 he joined Invesco Perpetual and built a reputation as a brilliant contrarian investor. When others piled into dotcom shares at the turn of the century, he decided against, and backed more traditional companies. He made huge gains when the dotcom crash came. He eschewed banking stocks before the financial crisis – and avoided that crash too.
He held big stakes in giant companies, whose chief executives needed to retain his support. In 2012 his criticism of AstraZeneca chief executive David Brennan was widely regarded to have cost Brennan his job, and his criticism of BAE’s attempted £28bn merger with Airbus was seen as one of the reasons the deal collapsed.
In 2014, feeling that he had outgrown Invesco Perpetual, where he personally managed some £25bn of funds, he set up his own firm, Woodford Investment Management. Within two weeks of launching, he had raised £1.6bn, a UK record, and this quickly grew to £16bn. In its first year, his flagship fund made a 16% return and Woodford, a devotee of veteran US investor Warren Buffett, was called the “Oracle of Oxford”.
FacebookTwitterPinterest Woodford is a keen student of the US investor Warren Buffett. Photograph: Andrew Harnik/AP
But since then things have turned sour. Over the past four years, investors in Woodford Equity Income have collected a return of less than 1% – compared with 29% for the market as a whole. Over that same four-year period, Woodford has paid himself some £63m.
In the 2017-18 financial year alone, which was a dreadful period for his funds, Woodford Investment Management paid a £36.5m dividend to a company called Woodford Capital. Woodford holds 65% of that firm, and his business partner Craig Newman has the remaining 35%.
Woodford, who has spoken out against the huge bonuses awarded to other fund managers, and to the bosses of companies he has invested in, declined to answer any questions about his own pay, or to elaborate, beyond his YouTube video, on the fund’s tricky situation.
The firm’s public relations officer asked the Observer to point out that Woodford had donated some of his pay to charity. But he was unable to state how much money had been donated, or to which causes. The PR person declined to comment when asked whether Woodford would consider pumping any of his personal millions back into the fund.
Those who know Woodford say he is “decidedly unflashy” and that it is “difficult to fathom where all that money goes”. Well, a lot of it appears to go on horses. He and his wife Madelaine have a few dozen top showjumpers training at a vast equestrian complex near their home in the Cotswolds.
The house, near Tetbury, was built on land the Woodfords bought for nearly £14m in 2013. They moved to the Cotswolds after a planning application to construct a dressage arena and 28-horse stabling block near their previous estate, in Buckinghamshire, was rejected following a row with neighbours. One of those neighbours, the BBC’s Jeremy Paxman, described Woodford’s planned addition as “enormous, unsightly and environmentally unfriendly”.
The Tetbury venue, however, got the planners’ green light and includes a full-size manège (dressage arena). Woodford, who came to the sport only after meeting Madelaine – a keen rider whom he married in 2015 – has put in the hours at the manège and now often takes part in eventing competitions on a bay gelding called Willows Spunky.
Woodford’s other passions are fast cars and racing bicycles. He starts up the Porsche at 5am every weekday to drive to his fund’s minimalist offices on an industrial estate in Cowley, Oxford. At weekends he drives it down to the couple’s £6.3m glass-walled holiday home in Salcombe, Devon.
Woodford’s huge pay and luxury lifestyle haven’t gone unnoticed by his investors, many of whom are relying on him to be a safe pair of hands and to increase the value of their retirement or rainy day fund.
A comment on his YouTube video, by someone with the username Platoreads: “Arrogance, Incompetence, Complacency and greed: your name is Woodford! You have failed, Neil. Return the funds to your investors (including that £37m bonus you pocketed this year despite a disastrous performance in all three funds).”
Luke Hilyard of the High Pay Centre said: “This particular instance of an investor making tens of millions while losing money for ordinary savers raises questions about the governance of the funds and platforms channelling other people’s money into Woodford’s fund, and the regulatory oversight of the process.
“The case is also a microcosm of our wider business culture and economic system, where superstar managers in investment, banking, retail, commodities and other industries have been treated like gods and rewarded accordingly, yet ultimately have shown themselves to be highly fallible mortals whose success was always partly contingent on timing and luck.”
Woodford, who made his name at Invesco by backing big companies, but then switched to a new strategy of investing in smaller and unquoted companies in his own funds, has now pledged to change direction.
In his video he said he would now be targeting bigger companies, especially FTSE 100 stocks – even though only a few weeks ago he was insisting that his approach was the correct one and that the best investment opportunities were “absolutely not” in large companies.
Big bad bets
Woodford bought big stakes in many companies that performed very poorly. They include:
• Kier (construction) -74% in 12 months; Woodford funds own 20%
• Circassia (biotech) -74%; Woodford owns 28.5%
• Prothena (biotech) -36%; Woodford owns 29.9%
• Stobart Group -46%; Woodford owns 18.8%
• Redde (support services) -39%; Woodford owns 28%
• Allied Minds (technology) -31%; Woodford owns 27%
• Spire Healthcare -51%; Woodford owns 5%
• Utilitywise, energy broker that collapsed in Feb 2019; Woodford owned 29%
What Woodford investors say:
“I invested £60,000 three years ago and have lost over 20%. Luckily I sold nearly half my investment the week before the fund closed. I’m going to hold my remaining units until after Brexit as a high-risk bet.”
Simon, 51, Brighton
“I‘m getting married on 10 August and we’ve been saving for over two years. My final bill to the venue and suppliers is due at the start of July. If I can’t withdraw my money I’m going to be looking to beg, borrow or steal until I can get it released.”
James M, 28, Newcastle
“I inherited some money, and chose on a stocks and shares Isa, following suggestions from Hargreaves Lansdown, then watched the value dwindle. On 31 May I decided to take the hit and sell. The deal was shown as “pending” until Wednesday morning, but that disappeared and I was told I wouldn’t be able to sell my units. I don’t think I’ll be getting much back when trading opens again.”
Sally Williams, 53, London
He was, the BBC declared in 2015, “the man who can’t stop making money”. He was the rock star of pensions and fund management, awarded a CBE for his services to the economy. But now, since Neil Woodford stopped investors from withdrawing their own money from his flagship fund, he is in the spotlight for all the wrong reasons.
His Woodford Equity Income Fund holds the pension savings and investments of tens of thousands of people. But it has been performing so badly that investors were withdrawing money at the rate of £10m a day.
-----Also read
It can be Hard to tell Luck from Judgment
-----
Last week, after 23 consecutive months in which withdrawals from the fund had been greater than the new money coming in, Woodford found he couldn’t realise cash quickly enough to meet the withdrawal requests – at least at a decent price. He closed the fund to withdrawals, leaving legions of investors angry and in limbo for 28 days.
In a YouTube video he posted on Wednesday to finally apologise to investors, he looked anything but the archetypal City fund manager, with his close-cropped hair and trademark casual jumper rather than suit and tie. In the video, filmed at his fund’s headquarters on an industrial estate near Oxford, Woodford said: “I’m extremely sorry that we’ve had to take this decision. We understand our investors’ frustration. All I can say in response to that is that this decision was motivated by your interests.”
Woodford said he had been forced to “gate” the fund because so many big investors were trying to pull money out that he wasn’t able to meet the demand. His funds hold unusually big stakes in smaller and early stage unlisted companies, which are hard to sell quickly.
The final straw had been Kent county council pension fund’s request to take out its £263m holding. The trustees of Kent’s pension fund – who had been trying to stem the losses Woodford had racked up for its 110,000 members – decided to pull out when it emerged at the end of last month that the flagship fund had shrunk by £560m to £3.77bn in just four weeks. At its peak the fund was worth more than £10bn.
Of the £560m lost, just under £190m was made up of withdrawals. The rest – more than £370m – represented yet further declines in the value of the investments held in the fund, which at the end of April was made up of stakes in 101 companies ranging from housebuilders such as Barratt Developments and Taylor Wimpey to logistics business Eddie Stobart and a large number of esoteric healthcare firms.
Under EU rules aimed at ensuring that funds which hold unquoted – and therefore potentially hard-to-sell – shares can retain their stability, these shares are permitted to make up no more than 10% of the portfolio. Woodford got around those rules, quite legally, by putting some of them into his separate, quoted Patient Capital investment trust – and taking Patient Capital shares into the main fund. He also listed some of them of the Guernsey stock exchange.
But the Kent fund had left it just too late: instead of getting its cash back, its request triggered Woodford’s suspension of trading in the fund.
The video apology, in which Woodford set and answered his own questions, followed months during which he had been dismissing the concerns of investors and financial experts about his fund’s prolonged poor performance.
In February, his Woodford Equity Income Fund was listed for the first time on a “Spot the Dog” list compiled by Bestinvest, which highlights underperforming “dog” funds. Bestinvest criticised some of his worst investments and described the fund as “a Great Dane-sized” new entrant to its list.
Just a few weeks later, Woodford told the Financial Times that the investors who were pulling out were making “appallingly bad decisions”, influenced by “a mountain of fake information and fake analysis” that “pisses me off”.
Neil Woodford apologises to investors in a still from his YouTube video last week. Photograph: Woodford Investment Management/PA
In December 2017 he said in an interview that they key to successful investing was to “have a sufficiently strong arrogant gene to back your judgment, back your conviction”.
That arrogance is now provoking widespread anger, not just from his investors but also among other fund managers, who say Woodford has tarred the whole industry with the same loss-making brush.
Last Wednesday the Financial Conduct Authority, the City’s watchdog, said it was considering a formal investigation into the fund, and the following day, Bank of England governor Mark Carney told an audience in Tokyo that funds such as Woodford’s (although he died not name him) needed closer scrutiny to lessen the risk of fire sales triggering market disruption. The Bank, he said, would start stress-testing funds to ensure they couldn’t threaten a system-wide crisis.
This is a staggering fall from grace for Woodford, who had been one of the UK’s very best and most reliable stock pickers. Anyone who invested £10,000 at the start of his quarter-of-a-century career at Invesco Perpetual would have seen their money grow to almost £250,000 by the time he left.
Mark Dampier, director of research at stockbroker Hargreaves Lansdown, declared in 2015 that Woodford was “arguably the best fund manager of his generation”. Just weeks ago, despite the growing cloud surrounding Woodford, Hargreaves told its clients “we retain our conviction in him to deliver excellent long-term performance” and reminded them that he had “built his career by investing against the herd” and “shown an ability to get the big calls right”.
Hargreaves’s customers had £2bn invested with Woodford at the end of March – roughly a fifth of all the money in his three big funds.
Only when the fund was gated did Hargreaves, which has heavily promoted Woodford at discounted fees, finally drop Woodford Equity Income from its influential “Wealth 50” list of favourite funds, which it marketed to its more than a million clients.
FacebookTwitterPinterest Bank of England governor Mark Carney has suggested that funds such as Woodford’s need more scrutiny. Photograph: Hannah McKay/Reuters
Asked if he regretted his support for Woodford and the controversial discount fee structure, Dampier said: “Our aim is to enable our clients to choose the best-in-class funds at lower fees. Our favourite fund choices have, for the most part, beaten their sector averages and benchmarks. Not every fund has, and we share our clients’ disappointment and frustration when they don’t.”
Other big backers have also deserted Woodford. St James’s Place last week took its clients’ £3.5bn to another manager. On Thursday another supporter, Openworks, did the same with its £330m.
Woodford fell into fund management by accident. He had never even heard of the business until he rocked up in London in the 1980s, sleeping on his brother’s floor while looking for a job. He had left school wanting to fly fighter jets but couldn’t pass the RAF’s aptitude test, and instead read agricultural economics at the University of Exeter.
In 1988 he joined Invesco Perpetual and built a reputation as a brilliant contrarian investor. When others piled into dotcom shares at the turn of the century, he decided against, and backed more traditional companies. He made huge gains when the dotcom crash came. He eschewed banking stocks before the financial crisis – and avoided that crash too.
He held big stakes in giant companies, whose chief executives needed to retain his support. In 2012 his criticism of AstraZeneca chief executive David Brennan was widely regarded to have cost Brennan his job, and his criticism of BAE’s attempted £28bn merger with Airbus was seen as one of the reasons the deal collapsed.
In 2014, feeling that he had outgrown Invesco Perpetual, where he personally managed some £25bn of funds, he set up his own firm, Woodford Investment Management. Within two weeks of launching, he had raised £1.6bn, a UK record, and this quickly grew to £16bn. In its first year, his flagship fund made a 16% return and Woodford, a devotee of veteran US investor Warren Buffett, was called the “Oracle of Oxford”.
FacebookTwitterPinterest Woodford is a keen student of the US investor Warren Buffett. Photograph: Andrew Harnik/AP
But since then things have turned sour. Over the past four years, investors in Woodford Equity Income have collected a return of less than 1% – compared with 29% for the market as a whole. Over that same four-year period, Woodford has paid himself some £63m.
In the 2017-18 financial year alone, which was a dreadful period for his funds, Woodford Investment Management paid a £36.5m dividend to a company called Woodford Capital. Woodford holds 65% of that firm, and his business partner Craig Newman has the remaining 35%.
Woodford, who has spoken out against the huge bonuses awarded to other fund managers, and to the bosses of companies he has invested in, declined to answer any questions about his own pay, or to elaborate, beyond his YouTube video, on the fund’s tricky situation.
The firm’s public relations officer asked the Observer to point out that Woodford had donated some of his pay to charity. But he was unable to state how much money had been donated, or to which causes. The PR person declined to comment when asked whether Woodford would consider pumping any of his personal millions back into the fund.
Those who know Woodford say he is “decidedly unflashy” and that it is “difficult to fathom where all that money goes”. Well, a lot of it appears to go on horses. He and his wife Madelaine have a few dozen top showjumpers training at a vast equestrian complex near their home in the Cotswolds.
The house, near Tetbury, was built on land the Woodfords bought for nearly £14m in 2013. They moved to the Cotswolds after a planning application to construct a dressage arena and 28-horse stabling block near their previous estate, in Buckinghamshire, was rejected following a row with neighbours. One of those neighbours, the BBC’s Jeremy Paxman, described Woodford’s planned addition as “enormous, unsightly and environmentally unfriendly”.
The Tetbury venue, however, got the planners’ green light and includes a full-size manège (dressage arena). Woodford, who came to the sport only after meeting Madelaine – a keen rider whom he married in 2015 – has put in the hours at the manège and now often takes part in eventing competitions on a bay gelding called Willows Spunky.
Woodford’s other passions are fast cars and racing bicycles. He starts up the Porsche at 5am every weekday to drive to his fund’s minimalist offices on an industrial estate in Cowley, Oxford. At weekends he drives it down to the couple’s £6.3m glass-walled holiday home in Salcombe, Devon.
Woodford’s huge pay and luxury lifestyle haven’t gone unnoticed by his investors, many of whom are relying on him to be a safe pair of hands and to increase the value of their retirement or rainy day fund.
A comment on his YouTube video, by someone with the username Platoreads: “Arrogance, Incompetence, Complacency and greed: your name is Woodford! You have failed, Neil. Return the funds to your investors (including that £37m bonus you pocketed this year despite a disastrous performance in all three funds).”
Luke Hilyard of the High Pay Centre said: “This particular instance of an investor making tens of millions while losing money for ordinary savers raises questions about the governance of the funds and platforms channelling other people’s money into Woodford’s fund, and the regulatory oversight of the process.
“The case is also a microcosm of our wider business culture and economic system, where superstar managers in investment, banking, retail, commodities and other industries have been treated like gods and rewarded accordingly, yet ultimately have shown themselves to be highly fallible mortals whose success was always partly contingent on timing and luck.”
Woodford, who made his name at Invesco by backing big companies, but then switched to a new strategy of investing in smaller and unquoted companies in his own funds, has now pledged to change direction.
In his video he said he would now be targeting bigger companies, especially FTSE 100 stocks – even though only a few weeks ago he was insisting that his approach was the correct one and that the best investment opportunities were “absolutely not” in large companies.
Big bad bets
Woodford bought big stakes in many companies that performed very poorly. They include:
• Kier (construction) -74% in 12 months; Woodford funds own 20%
• Circassia (biotech) -74%; Woodford owns 28.5%
• Prothena (biotech) -36%; Woodford owns 29.9%
• Stobart Group -46%; Woodford owns 18.8%
• Redde (support services) -39%; Woodford owns 28%
• Allied Minds (technology) -31%; Woodford owns 27%
• Spire Healthcare -51%; Woodford owns 5%
• Utilitywise, energy broker that collapsed in Feb 2019; Woodford owned 29%
What Woodford investors say:
“I invested £60,000 three years ago and have lost over 20%. Luckily I sold nearly half my investment the week before the fund closed. I’m going to hold my remaining units until after Brexit as a high-risk bet.”
Simon, 51, Brighton
“I‘m getting married on 10 August and we’ve been saving for over two years. My final bill to the venue and suppliers is due at the start of July. If I can’t withdraw my money I’m going to be looking to beg, borrow or steal until I can get it released.”
James M, 28, Newcastle
“I inherited some money, and chose on a stocks and shares Isa, following suggestions from Hargreaves Lansdown, then watched the value dwindle. On 31 May I decided to take the hit and sell. The deal was shown as “pending” until Wednesday morning, but that disappeared and I was told I wouldn’t be able to sell my units. I don’t think I’ll be getting much back when trading opens again.”
Sally Williams, 53, London
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