And, with valuations now approaching ludicrous levels in certain parts of the market, the indices, he said, are “pregnant with risk”.
“At certain parts of my career, there has been an embarrassment of riches, but at the moment the opposite is the case. You really have to hunt for value now; from here things get much more difficult.”
“For closet index trackers and passive strategies, things get harder now, I think investors may have been lulled into a false sense of security because passive strategies have performed very well, but much of that has been the result of extraordinary monetary policies. This is where active managers earn their stripes,” he added.
Part of the problem, Woodford says is that the hoped-for normalisation still looks to be a long way off.
“Growth is a problem for the global economy, there is a secular stagnation, and importantly there remains an overbearing weight of debt in the developed world,” he said.
Yet, at the same time, asset prices have risen. And, as a result, he added, investors should expect a tough time of things.
“It is an incredibly difficult environment in which to manage money. There is a lot of earnings risk, there have been more than 170 earnings downgrades in the FTSE 350 , there are more stock specific risks present now,” Woodford added.
But said: “The opportunity set is much more restricted, but the possibility of achieving high single digit returns, but it will be a much more volatile ride.”
