fund going into soft closure, whats the implications?

happyhero

Hi sorry if this in wrong place it seemed the best place for this. I am a amateur investor and I have some funds and shares invested with Barclays and Hargreaves Lansdown. One fund I happen to have in both accounts is Cazenove UK Smaller Companies Class B Accumulation, it has done quite well but today I received a message from Barclays so I am assuming I will shortly receive the same sort of thing from Hargreaves Lansdown but I understand the message more or less but what I don't know is what effect this is likely to have on the price, i.e., its still going to be running and has a good track record but will this information have any positive or negative effect, what is the most likely effect of this news?

Here is the email I received:-

Dear Client,

We are writing to let you know about important changes affecting a fund that you may hold on our Funds Market.

What is happening?

The Fund Managers of the Cazenove UK Smaller Companies fund have decided to put the fund into 'soft closure' as of 22 January 2014. We will not be able to accept any investments after 10am on that day.

What is meant by 'soft closure'?
Soft closure is a state that Fund Managers apply to their funds when they decide that they have grown too large and they need to have better control over their ongoing growth
It means that the Fund Manager is either closing the fund to further investments or making a charge on investments, as a means of trying to reduce the amount being bought
It does not mean that the fund is being liquidated or closed down. Your assets remain fully invested.
What does this mean for you if you hold this fund?
It means that you will no longer be able to make further investments into the fund
You can continue to hold the fund in your portfolio for as long as you choose
The Fund Manager will carry on managing the fund and you will still be able see it in your portfolio
The fund will continue to be priced and valued on a daily basis
You can sell either all or part of your holdings in the fund as normal.
What do you need to do next?

There is nothing that you need to do, however, you should be aware that:
The fund will no longer be included on our Funds Market and will not be available for dealing online, so please call us to place any deal instructions
If your account charges are currently waived due to holding only funds from our Funds Market this will be unaffected by this change
If the closure of this fund means that you need to find a new fund for future investments then our funds research centre and fund factsheet search are tools available to point you in the right direction.

Can anybody give me some idea what to expect, should I be getting out of this or stay put, or even invest a bit more (it looks like the terms of "soft closure" only prevents new investor investing but allow existing investors to still add to the original investment)?

Any advice or help appreciated.

westy22

Stay put - soft closing this fund is a good thing for existing investors as it will allow the manager (an excellent manager by the way) to manage the fund the way he thinks best without having to worry about where to invest surplus cash.

Lokolo

Pretty sure its going to hard close

http://www.moneymarketing.co.uk/news-and-analysis/investments/marriages-cazenove-uk-smaller-companies-fund-to-hard-close/2003481.article

Soft close would mean you could continue investing, but as it is going to hard close (according to this article), you will be unable to invest.

Schroders can choose to open it again at a lower date should there be some more outgoings.

ColdIron

I would agree with most of what the email says except the wording 'soft closure'. The fund is being hard closed, i.e. it will not be accepting any new investments even from existing holders in the fund, the wording of the email you received states this as well. Soft closed funds usually continue to accept investments but often place one form of restriction or another to discourage inflows

http://www.moneymarketing.co.uk/news-and-analysis/investments/marriages-cazenove-uk-smaller-companies-fund-to-hard-close/2003481.article

Some funds find it difficult to optimise performance once they become too large and this is especially true of Small Cos as by their very nature they either need to buy more shares than are available or have to take holdings in companies that they would not have done so but need to, to match inflows. I view this as a positive move and I will continue to keep my holding and top up a little before January

grizzly1911

You may find this interesting.

http://www.trustnet.com/News/478548/should-you-sell-out-of-a-fund-when-it-soft-closes/

Many smaller company sector funds have done extremely well and have suffered a large influx of funds as a consequence. The market is only so big and as the funds get bigger they need to look outside their focus which can lead to a call in performance.

How much of a fall and how this impacts relatives performance is open to question. Just needs to be kept under review.

I hold Cazenove SB, will continue to do so and monitor progress. ( Not a recommendation)

happyhero

Cheers guys all very helpful, so the change in this funds status seems to be fairly positive and seems to encorage maybe a little more investment if I read you all correctly.

Are any of you going to add to it if you have it, double your holding etc?

A little bit annoying I can't sell it online after 22nd Jan but having to phone up to sell is not that terrible anyway, and keeping it seems more likely anyway plus things could change anyway.

Does anyone know it sounds a bit like it may not be possible to view it within the broker site I bought it through is this correct or am I interpreting that incorrectly, i.e. will I still be able to view it even though I cannot trade it online?

Also probably a silly question but I presume I should shortly expect a similar message from Hargreaves Lansdown as the have not mentioned anything to me yet?

ColdIron

happyhero wrote: »

Also probably a silly question but I presume I should shortly expect a similar message from Hargreaves Lansdown as the have not mentioned anything to me yet?

I heard of the closure a fair time ago and I was expecting something from HL regarding this but nothing so far. No mention of it on the site either and it still remains within the Wealth 150 which is a little at odds with the impending change of state. I have no idea why

A_Flock_Of_Sheep

Small Companies Dividend Trust is still trading at a discount. I have held this out of ISA sins April but have purchased some in ISA yesterday.

A_Flock_Of_Sheep

I'm wondering if I'm the only holder of SDV here

grizzly1911

happyhero wrote: »

Cheers guys all very helpful, so the change in this funds status seems to be fairly positive and seems to encorage maybe a little more investment if I read you all correctly.

Are any of you going to add to it if you have it, double your holding etc?

A little bit annoying I can't sell it online after 22nd Jan but having to phone up to sell is not that terrible anyway, and keeping it seems more likely anyway plus things could change anyway.

Does anyone know it sounds a bit like it may not be possible to view it within the broker site I bought it through is this correct or am I interpreting that incorrectly, i.e. will I still be able to view it even though I cannot trade it online?

Also probably a silly question but I presume I should shortly expect a similar message from Hargreaves Lansdown as the have not mentioned anything to me yet?

The email says;-

The Fund Manager will carry on managing the fund and you will still be able see it in your portfolio
The fund will continue to be priced and valued on a daily basis
You can sell either all or part of your holdings in the fund as normal.
What do you need to do next?

Can't see the phone/online dealing issue posing any problems.

I hold it and haven't received anything direct form my platform yet. Expected it to be closed before the end of the year. I have increased holding recently as a result.

pip895

There is some evidence that funds do less well once soft closed - this article is quite an interesting read.


http://www.trustnet.com/News/478548/should-you-sell-out-of-a-fund-when-it-soft-closes/