New Woodford Fund

redbuzzard

I'll stick with my order as above. Woodford holding some cash just now doesn't worry me, and I believe he has the will to do that if he can't see the value to invest in. And I expect him to know the right timing better than I do. It's between 5 and 6% of my ISA money, a good slice of which I regard as 10 year+ investment.

My question to myself is, what else am I going to invest in that isn't just correlated with the risks I already own?

mike88

I have seen many posts on various sites and in the newspapers about the comparison with Bolton. Bolton was investing in a completely new area for him - China - so was totally inexperienced in operating in that market. By inexperienced I mean he had no experience. Conversely Woodford has been dabbling in micro companies for years and of course his new fund will hold shares in companies with which he is very familiar in the short term. The major fear here is that I am investing at the height of the market which is a tactic I do not usually use.

I too am very doubtful about the increase in size of this launch but have decided to stick with it as I intend holding it for the long term. Initially I thought it would go to a premium after day 1 but now there is little, if any, chance. Of course I hope I'm wrong.

steelbru

Just cancelled my order, hopefully pick some up next week at a discount

Porcupine

Do we know if the offering will be exactly £800m, or 'up to'? So if there's £600m of investors' cash on the table, they'll issue enough units to be valued at £600m, or they'll offer units with £800m face value and immediately discount them to £600m (instant 25% discount)?

If the latter, does it actually matter? If I buy £1000 of units won't I own 1/600,000 of the fund (total value £600m, my bit £1000) even if my holding is hypothetically labelled as £1333?

Surely money in = money out?

redbuzzard

mike88 wrote: »

The major fear here is that I am investing at the height of the market which is a tactic I do not usually use.

I am very mindful of that too, and as I implied above I see it as a reason to invest in this sort of fund as opposed to a mainstream equity or bond investments, even though volatility be be high.

But I could be rationalising an emotional decision - always a risk!

steelbru

I was assuming it was the "up to" £800m scenario, had not even considered that it would be £800m face vale and an immediate discount

masonic

steelbru wrote: »

Just cancelled my order, hopefully pick some up next week at a discount

Seems a lot of people are taking this view and will be looking to buy shortly after launch. So are there enough people left who plan to sell immediately after launch to meet this demand for shares?

Personally, I'm not going to gamble on picking these up at a discount on the open market. Perhaps a slightly better price is possible, but a few percent shaved off the price now will not be material in 10-20 years time.

bowlhead99

Porcupine wrote: »

Do we know if the offering will be exactly £800m, or 'up to'? So if there's £600m of investors' cash on the table, they'll issue enough units to be valued at £600m, or they'll offer units with £800m face value and immediately discount them to £600m (instant 25% discount)?

If the latter, does it actually matter? If I buy £1000 of units won't I own 1/600,000 of the fund (total value £600m, my bit £1000) even if my holding is hypothetically labelled as £1333?

Surely money in = money out?

They will issue as many shares as they have demand for, at 100p each, subject to an overall £800m fundraising cap.

If there is £600m of cash on the table, and the shares are being issued at the known and agreed price of £1 each, the number of shares in issue will be 600 million. If there is enough demand, 800 million shares will be issued instead, raising more actual money for the company's bank account.

But let's assume the amount raised was £600 million total. If you asked for 6000 shares for £6000 and don't get scaled back, you will own one hundred-thousandth of the company.

After they pay their issue costs of perhaps £3 million, the company will have £597 million in the bank. Each of the 600 million shares in issue will represent 99.5p of actual asset value. Your 6000 shares will still be one hundred-thousandth of the company and will represent £5970 of asset value.

As you say: money in, money out. At least I think that's what you meant.

Of course, what someone is willing to pay you for those shares may be nearer £5900 or £6100. Once the company is listed on the stock exchange, the cash shell which is going to try to go and buy a portfolio of assets broadly as outlined in the prospectus, is going to have a market value which fluctuates every minute of every day and may be quite divorced from the value of the underlying assets that the company holds which the shares represent, or what money might be available if the company were to be wound up and its assets sold.

As a side note the shares being issued have a nominal value of a penny each, so that is what will be printed on the share certificates, so that technically the company only has £6 million or maybe up to £8 million of value of "share capital" - but that is just an accounting / legal point which bears no relation to what you paid or the current value of those shares.

steelbru wrote: »

I was assuming it was the "up to" £800m scenario, had not even considered that it would be £800m face vale and an immediate discount

The issue price is known. They will only issue 800 million shares if there is demand for it. It will only move to a discount if lots of the people who bought 800m at launch suddenly decide they don't want them. Which could happen for various reasons. But no, they are not issuing a high face and immediate discount. In fact as mentioned they are issuing a low face, 1p, and a 99p premium to face, but a nil premium to actual cash raised, and a small premium to the net assets the company will have after it's paid its fundraising/ share issue costs.

brasso

I'm aiming to have roughly half this year's ISA allowance in this fund at the outset so I've applied for slightly more than that as I think I may be scaled back.

The fund checks a few boxes for me:

- I like the charging structure. I have no objections to handing over higher-than-usual fees as long as I'm getting better-than-usual returns.

- The focus of the fund offers the strong possibility of high growth. Higher risk too, obviously, but I'm comfortable with that trade-off. I'll be in no hurry to sell off the fund.

- Woodford himself. Inevitably there is sentiment involved here, given his track record. Not entirely logical, but total logic isn't an essential ingredient of my decisions. In a cut-throat environment, trust is all important, and I trust Woodford to do the right thing.

The expansion to £800m may be a negative for some but again, I trust Woodford to do the right thing. I don't think there's any chance of him making wild decisions simply because he has more money to play with.

I've read quite a few comments about short-term trading possibilities on this fund. Several people seem to have weighed up their decision based on how the price will change immediately after launch. This strikes me as dangerous thinking.

Looks like a classic buy-and-hold to me.

redbuzzard

brasso wrote: »

I'm aiming to have roughly half this year's ISA allowance in this fund at the outset so I've applied for slightly more than that as I think I may be scaled back.

The fund checks a few boxes for me:

- I like the charging structure.

Which is a fair one - the manager is compensated for the closed-ended nature of the fund - he cannot make more money from additional subscriptions, only from higher returns; which should be easier to achieve, especially with the intended focus, than with a fund whose growth through subscriptions is likely to dilute the kind of opportunities this trust is intended for.

The focus is ideally suited to an IT.

- The focus of the fund offers the strong possibility of high growth.

the more so for being closed ended, as above.

- Woodford himself. Inevitably there is sentiment involved here, given his track record. Not entirely logical, but total logic isn't an essential ingredient of my decisions. In a cut-throat environment, trust is all important, and I trust Woodford to do the right thing.

Nothing wrong with that - if you aren't going to make a judgement about the managers, you should hold market trackers

The expansion to £800m may be a negative for some but again, I trust Woodford to do the right thing. I don't think there's any chance of him making wild decisions simply because he has more money to play with.

agreed and agreed.

I've read quite a few comments about short-term trading possibilities on this fund. Several people seem to have weighed up their decision based on how the price will change immediately after launch. This strikes me as dangerous thinking.

Looks like a classic buy-and-hold to me.

Yes...there is an element of a gamble in the timing for me, i.e. whether to apply for the issue or expect a discount and save a bit of cash...but I am not thinking to stag it, regardless.

I expect volatility. It could be hit hard in a bear market by the double whammy of the vulnerability of quoted investments not underpinned by income, and a negative swing in the price to NAV. We might not know how good an investment this is until this point in the next cycle.

I'm fully expecting to hold this for ten years or more, if spared.