Woodford Concerns

bowlhead99

littlecub wrote: »

I have been watching this from a distance almost burying my head in the sand

littlecub wrote: »

. The news today confirming my payout has undone all my efforts from the last 15 years 10 times over.

The indicative NAV of the fund has been published every day and it was known for quite a long time that some of the assets within the NAV will take longer to be turned into cash, if at all. So, to be blunt, you shouldn't have put your head in the sand and expected to get all your initial investment back because that was never going to happen.

They are saying they will immediately pay out 74% of the most recent published value. They will make more payments over the coming years. So you have some money now and you'll likely have some more (a smaller amount) to come in the future.

In the past few hours I have listed so of my prize possessions for sale (from my hobbies etc), I feel like I owe it to myself to fill the void what I have lost i'm almost crying.

While it's not at all pleasant to realise that you've lost a bunch of money, gathering up your possessions and trying to flog them off (probably for less than they are worth to you) just seems self destructive. Don't punish yourself - it's not healthy.

Maybe your losses mean that you will have to cut back on some things you would have been buying in the future if you had eventually sold your shares in the fund in a decade's time at a nice profit instead of a loss. But investments are for the long term - presumably you had not initially bought your shares in the fund expecting to cash out your investment in the fund and use it to pay for your barest living expenses in 2020.

There is a lesson to be learned, certainly, but it seems it might be better to take a deep breath and relax, rather than rush to sell things to 'replace' the fund profits that you eventually hoped to make.

Do you think any of the future sales from the funds will amount to much?

On the face of it, the value of assets that they are not distributing as cash right now is about a third of the amount they are distributing.

So take the figure you'll be getting paid now and divide by 3, and that's probably the very most you could reasonably expect, and would be optimistic You might eventually get between 5 and 50% of that. Or you might get lucky and get more than 50% of it.

littlecub

bowlhead99 wrote: »

The indicative NAV of the fund has been published every day and it was known for quite a long time that some of the assets within the NAV will take longer to be turned into cash, if at all. So, to be blunt, you shouldn't have put your head in the sand and expected to get all your initial investment back because that was never going to happen.

They are saying they will immediately pay out 74% of the most recent published value. They will make more payments over the coming years. So you have some money now and you'll likely have some more (a smaller amount) to come in the future.


While it's not at all pleasant to realise that you've lost a bunch of money, gathering up your possessions and trying to flog them off (probably for less than they are worth to you) just seems self destructive. Don't punish yourself - it's not healthy.

Maybe your losses mean that you will have to cut back on some things you would have been buying in the future if you had eventually sold your shares in the fund in a decade's time at a nice profit instead of a loss. But investments are for the long term - presumably you had not initially bought your shares in the fund expecting to cash out your investment in the fund and use it to pay for your barest living expenses in 2020.

There is a lesson to be learned, certainly, but it seems it might be better to take a deep breath and relax, rather than rush to sell things to 'replace' the fund profits that you eventually hoped to make.


On the face of it, the value of assets that they are not distributing as cash right now is about a third of the amount they are distributing.

So take the figure you'll be getting paid now and divide by 3, and that's probably the very most you could reasonably expect, and would be optimistic You might eventually get between 5 and 50% of that. Or you might get lucky and get more than 50% of it.

Do you think any of the future sales from the funds will amount to much?

[/QUOTE]

Well I was aware I could follow the latest news since the fund was halted but really it just made me sick with worry, and please dont suggest I was expecting it all back, I never claimed that.

I feel like the gravity of it perhaps cant be understood by some people on here who are talking about multiple funds, various assets etc, this has reset me years and years.

Thank you for your kind words though, I do feel like I'm at risk of a knee jerk reaction that I will regret.

SonOf

I feel like the gravity of it perhaps cant be understood by some people on here who are talking about multiple funds, various assets etc, this has reset me years and years.

We don't know your portfolio. If you built your portfolio correctly then it shouldn't really be any more than 20-25% of your overall portfolio. So, the loss relative to your portfolio shouldn't be much more than a minor setback. Indeed, the rest of your portfolio could well have more than made up for it. It's a setback but it shouldn't be a large one costing you years.

If you built your portfolio badly. Such as investing 100% into a fund not designed for that purpose, then it would hurt. However, a large stock market crash (of the level since twice in the last 20 years) would have given a similar outcome. So, the level of loss was always possible with this fund, even though how it managed it was unexpected.

Nobody likes an event like this. However, some of the stories you read in the media do not have the full context and focus just on this fund and not the rest of the portfolio held. There was one i recall where he was saying he has lost £20k. However, it quickly brushed by the bit where it was something like 10% of his overall portfolio and the rest of it would have grown by more than his loss.

masonic

littlecub wrote: »

I feel like the gravity of it perhaps cant be understood by some people on here who are talking about multiple funds, various assets etc, this has reset me years and years.

Even those of us who are investing in multiple funds and various assets have to accept that at times we will experience significant setbacks. I've seen my investments fall in value by over 30% and that's not the worst that could happen.

Thank you for your kind words though, I do feel like I'm at risk of a knee jerk reaction that I will regret.

The other knee jerk reaction you might regret is to allow this experience to make you believe that investing is a mugs game and never take any risk with your money again. That's a common reaction of those who have invested in something they didn't fully understand, not appreciating the potential for loss. While these circumstances are very unusual, the outcome is not. This is a good opportunity to re-evaluate and make a better plan for the future.

newatc

QUOTE from Littlecub.

Well I was aware I could follow the latest news since the fund was halted but really it just made me sick with worry, and please dont suggest I was expecting it all back, I never claimed that.

I feel like the gravity of it perhaps cant be understood by some people on here who are talking about multiple funds, various assets etc, this has reset me years and years.

Thank you for your kind words though, I do feel like I'm at risk of a knee jerk reaction that I will regret.

---

Sorry for your loss. I made a significant loss back in early 2000s after following IFA's advice and it hurt greatly (though eventually won some back in compensation). I know how your feel.

The great thing about this board is there a lot of knowledgeable people on here, and I've certainly feel I've learnt a lot from the board, but don't let their expertise make you fall in to the trap of thinking you are alone in being DIY investor without a balanced portfolio (by the way my professionally advised investments referred to above, I now know were miles away from being balanced). I would guess there are many out there who have badly affected by the Woodford fiasco.

There are many threads on this board about building a portfolio which are worth reading in going forward from here. Hopefully in 10 years time the loss will be seen as a minor hiccup on your investment path.

jimjames

littlecub wrote: »

I know its only money and I hope I can recover, but I just feel so so guilty for being stupid, I dont know why I thought this couldn't have happened I feel like I should have foreseen it.

I don't think a lot of people could foresee it. I invested, I've been investing for over 25 years and still got caught out. It's only a very small part of my portfolio but it still hurts to have any loss like this but essentially you can invest the money in something else to grow. It would be little different to funds dropping in value and waiting for them to rise. The only difference this time is that the loss has been crystallised for you.

ColdIron

Payment per unit class for those interested
https://citywire.co.uk/wealth-manager/news/trapped-woodford-investors-to-receive-74-of-their-cash-this-week/a1317635?

What is exercising me is how to account for this from a CGT point of view. I know how many units I have and their weighted average cost but after the distribution, a capital repayment, I assume I will still own the same number of units. How to establish the gain or, likely, loss?

bowlhead99

ColdIron wrote: »

What is exercising me is how to account for this from a CGT point of view. I know how many units I have and their weighted average cost but after the distribution, a capital repayment, I assume I will still own the same number of units. How to establish the gain or, likely, loss?

Given the amounts currently being distributed will be less than anyone has spent on their shares, there are 2 potential choices for handling a capital distribution:

a) The 'proper' way is: do a partial disposal calculation.

You will still have all your shares and won't have disposed of any of them, so you can't do a normal part disposal calculation and allocate your overall cost of investment over the number of shares that you have sold and not sold. Instead you would just look at the value distributed now by way of capital distribution, as a fraction of the total value. https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg57826

So if your capital distribution is £A per share and the value of the shares immediately after the distribution has been taken off them is £B per share, you would apportion your costs of buying the shares among A and B, and then compare the proceeds A with the cost of that A portion. The portion of the shares that you're deemed to have disposed of is A / (A+B).

For example if ZAcc shares are somewhere around 79 to 80p now, and they are distributing 59p leaving 21p in the next valuation.... the original purchase costs that you should apportion to your 59p proceeds would be 59/(21+59)ths of the total purchase costs. That would create a loss on 30 Jan or whenever the distribution happens.

b) Alternative: If it's a small amount, knock it off your costs

If the capital distribution is both small and less than your 'allowable expenditure' on all the shares which are providing you the distribution, you can use a simple approach - simply deduct the total value of capital being returned to you, fom that allowable expenditure (i.e. the amount you had paid for all he shares) rather than treating it as a part disposal. https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg57835.

In that way, you would not consider that you had any 'disposal proceeds'; you still have all the shares, and you would just knock it off the cost of those shares, meaning that the shares you're still holding have a lower carrying cost. Then then when you eventually get the rest of the liquidation proceeds you would compare those proceeds to your lowered cost.

Usually, 'small' means <5% of the current value, which the forthcoming distribution from Link will not be (it's more like 70%+ based on the latest published value), but the Inland Revenue clarified in Tax Bulletin 27 (February 1997)in an interpretation note: 'meaning of "small" in...' that to reduce their having to deal with excessive delays or expenses in trivially small cases they would generally consider any receipt of <£3000 as being 'small', even if it was more than 5%. If you need a reference for this you could find it at the national archives https://webarchive.nationalarchives.gov.uk/20110617054707/http://www.hmrc.gov.uk///bulletins/tb27.htm and it is also referenced in the CG manual used by HMRC workers at https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg57836

So, someone receiving less than £3k as part of this first distribution might decide they would like to follow that treatment, simply knocking it off their purchase cost to carry forward, and not worry about doing a computation for CGT as if it were a partial disposal. But even if it is small in the sense of being under £3k, you can do a proper partial disposal calculation if you want.

If the amount is under £3k you'll therefore have a choice.

Some people might prefer to do it as a partial disposal because then they will get a bit of a loss this tax year which might be useful to offset other gains they have in 2019/20, saving them some CGT. as soon as possible. However if you don't have any gains this year (or all your gains this year are covered by your annual exemption anyway) you may prefer not to bother recognising any loss this year. Just say that the proceeds reduced your cost, and carry forward that reduced cost until you get the rest of the liquidation proceeds. In that way, the full actual loss will be recognised whenever you get the rest of the proceeds. But that optional simplified treatment is only available if the amount of capital distribution you're getting now is below the £3k guideline, unless you can successfully argue otherwise.

ChesterDog

jimjames wrote: »

I don't think a lot of people could foresee it. I invested, I've been investing for over 25 years and still got caught out.

Jim, I'm surprised to see you getting caught out. I've always felt you and I are very much on the same wavelength.

I invested in the Woodford OEIC initially (as did a friend to whom I suggested it), but as time passed, I became concerned enough to pull out well before the crisis hit. I twisted my friend's arm to do likewise even though - as he pointed out at the time - I had always told him investment is for the long term and you shouldn't chop and change. But this was a special case...

The fund got chucked out of the Equity Income sector - bad sign.

There was a high level of small, unlisted, high-risk companies in it, and the proportion of these grew and grew - bad sign.

Increasingly, the holdings didn't reflect his previous successful funds - bad sign.

There were big problems with individual holdings within it (Capita, Provident, Industrial Heat...) - bad sign.

The performance, initially good, fell away - bad sign.

Woodford started to rule-bend and wriggle the regs (Guernsey listings) - bad sign.

Withdrawals from the fund sucked further value from it - bad sign.

Woodford - the high-hubris, high-conviction, dedicatedly contrarian investor - found himself issuing contrite apologies to his investors, while also blaming them for the poor performance by pulling their money out - bad sign.

Etc, etc, etc.

So I am curious: what made you hang on?

tigerspill

ColdIron wrote: »

Payment per unit class for those interested
https://citywire.co.uk/wealth-manager/news/trapped-woodford-investors-to-receive-74-of-their-cash-this-week/a1317635?

So the fund I have is called "Link Fund Sol Ltd LF Equity Income C GBP ACC" (held with CSD)
Is this the same as "C Sterling Accumulation" detailed in the table in the article linked above