Woodford Concerns

masonic

arnoldy wrote: »

How can the HL 'Fund of Funds' keep trading? They have huge positions in Woodford and the value of the Woodford funds is unknown - the required fire sale will be painful. So sellers now of the HL funds will take an unfair slice of the fund if its based on the last price for Woodford Equity Income at suspension? Surely the regulator has to get involved? Its going to take years to regain trust in HL. An immediate and fullsome apology would be the start of that long road to redemption and rehabilitation.

The value of the Woodford funds is no less known now than it has ever been. WEIF is valued based on its assets only, so the fact trading is suspended is not relevant - its underlying holdings will rise and fall in value, leading to a consequent rise or fall in the fund, just as previously. WPCT on the other hand is valued by the market, but is still trading.

The HL funds of funds can continue trading by holding their position in WEIF and buying/selling their other constituents to meet net inflows and outflows. This will alter their composition to some degree, but I wouldn't be surprised if these funds experience net inflows of cash, thereby diluting Woodford, which is not exactly a bad thing (edit: from the perspective of existing investors - I wouldn't be thrilled about buying into a share of this train wreck, but I doubt many people who use these funds would realise this was a consequence).

dividendhero

Looking at todays pricing for HL's "funds of funds" that include WEI, the price is hardly affected - it suggests that HL is valuing the WEI fund at near par to the the pre-suspension price.

redux

arnoldy wrote: »

Well HL have come out of this tarnished and up to their neck in this sordid mess. Why did they put it on wealth 50? Why did they get themselves so pregnant with their own find of funds investing in W E I? Conflict of interest if ever there was one. Sorry I'm trusting AJBell over HL after this cats cradle of concerns. As ever regulator has disappeared off pitch and won't slap HL/Woodford wrist.

Despite having an account at HL, from a couple of invesrment trust savings scheme closing and transferring there (history repeating now), I've never taken any notice of HL's Wealth 50, and a couple of reported comments by Terry Smith that he refused to offer commission to buy his way on to it only convinced me I was right.

Going back a few years, I can think of a mobile phones forum where some spammer wanted to recommend his affiliate referral site 'independently' reviewing global roaming SIM cards. Spammer banned from forum in short measure. Not long later one firm's proprietor told me privately the bloke wanted several thousand quid for a decent review.

arnoldy

dividendhero wrote: »

Looking at todays pricing for HL's "funds of funds" that include WEI, the price is hardly affected - it suggests that HL is valuing the WEI fund at near par to the the pre-suspension price.

In which case I would sell out now of HL fund of funds - the value of their Woodford Equity Income holding is hardly likely to go up with the approaching fire sale of the Woodford Assets. Remember Woodford holds such large positions in companies the sale will move the market.

The value of the ssets in WEI is Not the same as it was at the point of suspension because of the approaching fire sale. The short sellers are already out sensing money to be made here.

masonic

dividendhero wrote: »

Looking at todays pricing for HL's "funds of funds" that include WEI, the price is hardly affected - it suggests that HL is valuing the WEI fund at near par to the the pre-suspension price.

Hmm, it looks like they are going on Friday's valuation, so even the Kier profit warning has not yet been priced into the MM funds. Great opportunity for people to exit as arnoldy points out. Who knows when WEIF will be revalued and factored into the MM funds prices.

manysaver

The HL Equity Income fund of fund is nice work if you can get it, 0.75% fees to dump some money in 9 funds. More than the actual fund managers get for managing the funds. £60+ million a year across their various products.

Another 0.45% to HL on top of that of course to hold the funds.

londoninvestor

dividendhero wrote: »

Looking at todays pricing for HL's "funds of funds" that include WEI, the price is hardly affected - it suggests that HL is valuing the WEI fund at near par to the the pre-suspension price.

The fund accountant is still publishing prices, although stating they're indicative:
http://www.linkfundsolutions.co.uk/541.cshtml

e.g. the Z Acc shares are 97.51p for 4th June compared to 100.89p on 31st May before the suspension.

All HL can really do is use that price when valuing their MM funds.

As you say though, it's difficult to accurately price the fund when you have holdings which will be moved downwards by a distressed sale, but they're illiquid so it's difficult to gauge the effect until the sale actually happens...

londoninvestor

londoninvestor wrote: »

All HL can really do is use that price when valuing their MM funds.

I should add here that HL can apply a dilution adjustment to the price - that's allowed in an OEIC, and should be seriously considered if they see significant outflows from the MM funds.

fun4everyone

londoninvestor wrote: »

The fund accountant is still publishing prices, although stating they're indicative:
http://www.linkfundsolutions.co.uk/541.cshtml

Thanks for that, good information. C class accumulation units down 3% since the freeze :eek:

dividendhero

masonic wrote: »

Hmm, it looks like they are going on Friday's valuation, so even the Kier profit warning has not yet been priced into the MM funds. Great opportunity for people to exit as arnoldy points out. Who knows when WEIF will be revalued and factored into the MM funds prices.

I'm sure I read it on my mobile on the FT website, so can't find the link. but here goes

My understanding is that second tier holders of Woodford such as HL would today agree a price with the FCA which they would use as a benchmark to value funds of funds. If so it looks like the agreed price is pretty close to the the pre-suspension price of Woodford. I guess HL can afford to take the hit, especially if they take a charge over assets held by Woodford which they can sell pretty much whenever they like