Woodford Concerns

thelawnet

btw, it seems the Income & Growth Trust is down 0.2%, but the underlying assets excluding Woodford are up 0.74%

https://www.hl.co.uk/funds/fund-discounts,-prices--and--factsheets/search-results/h/hl-multi-manager-income-and-growth-trust-accumulation/fund-analysis

by my calculations, that suggests they have marked Woodford down by ~6.7% (officially it's down 0.71% https://www.hl.co.uk/funds/fund-discounts,-prices--and--factsheets/search-results/l/lf-woodford-equity-income-accumulation).

of course I don't fully understand how they price these things, because it's funds on top of funds, and it says 'Prices as at 4 June 2019', so it could be there are different day's price movements in the FoF as against the price movements on the individual holdings?

TheTracker

Saw the news. Thought of you all. Goodness me, I bet you all sold high?

fun4everyone

Statement from Neil via youtube

https://www.youtube.com/watch?v=2-jlRsbbF0k

https://www.youtube.com/watch?v=2-jlRsbbF0k

talexuser

The Mail's spin, quote:

"Anyone planning to use the money - for anything like deposit for a house, building work, a holiday or wedding will be forced to wait or find the cash elsewhere."

Never knew stock market funds were equivalent to an easy access Building Society!

Malthusian

londoninvestor wrote: »

Yes - and getting onto a bit of a tangent here - the case for investing in active funds can't only be "look at these funds that have beaten the market". It has to be "look at this robust process which, without the benefit of hindsight, reliably picks funds that will beat the market".

Which does not exist.

Or rather there is no evidence for its existence whatsoever, despite fifty years of searching for the Holy Grail of the asset management industry. Which is the same thing.

westernpromise wrote: »

That's an interesting point. Over most 17-year periods there would be growth, so in fact, there might be more than 33% clear winners each year because just by being in the market at all some gain is likely.

In the context of the "star fund manager" v "lucky rat" discussion, being a winner means outperforming the market, not just generating a positive return.

masonic

arnoldy wrote: »

Very clear thanks. But that does now mean the Hargreaves MM funds are now 25% exposed to WEI? In fact HL are now almost doing what they accused Woodford of doing Ie holding untradeable and illiquid holdings - in this case WEI?

No it does not (and my illustration had WEI rounded up to 20%, not 25%, and purely to make the maths simple). It holds whatever percentage the relevant fact sheet says it holds. I was just illustrating the loss suffered by remaining investors when a fund sells units based on a price agreed between the FCA and HL that is artificially inflated.

thelawnet wrote: »

unnecessary.

It might be unnecessary for you, because you understand that existing investors are getting stitched up if HL did not use the published valuation of the Woodford fund and instead used a higher price cooked up between HL and the FCA - as was being discussed in the preceding discussion.

It was necessary to explain this point to others, however.

It's easy to see that the lion's share of the potential saving comes from selling the MM funds with the Woodford fund priced at the suspended value (as against the true NAV it will be repriced at at some point in the future) rather than the saving on the loss of capital from the outflows (though I think there will be further costs to reflect transactional costs from the outflows).

I presume though these things take several days to sell, that HL won't be able to delay settlement till they reprice at some lower price factoring in the real cost.

No, the published price of the MM fund on Tuesday is the price people who sold on Tuesday before the cut-off will get for their units. The MM funds are not suspended so those who sold yesterday will already have contract notes with a price that's higher than it should be. There's no guarantee that people who sell today will achieve the same feat, but it is a distinct possibility based on the comments by dividendhero that started this avenue of discussion.

Anyway, with most of the funds having such large stakes, selling now at potentially 2 or 3% above real value, seems like almost as much of a no-brainers as not buying these expensive fund-of-funds in the first place....

Absolutely, and that's a point I made several posts ago, before explaining to those who didn't understand why this was a bad thing for remaining investors in a subsequent post that you deemed "unnecessary".

I'm not suggesting that there will be significant outflows from the fund either, as I do not underestimate HL's marketing machine. If there are net inflows into the fund, then this will enrich the fund to the detriment of those new investors. A point I also made several posts ago.

masonic

thelawnet wrote: »

btw, it seems the Income & Growth Trust is down 0.2%, but the underlying assets excluding Woodford are up 0.74%

https://www.hl.co.uk/funds/fund-discounts,-prices--and--factsheets/search-results/h/hl-multi-manager-income-and-growth-trust-accumulation/fund-analysis

by my calculations, that suggests they have marked Woodford down by ~6.7% (officially it's down 0.71% https://www.hl.co.uk/funds/fund-discounts,-prices--and--factsheets/search-results/l/lf-woodford-equity-income-accumulation).

of course I don't fully understand how they price these things, because it's funds on top of funds, and it says 'Prices as at 4 June 2019', so it could be there are different day's price movements in the FoF as against the price movements on the individual holdings?

The valuation point of the I&G MM fund is 11:00, whereas most of the constituents are valued at 12:00. So the Tuesday price of the MM fund uses the Monday 12:00 valuations of the constituents. So the rise of several of the constituents on Tuesday is not yet reflected in the valuation of the MM fund.

The Wednesday price will use the Tuesday 12:00 figures. The question is whether this price will be calculated using the published value for WEIF (noted as being 'indicative' as nobody can use it to buy or sell), or a different price agreed between the FCA and HL as suggested by dividendhero based on memory of an FT article. If the latter, it will be interesting to see if this is a higher price or a lower price.

Retired_Minky

A bit off topic but I’d like your advice on this.

Seeing what’s happened here with a single fund has got me worried about my own situation.

I’m 100% invested my pension in the Vanguard Life Strategy 80 fund.

Should I move my money to multiple funds to avoid a similar situation. If so how many funds do you recommend?

I’m not an active investor. I just want to put the money somewhere and forget about it. Looking to drawdown from the pension in about 10 years. Happy with a slightly higher than normal risk as I have a separate income from property portfolio that will supplement whatever I get from my pension.

Any advice from those more in the know appreciated.

Lokolo

Retired_Minky wrote: »

A bit off topic but I’d like your advice on this.

Seeing what’s happened here with a single fund has got me worried about my own situation.

I’m 100% invested my pension in the Vanguard Life Strategy 80 fund.

Should I move my money to multiple funds to avoid a similar situation. If so how many funds do you recommend?

I’m not an active investor. I just want to put the money somewhere and forget about it. Looking to drawdown from the pension in about 10 years. Happy with a slightly higher than normal risk as I have a separate income from property portfolio that will supplement whatever I get from my pension.

Any advice from those more in the know appreciated.

You have to remember this is a rare scenario

- The fund invests a lot of money in illiquid assets (private companies)
- There were large withdrawals in a short space of times
- It's a small fund

It's a similar scenario that happened at Northern Rock where there were a large number of cash withdrawals over a short space. It's unexpected and they hadn't anticipated it.

Funds like life strategy do not hold a lot of illiquid assets. So redemptions will almost always be met unless there is huge withdrawals. With someone like Vanguard if this happens there are issues

A risk team for a fund manager will hold details on funds liquidity (i.e. how much of a fund could be sold within 1/2/5/10/20 days) for these scenario. They have to stay within limits (I don't know what the regulations are though).

gadgetmind

The equities in Life Strategy are certainly liquid, but flogging a lot of bonds in a hurry is less easy. But as you say, the problems would be *far* bigger were passives to see large withdrawals.