Woodford Concerns

Malthusian

Reaper wrote: »

I have a suspicion this might be what he is doing. If the market knew a large fund was selling everything off it would depress the value further. By pretending he is only doing a limited sell off he may get better prices.

If the market isn't already well aware that Woodford is selling everything off - when he eventually gives up the pretense and announces the wind up - it is even dumber than economists give it credit for.

If he gets better prices on behalf of investors who cash out during this "temporary closure" than for those who get cashed out during the subsequent windup, then investors who got out earlier have profited at the expense of those who were too slow. Especially if the wind-up fails to realise the fund's remaining assets at the prices Crapita gave them when the first lot of investors cashed out.

WillGates

Looks like he's just sold the holding in Stobart Group (STOB).
Then the price pops 10 pence!

HardCoreProgrammer

I thought the price was dropping well before Woodford fund was closed?

https://www.proactiveinvestors.co.uk/LON:STOB/Stobart-Group-Ltd/shares/

Meanwhile, share price of Hargreaves Lansdown has been ticking up steadily over the last week. Looks like they are trying to act as if nothing ever happened.

Thrugelmir

Brian65 wrote: »

But then you could say the same for investment trusts that trade on a huge discount because the management has become a liability.

Discounts are in themselves an opportunity. Not a reflection of management per se.

AnotherJoe

Brian65 wrote: »

Yeah I think its pretty obvious that reopening the gates would create a stampede for the exit, so closing the fund and distributing the proceeds to investors would be the least worst option for investors. If Woodford won't do that the FCA should wake up and compel him to.
But then you could say the same for investment trusts that trade on a huge discount because the management has become a liability.
Problem is that when a fund closes the management loses face and stops getting its fees, so they want to keep it open.

The difference is, the IT investor has the ability to get out whenever they want. The structure of the Woodford fund is the issue, the funds holdings are much more suited to an IT where liquidity would not be an issue. Look at WPCT which at root is just as much a car crash as the fund but doesnt have these issues.

gadgetmind

HardCoreProgrammer wrote: »

Meanwhile, share price of Hargreaves Lansdown has been ticking up steadily over the last week. Looks like they are trying to act as if nothing ever happened.

Very short memories is what keeps active management in business.

Malthusian

AnotherJoe wrote: »

The difference is, the IT investor has the ability to get out whenever they want.

Fans of investment trusts never seem to answer the question of whether it is better to be able to sell today at a 33% discount than to wait a few weeks or months and not lose 33%.

Unless the mob are on your doorstep demanding you settle your gambling debts tomorrow the latter option is better, which is why open-ended funds are far more popular.

I am aware that there is a huge question mark over whether if, hypothetically, WPCT was an open-ended fund, its investors would get the published NAV. Commercial property funds during the post-referendum panic are a better example as the 30% discounts being applied to closed-ended UK commercial property funds back in July 2016 are now known to be hysterical.

A discount on a closed-ended fund may never narrow unless the fund winds up and returns NAV, which can't happen with an open-ended fund.

The structure of the Woodford fund is the issue, the funds holdings are much more suited to an IT where liquidity would not be an issue.

There I agree with you. There is too much illiquid crap in Woodford's fund and it has led to a material risk of those out of the door first profiting at the expense of those who get out later. That's not just my opinion, this is why there's a rule that you can only hold maximum 10% unlisted stocks in an OEIC.

Unfortunately the rule is effectively meaningless as there is no sanction for breaking it. The fund should have been put into administration by the FCA and wound up once it had exceeded the 10% limit and not rectified that position within 30 days. But easy to say that now.

Look at WPCT which at root is just as much a car crash as the fund but doesnt have these issues.

A 33% discount to NAV is quite a big issue for anyone who wants to get their money back.

Malthusian

Woodford commitment to transparency 'making a bad situation worse'

Short version: Woodford publishing his fund's entire holdings (presumably more frequently than almost all other funds do via Morningstar) is biting his investors on the bum because fund managers are looking at what he holds and then shorting it, knowing he's a forced seller.

Reaper

Malthusian wrote: »

Short version: Woodford publishing his fund's entire holdings (presumably more frequently than almost all other funds do via Morningstar) is biting his investors on the bum because fund managers are looking at what he holds and then shorting it, knowing he's a forced seller.

Interesting though that the short sellers may not be doing as well out of it as you would think. Once they realise Woodford is out they quickly need to buy the unlisted stocks themselves. Not being liquid that can be hard so the stocks have a rally making it expensive for them to unwind their position. It's much simpler shorting a liquid stock.

I wonder if that will help WPCT a bit.

AnotherJoe

Malthusian wrote: »

Fans of investment trusts never seem to answer the question of whether it is better to be able to sell today at a 33% discount than to wait a few weeks or months and not lose 33%.


They have the choice, compared to a gated fund


Unless the mob are on your doorstep demanding you settle your gambling debts tomorrow the latter option is better, which is why open-ended funds are far more popular.
Is it? Or is it just ignorance of all the different options of investment choice?


I am aware that there is a huge question mark over whether if, hypothetically, WPCT was an open-ended fund, its investors would get the published NAV. Commercial property funds during the post-referendum panic are a better example as the 30% discounts being applied to closed-ended UK commercial property funds back in July 2016 are now known to be hysterical.

A discount on a closed-ended fund may never narrow unless the fund winds up and returns NAV, which can't happen with an open-ended fund.

There I agree with you. There is too much illiquid crap in Woodford's fund and it has led to a material risk of those out of the door first profiting at the expense of those who get out later. That's not just my opinion, this is why there's a rule that you can only hold maximum 10% unlisted stocks in an OEIC.

Unfortunately the rule is effectively meaningless as there is no sanction for breaking it. The fund should have been put into administration by the FCA and wound up once it had exceeded the 10% limit and not rectified that position within 30 days. But easy to say that now.
Add in the Guernsey loophole to that. I wonder if they will close that now by publishing a list of specific stock markets that are allowed?


A 33% discount to NAV is quite a big issue for anyone who wants to get their money back.

I suspect there are plenty of holders who'd prefer to get out at that discount now rather than be in limbo for an indeterminate period.Or who might find that when they do get it back (either when the gate is released or the fund wound up) the NAV revalue means they are no better off than WPCT holders