Woodford Concerns

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

Reed_Richards

Is it really genuinely possible to short a stock that is unlisted or infrequently traded? Don't you have to find someone who owns the stock (not Woodford) who is prepared to loan it to you so you can sell it faster than Woodford can so you can buy it back from Woodford at less than you sold it for?

Linton

Reed_Richards wrote: »

Is it really genuinely possible to short a stock that is unlisted or infrequently traded? Don't you have to find someone who owns the stock (not Woodford) who is prepared to loan it to you so you can sell it faster than Woodford can so you can buy it back from Woodford at less than you sold it for?

Plus shorting only works if you know something, or believe you know something, that the rest of the world doesnt. So you would need to find a buyer of your borrowed unlisted/illiquid shares who doesnt know that Woodford is just down the street knocking on doors with a wheelbarrow full of them.

Malthusian

AnotherJoe wrote: »

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.

Not many. During the 2016 commercial property panic, Aberdeen offered to let investors out of their open-ended fund early at a 17% penalty, and most of them withdrew their withdrawal requests. (Despite this being lower than some closed-ended funds were subject to.)

Investors in funds which have closed to withdrawals due to a crisis are like cats miaowing to be let out during a rainstorm. As soon as you open the door they change their mind.

Very few people have a gambling debt to the mob that makes paying an avoidable 17% penalty worth it.

There is no ignorance going on - the difference between an open-ended and closed-ended fund is in the public domain. Aggrieved investors can do a WASPI if they like ("well nobody told me") but it doesn't change anything.

No doubt they would like to be offered the fund's last published unit price to get out tomorrow but that isn't going to happen. If you worked out what you could get for WEI's assets this very day and then offered investors their percentage, most of them would decide they'd rather wait for the orderly wind-up.

(Note: the penalty that would be necessary to allow WEI investors to cash out early is completely distinct from the eventual write-down of the assets, as the latter isn't avoidable.)

Scarpacci

Malthusian wrote: »

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.

This might ring more true if he didn't have so many > 5% stakes in companies that he would be forced to declare anyway, and declare again after any 1% trading movements.

If you exclude the unlisted companies, which nobody can short anyway, and those large stakes in smaller companies which he'd have to declare anyway, you're left with the bigger caps and the question whether any anti-Woodford movement could really shift the price. Was the price of AstraZeneca, back when he held it, really going to move on people trying to outmaneuver Woodford?

talexuser

Today's Questor in the Telegraph, reinforces his hold on HL shares.

Whether this is PR puff or not HL claims Woodford no longer appears in the top 30 enquiries to HLs help desk. So "loyalty" inertia maybe outweighs anger over the consistent Woodford recommend?

If true it's disappointing for the concept of competition - if I was trapped in the gate I would be looking hard at those intermediaries who put Woodford on their sell lists a year ago, and not pay HL any more fees on my total portfolio.