Woodford Fund

masonic

ffacoffipawb wrote: »

How do HL value the Woodford Equity Income fund for encashing their MM funds. Does WEIF still have a daily price even though it cannot be traded?

Yes, it is still being valued and the relevant fund house (Link Fund Solutions) is publishing the NAV.

Aretnap

ffacoffipawb wrote: »

How do HL value the Woodford Equity Income fund for encashing their MM funds. Does WEIF still have a daily price even though it cannot be traded?

Yes, there's still a daily price based on the (measurable) prices of the listed assets and the (somewhat subjective) valuations if the unwlisted ones. It's just that you can't actually buy or sell at that price.

bowlhead99

ffacoffipawb wrote: »

How do HL value the Woodford Equity Income fund for encashing their MM funds. Does WEIF still have a daily price even though it cannot be traded?

Yes, correct. The accounting process is still going on, with daily published valuations "for information purposes only".

So (e.g.) if a holding like Burford drops in value this week, that will be reflected in the published price of WEIF, and the HL MM funds will likely take that to be fair value for the purposes of valuing their own fund.

If you agree with the viewpoint that some / most of WEIF's illiquid holdings will eventually be auctioned or strategically placed with new owners for less than their current valuations (because in some case they will have a very limited set of buyers, and it is known that Woodford is a distressed seller), then you would expect the WEIF fund to reduce further in value before HL can start to access it to provide cash to meet their own net redemption requests and/or change to a different managers' equity income fund.

So if you have the expectation that HL MM will take a loss on WEIF between now and whenever they can get out of it, it is probably best to sell now, unless you believe the MM funds' other holdings will make up for it. As you could access those other funds directly yourself (i.e. not through the MM fund product) there is little sense continuing to hold the MM fund to access the non-Woodford holdings.

As a side note, it would be feasible for HL to value the WEIF holdings at less than their 'information only' NAV value if they believe that NAV to be overstated or unreliable and they are capable of valuing it more accurately. If they marked it down x% already, then there wouldn't be the same 'loss between now and when we can sell it' to worry about.

It's unlikely that they would try to do this, due to the fact that if you are going to recognise a lower NAV you need to be able to support it rather than just mark down by an arbitrary percentage, and they do not have sufficient information on WEIF's current portfolio to do this, nor a specialist private equity valuations team. There is also the 'self-interest' angle of course, as there is not much point them putting an expensive 'daily WEIF revaluation process' in place which would draw scrutiny, when ultimately a lower NAV translates to lower fees and they are still getting a daily third party pricing source that can be used to justify the current (higher) price.