Woodford suspension

Huggy_Bear

Hi all
Can anyone explain what might happen when the Woodford suspended funds re-open (if thats the right terminology) - do you think lots of investors will cash in or transfer funds? Will this mean the price drops suddenly or what?


I am completely new to this happening so not quite sure what to expect.



Many thanks

cogito

I've no doubt at all that if (not when) the fund reopens that there will be a rush for the exit. Even if the fund has completely repositioned itself to invest only in blue chips, Woodford has become so toxic that few people will want to remain invested especially when there are over 250 funds to choose from in the sector. The price would only drop if he has to dump a lot of shares in the market to meet redemptions but I guess that if the fund reopens, it will be holding plenty of cash.

I'm still betting that the fund will close completely and return cash to investors.

Huggy_Bear

thank you
I've accepted that I've lost a bit of money with this one and learning a strong lesson to keep a closer eye on things, but I'm worried that if I miss the fund reopening the price will plummet and I'll loose even more or are you saying it doesn't work like that?


If investors get cash back - how does that work? Is it based on the current price? I know on the Woodford website they update the price daily.


:beer:

Many thanks

londoninvestor

Huggy_Bear wrote: »

If investors get cash back - how does that work? Is it based on the current price? I know on the Woodford website they update the price daily.

If (as cogito suggests) the fund closes completely, then all its holdings will be sold, and whatever cash is received will be distributed to investors in proportion to the numbers of units they own.

So what you'd get is not necessarily today's price, it's whatever can be realised in the sale.

The price quoted today (as for any fund!) is theoretically the best estimate of what you'd get for selling the assets in the fund, but of course it's difficult to know what assets will sell for when you really have to get rid of them and everyone in the market knows you're a distressed seller.

AnotherJoe

If WEIF does though end up full of ftse mainstream funds there won't be any issue with distressed selling because the amount of any holding, say BT or IAg, sold will be very small compared to the total market size of those companies.
I'm with cogito though , in the unlikely event it reopens the rush for the exits will mean it shortly has to close again, and in the very unlikely event it survives that, what remains will be so small it's not economical to run. And this is so obvious that why wouldn't you sell as soon as it reopens rather than being stuck again for months whilst they shut it down.
Dead. Man. Walking

talexuser

AnotherJoe wrote: »

Dead. Man. Walking

It looks very much like it. So the next question is will the Patient Capital and Focus be big enough to keep the firm going or just uneconomic?

Huggy_Bear

Thanks for replies, again not knowing how these things work, will investors have wanring that the fund will re-open (if it does) ?

AnotherJoe

Good question, I don't know. Usually these things leak out though even if it was done without notice.
The gating occurred with no notice. I suppose notice might let them get their admin lined up better than if they just said "doors open" . If they said "we open in two weeks" then that will perhaps flush out 90% of the leavers and give them a known size of redemptions to deal with.
I suspect there might also be a maximum redemption to try and avoid being completely swamped, let's say "no more than 20% of your holding or £20k whichever is biggest for the first month" or something like that. That would be fairer to smaller holders otherwise a Kent Council sized holding or three coming in on Day 1 might require an immediate "regating". Plus if the fund price remains stable over that first month that might then reduce the number of leavers

green_man

AnotherJoe wrote: »

I suspect there might also be a maximum redemption to try and avoid being completely swamped, let's say "no more than 20% of your holding or £20k whichever is biggest for the first month" or something like that. That would be fairer to smaller holders otherwise a Kent Council sized holding or three coming in on Day 1 might require an immediate "regating". Plus if the fund price remains stable over that first month that might then reduce the number of leavers

I think this approach would be the only way they could possibly reopen and might just be viable (if legal?), though you can just see the letters of uproar to Daily Mail now.

AnotherJoe

green_man wrote: »

I think this approach would be the only way they could possibly reopen and might just be viable (if legal?), though you can just see the letters of uproar to Daily Mail now.

Did they do something like that when property funds reopened after a few months of closure? My only recollection is that there was a "penalty" for cashing in at first, eventually relaxed. That would be another approach.