Is tax relief possible on Woodford capital losses

eskbanker

Snakes_Belly wrote: »

I think that it may be an idea to take a screen shot of the value of the investment at present.

What do you believe that will achieve?

In the context of this thread's subject of calculating capital losses, the only values that matter are costs of purchase and disposal, so, as neither are happening at present (as you accepted in an earlier post), the notional current value doesn't really seem particularly useful or worthy of recording....

bowlhead99

Snakes_Belly wrote: »

I think that it may be an idea to take a screen shot of the value of the investment at present.

The value of the investment at present is neither here nor there, because you won't receive today's value. You will receive whatever the assets are ultimately sold for, net of the fund's operating and selling costs. Whatever the amount of money is that you get (which may be similar to the value declared today, but may not be) will be paid out to your account (ISA or pension or other general account, depending how you hold the investment), in multiple payments, starting next year.

If you want to make sure you know you have been paid the right amount of money, the thing to take a screenshot of is the number of shares you hold.

What they are worth today is not really relevant as you won't get that exact amount of money, and what you paid for them isn't relevant unless you are holding them outside an ISA or pension and need to calculate a tax loss.

If you're trying to track stuff in case you later get confused by the numbers flying about, the thing to focus on is how many shares you own, of what share class (e.g. "Class Z - Income", and write it down somewhere. The indicative value per share is published on a daily basis (though that would likely stop when, or before, they enter formal liquidation), and all the distributions will be described in amounts per share. Knowing how many shares you have, of what type, will allow you to later cross check that you (or your ISA or pension) received all the distribution monies that you had been expecting.

Snakes_Belly

@eskbanker, @bowlhead.

I think that this debacle will get very messy. There is talk of legal action against HL. I have concerns about the cost of administering the fund and the sale of the assets that cannot be easily disposed of.

I also have concerns about the potential short positions that may be taken on some of the holdings.

I know that I will not receive back what I invested however I do believe that there has been negligence by several parties involved in the fund.

This is not a case of people should not take the risks if they want their capital to be safe. There are risks and risks and this fund started as a medium risk fund and then morphed into something else. All the time HL was still promoting the fund in their Wealth 50.

I cannot imagine that the pension funds that have invested in this fund will take this lying down.

SonOf

This is not a case of people should not take the risks if they want their capital to be safe. There are risks and risks and this fund started as a medium risk fund and then morphed into something else. All the time HL was still promoting the fund in their Wealth 50.

It has never been medium risk. On a typical 1-10 scale it would be at 9 out of 10 in isolation of other investments.

For many years it was known as a fund that had a high level of illiquid assets. That is why many research and advice companies refused to endorse/recommend it.

HL's marketing list was not an advice list. Yes, many felt it crossed lines at times but they were very careful in how they presented information. Even if people thought it was advice. Much the same as people often refer to HL as having a low cost SIPP despite it being one of the most expensive.

I cannot imagine that the pension funds that have invested in this fund will take this lying down.

Most pension funds use an asset/sector allocation model and those that did not have good quality research and chose to invest in it are likely to have relatively low exposure to it relative to their whole portfolio. However, any occupational pension fund using this should face questions when the illiquid assets issue was been raised two years ago.

bowlhead99

Snakes_Belly wrote: »

@eskbanker, @bowlhead.

I think that this debacle will get very messy. There is talk of legal action against HL.

Often when people lose money or feel wronged, there is 'talk' of legal action. In many cases this doesn't result in actual action, or successful action.

Most of their investors were using them as an execution-only fund platform without advice. To pick from an ideas list of 50 or 150 funds that have management fee discounts and more articles than the other 3000, is not something you're forced to do - and if within all the funds you choose to invest in, you pick some funds that don't do very well, it's you that picked them.

Some of HL's customers bought multi-manager fund products run by HL. They would have been better off if HL's fund had invested in something other than Woodford. Still, it's very difficult to take legal action against a fund that chooses holdings that turn out to be unwise, otherwise fund managers would be perpetually in litigation.

I have concerns about the cost of administering the fund and the sale of the assets that cannot be easily disposed of.

Illiquid / unquoted assets can be tricky to sell and running a process to exit the unquoted companies in a compressed timescale can absorb millions of pounds of costs over the coming couple of years.

However, fortunately the fund has a few thousand millions of pounds so it's not like they're going to spend half of the asset value in fees.

I also have concerns about the potential short positions that may be taken on some of the holdings.

A downside of the transparent approach taken by Woodford to disclose the entire list of holdings every month is that people can see what you hold and take positions against you. He was very clear that he was going to do that as a feature of the product, so nobody can complain.

Due to commercial sensitivity he has stopped doing the disclosure now, but people still know what he held from the month going into suspension, and can carry out public research on some larger positions to see what he has or hasn't exited yet. But the short positions, such as they exist, will largely already be in place.

When shorters exit their position they have to buy back shares in the market which will be positive for the investee's share price. BlackRock who are handling the liquid assets part of the portfolio could decide to wait out some of the obvious shorts if feasible to do so, as they will not be dumping all the stocks immediately. However, winding down and returning investor money as soon as practicable does not give you the luxury of waiting around for a share price improvement. Their remit is to move into FTSE instruments and cash ahead of the end of the January notice period and they are unlikely to have a proper performance motivator as short term performance fees would incentivise them to take excessive risk.

As we know from his published comments, Woodford was not in favour of dumping all shares as soon as practicable and said that he didn't believe investor value was best served by firing him and closing it down and just getting whatever you could for the entire portfolio ASAP. He would have preferred to spend longer repositioning, and among other things that would make it riskier for shorters to short because they would suffer with every positive bit of news from the investee company or the economy - which could happen before Woodford got around to selling. By enforcing a time limit on WEIFs sales of quoted stock, shorters can be more confident that WEIF will be a big seller before they need to close their position.

So you could say that's Link's fault. But difficult to challenge them, legally, on their choice to go ahead with liquation 'in the interests of investors'.

This is not a case of people should not take the risks if they want their capital to be safe. There are risks and risks and this fund started as a medium risk fund and then morphed into something else.

You must know it wasn't ever a medium risk fund. It invested money primarily in a single country, with the ability to hold unquoted positions in unprofitable companies as part of a long-term strategy. So, 50%+ loss potential over the course of a year or two, goes with the territory. However you'd expect that 'normally' such losses would happen on the back of a wider bear market or crash. It's frustrating to get that when there isn't a crash and rival funds are going up. But never impossible.

I cannot imagine that the pension funds that have invested in this fund will take this lying down.

As such institutions are by default considered to be knowledgeable and sophisticated investors, eligible for all sorts of transactions, and received periodic reports showing exactly what they owned, they will certainly be embarrassed for giving Woodford 'the benefit of the doubt' for too long until they got caught up in the eventual gating, shorting, and firesale value erosion. Though being 'embarrassed' isn't the same as actually being able to do something about it.

Those who employed outside advisers and consultants who didn't highlight the change in risk profile as the fund developed, will be looking for some heads to roll there. Won't get the money back though, because the real money in the fund has primarily gone to capital losses, not to the back pocket of Woodford or Link or the advisors.

I know that I will not receive back what I invested however I do believe that there has been negligence by several parties involved in the fund.

The FCA will take a look and no doubt governance will be on the agenda for a while. As it's a high profile case, I expect there will be some ambulance chasers telling little old ladies they'd like to try to help get some of the money back from that nasty Mr Woodford and Link and HL and the FCA and the Guernsey stock exchange and anyone else who might be considered complicit in some way. Make sure you don't believe the ambulance chasers that they're there to help you, 'just sign here for the fees, guv'.