Investments  

Manager says Woodford debacle good for boutiques

Manager says Woodford debacle good for boutiques

Woodford Investment Management’s failure has been ‘good’ for boutique fund managers and investment trusts, the founder of Montanaro has claimed.

Charles Montanaro, manager of Montanaro UK Smaller Companies, which has total assets of £216.02m, said he had noted a shift in sentiment after Woodford Investment Management had to gate its flagship Equity Income fund last June and shut up shop six months later.

Mr Montanaro said: “The gating of a high-profile fund has brought to attention two things. The first is the dangers of owning illiquid and unquoted assets in an open-ended fund. Certainly this has highlighted the benefits of closed-ended structures, which do not have to manage daily investment flows.

"The second is the risk of fund managers moving away from their area of expertise. We have managed small and mid-cap portfolios for almost 30 years.”

It is all Montanaro does, he said, and all it will ever do. 

He added: “Some of our clients wanted reassurance about the underlying liquidity of our funds, which was easy to provide.

"Debacles such as Woodford are actually positive for boutiques such as Montanaro that take a disciplined and proactive approach to managing liquidity risk. It is an intrinsic part of what we do. 

“Generally, sentiment has not changed much for us. Woodford was not a specialist in small cap and the consequences were self-evident.

"It shows the importance of working with specialists in smaller companies who have the expertise and know what they are doing.”

simoney.kyriakou@ft.com