Too many snouts in the trough
The closure of Sanditon, the fund management business, is unfortunate but no surprise. Value v growth? Surely both methods of ‘active’ fund management are long past their sell-by dates?
Isn’t it just about buying great companies andholding them for thelong term?
In my opinion, too many have their snouts in the trough. The Woodford debacle will hopefully trigger a much needed clear-out.
SRC Wealth Management
Questions should be asked
Your article that the Financial Conduct Authority will not investigate its own handling of the [Woodford] matter is interesting, though disturbing.
Perhaps that is acceptable as these things can happen even to the most reputable of funds or groups.
The engagement of unlisted securities within a maximum percentage holding range is not awry, but if the overall asset value of the fund drops this can place a disproportionate impact upon the fund as the manager will struggle to sell those holdings to preserve the cap.
That’s fair enough and ‘gating’ the fund is possible (meaning that withdrawals are stopped to protect all holders).
However, when Woodford Investment Management listed some of these companies on the Guernsey Stock Exchange to circumvent the ‘unlisted’ criteria, alarm bells should have been ringing. That did not make them any more saleable than before. If we knew this because we read the news… why did the FCA not see it too?
When the unitised holdings wrapped up the unlisted assets and sold them to the quoted closed-end vehicle, Woodford Patient Capital, for £73m at the time, in reality that too was fine because it dealt with the issue of unlisted securities.
However, what was not so fine was that the price was at 96.67p – the then quoted asset value of the quoted trust and comprising just under 10 per cent of that vehicle’s total shares in issue.
This was 81.6m shares and a loss of two-thirds (£49m) has ensued, despite most of those assets not having lost anything like that in value.
Yes, I know that there are ‘rules’ about issuing new shares, but the deal could have been orchestrated through the market and if the level was so awry, that may have suggested it should not have proceeded at all.
Now the enforced sale of this chunk of stock has and will suppress the price at which Woodford Patient Capital shares will trade. Maybe [the unitholders] should be allotted those shares as part of the liquidation process to make their own decisions later.
Finally, it has been announced the unitised holdings they are going to be wound up. This is still a potentially £3.5bn pot.
Should not the regulator be involved to decide if that is indeed the best route for unitholders?