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The fall of star fund manager Neil Woodford – one year on

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Next week (3 June) is the one-year anniversary of the suspension of the Woodford Equity Income fund.

Investors remain locked in the fund with no information on when they are likely to get the rest of their money back.

Liquidity mismatch remains the elephant in the room, according to experts.

Ryan Hughes, head of active portfolios at investment platform AJ Bell said, “We’re now one year on from the disastrous Woodford collapse and frustrated investors are still waiting for their money back.

“There’s still £500m of Equity Income fund assets stuck in illiquid companies and little indication of when they are likely to be sold. Given the current state of the global economy due to the impact of Covid-19, there is little immediate prospect of progress being made in selling these assets and a big question mark hangs around their valuations during current market conditions.

“As we reflect on the past 12 months, big questions still remain about whether the asset management industry has learned its lesson from the Woodford debacle and where the FCA could still take stronger action to improve consumer confidence.

“In particular, the risk of a liquidity mismatch remains a real threat to investors so long as potentially highly illiquid and unquoted assets are allowed to be held in daily traded open-ended funds. A number of fund managers have attempted to address this, but unquoted companies are still held in funds and there has been little word from the FCA about an outright ban.

“Instead the regulator has reminded asset managers of their responsibilities and reiterated that suspensions are an appropriate tool. But telling investors they can’t have their money back when they want it and that it’s for their own protection is ultimately damaging for investor confidence in the long term.

“At the same time, there has not been any public industry discussion on the appropriateness of daily dealing for those funds that hold less liquid assets and this has been highlighted once again by the recent suspensions in the property sector.

“It’s the elephant in the room and there is no first mover advantage for asset managers to do this, meaning it will have to be led by the regulator. While conversations may well be happening behind the scenes, this needs to be accelerated and made public to help regain investor confidence.

“The ramifications of the collapse of Woodford have not gone away. It is absolutely vital that the asset management industry properly takes on board the lessons that should be learned, and quickly, or else miss a huge opportunity to help regain the trust and confidence of so many investors.”




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