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Posted by Ed 15 days ago
300,000 investors are unable to pull money out of the decimated Woodford Equity Income Fund...  having trusted their financial adviser.....
 
 
 
Liquidity Fears Hit Other UK “Equity Funds” as Investors Remain Trapped in Woodford Fund 
 
 
By EU law, equity funds like Woodford’s are allowed to hold a maximum of 10% of their portfolio in transferable securities that are not dealt in an “eligible market” such as the FTSE 250.
 
To get around this rule, Woodford reportedly bundled up his fund’s illiquid unlisted assets and listed them on the minuscule Guernsey-headquartered International Stock Exchange, which despite its impressive-sounding name has barely any trading activity at all.
 
 
This was enough to lend his most illiquid assets the appearance, albeit flimsy, of liquidity. The move was within the letter — though not the spirit — of the law, according to the FCA chief executive Andrew Bailey. Mr Bailey told the Commons Treasury select committee that Woodford Equity Income fund was “sailing close to the wind,” adding that “listing something on an exchange where trading does not actually happen, as far as I can see, does not actually count as liquidity.”
 
 
Yet all the time Woodford was doing this, no one at the FCA kicked up a fuss. And Hargreaves Lansdown sent more than £1.6 billion of investors’ money Woodford’s way. It even kept on recommending his funds up to the very day Woodford gated his flagship equity fund.
 
In total, around a quarter of Hargreaves customers, just under 300,000, are exposed to Woodford Equity Income, either directly or indirectly.
 
The brokerage house now faces allegations of conflicts of interest.
 
 
https://wolfstreet.com/2019/07/08/liquidity-fears-hit-other-uk-equity-funds-as-investors-remain-trapped-in-woodford-fund/

COMMENTS

Ed 15 days ago
“Hargreaves failed to manage some serious conflicts of interest and should have put in place internal controls that prevented it from having such a large exposure to Woodford Equity Income,” Anthony Morrow, chief executive of financial advice service OpenMoney, told the FT


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