Thank you for a detailed and clear explanation of the flaws inherent in Woodford strategic management of the Assets entrusted to him. You make a very good point of analysing the portfolio using Stockopedia's excellent analysis tools, in particular the speculative and stock (style) characteristics. Stockopedia makes the job of analysing a fund like this one, a realistic and rewarding proposition.
Excellent presentation has me re examining my own portfolio and my own risk management. I think the if your data is programmed to examine Quoted Investment Trusts this would be a welcome
There should be a set of rules that specifies how much liquidity investments in a fund should have if the fund is to be “open-end”. For example, one of the rules might specify that 80%/90%/95%of the stocks (by value), should have an average daily/weekly/monthly volume that exceeds the value of the fund’s holding in that stock. The rules should also specify what actions, and what notifications to investors are required, if the fund stops meeting the liquidity rule. For example, large redemptions, or if the average volume of a stock in the portfolio shrinks, causing a breach of the rule, then the fund should notify investors and specify what remedial action it plans to take and over what time scale. Secondly, in the event of a breach, beyond a certain point, and if it seems likely that it will continue to be in breach beyond 7 days - despite the remedial action, then there should be immediate “gating” in the form of a new class “G-Shares” of units representing the illiquid part of the portfolio. The G-Shares may only be redeemed into the main units when the breach has been resolved. The real problem, (apart from lack of investment skills), which hit the Woodford portfolio was redemptions. Those who exited first, got their money based on the liquid investments. The bag-holders were the remaining investors who then held a fund containing illiquid investments, which would have plunged as soon as you sold a few, so obviously not worth the quote if you are a seller. All investors were not treated equally, and the small guys, were the last ones out. If there had been rules in place, like I described above, that would have been avoided.
Nothing like hindsight is there
If you were on Stocko it would not be hindsite
Thank you for a detailed and clear explanation of the flaws inherent in Woodford strategic management of the Assets entrusted to him. You make a very good point of analysing the portfolio using Stockopedia's excellent analysis tools, in particular the speculative and stock (style) characteristics. Stockopedia makes the job of analysing a fund like this one, a realistic and rewarding proposition.
Excellent presentation has me re examining my own portfolio and my own risk management. I think the if your data is programmed to examine Quoted Investment Trusts this would be a welcome
There should be a set of rules that specifies how much liquidity investments in a fund should have if the fund is to be “open-end”. For example, one of the rules might specify that 80%/90%/95%of the stocks (by value), should have an average daily/weekly/monthly volume that exceeds the value of the fund’s holding in that stock. The rules should also specify what actions, and what notifications to investors are required, if the fund stops meeting the liquidity rule. For example, large redemptions, or if the average volume of a stock in the portfolio shrinks, causing a breach of the rule, then the fund should notify investors and specify what remedial action it plans to take and over what time scale. Secondly, in the event of a breach, beyond a certain point, and if it seems likely that it will continue to be in breach beyond 7 days - despite the remedial action, then there should be immediate “gating” in the form of a new class “G-Shares” of units representing the illiquid part of the portfolio. The G-Shares may only be redeemed into the main units when the breach has been resolved.
The real problem, (apart from lack of investment skills), which hit the Woodford portfolio was redemptions. Those who exited first, got their money based on the liquid investments. The bag-holders were the remaining investors who then held a fund containing illiquid investments, which would have plunged as soon as you sold a few, so obviously not worth the quote if you are a seller. All investors were not treated equally, and the small guys, were the last ones out. If there had been rules in place, like I described above, that would have been avoided.
Good video 👍
Thanks for sharing, very insightful.
Big pat on the back for your intern!