Investors trapped in closed fund face further delays before they can move on.
Like anyone who has ever had a go at being more hands-on with my investing, while there have been some memorable successes, there have also been a few horror shows.
And there aren’t many investments I regret more than my decision to divert a chunk of my monthly pension savings into a fund run by investment ‘superstar’ Neil Woodford back when he broke out on his own.
Not only did it go badly wrong, but it’s an investment I still can’t put behind me.
In fact, it appears I will still be holding onto the remnants of that investment until next year at least.
Following the crowd
When Woodford moved away from Invesco to set up his own funds, most of my investments were tied up in tracker funds.
I had reached the conclusion that while I was never going to beat the market with these funds, I wouldn’t be too far off.
And that seemed like a win compared to the performance of many managed funds, which charge much larger fees and then perform poorly due to the iffy decisions made by those managing the investments.
Things seemed different with Woodford though. I got caught up in the cult of personality, the fact that so many respected investment experts were backing his new venture. I adjusted my plans so that a decent chunk of the money I saved each month went into his fund.
You can check out any time you like, but you can never leave
This week Link Group, the administrator of what was once known as the Woodford Equity Income Fund, warned investors that it was taking longer than expected to sell off the remaining assets held within the fund.
It had previously suggested that the fund could be properly wrapped up this year, but in a statement to investors Link said: “We continue to make progress regarding the sale of the remaining assets, and whilst it is not possible to provide a definitive end date to the realisation process, it is hoped that the sale of the remaining assets will be concluded in 2022.”
While the bulk of the fund has been sold now, it’s worth emphasising that it still holds around £124 million, which is invested in nine companies.
This has been a really lengthy process, given the fund was suspended all the way back in June 2019 after being flooded with withdrawal requests from large investors who had grown concerned by the assets Woodford was investing in, as well as its mediocre performance.
I think it goes without saying that this isn’t exactly how I had hoped this particular investment would go.
Who is really in charge?
One of the issues that has emerged from the whole Woodford farrago is the difficulties that come from authorised fund management firms (AFMs).
These are the businesses that effectively launch a specific investment fund, with a different firm then appointed to run it.
So in the case of Woodford, while his business ran the funds, it was Link that launched the fund and was supposed to provide proper oversight, to ensure that Woodford was managing the fund as he should.
The FCA recently published the results of its own investigation into AFMs generally and found that all too often they are failing to actually assess the value of their funds properly.
The regulator said that many firms “did not consider what the fund should deliver given its investment policy, investment strategy and fees”, which doesn’t exactly inspire confidence.
After all, how on earth can they determine if the funds are doing the job properly if they have no idea what they are supposed to be measuring them against?
If fund managers aren’t properly governed by these host AFM firms, then it’s not exactly surprising that they may end up believing their own hype and making a pig’s ear of it, as happened with Woodford.
And what’s most galling is that while Woodford can retreat to his mansion with merely a bruised ego, occasionally floating the idea of a comeback, it’s ordinary investors like you and me that are then trapped in these zombie investment funds for years on end.