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Woodford Equity Income Fund Suspends Trading

Closed-end funds and OEICs
Luniversal
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Re: Woodford Equity Income Fund Suspends Trading

#227635

Postby Luniversal » June 6th, 2019, 11:49 pm

MusingMarket wrote:
SalvorHardin wrote:This is a great advertisment for investment trusts over open-ended funds. In similar circumstances the investment trust's share price would fall without the need for forced sales.


I'd add the proviso "This is a great advertisment for investment trusts without discount controls over open-ended funds".

Investment Trusts are allowed to buyback 14.99% of shares per annum without a further shareholder vote. Since Woodford' Equity Income went from a 10.9bn fund to 3.7bn fund prior to suspension of trading it would have had major problems as an Investment Company if it had discount controls. There are a fair number of fashionable investment trusts that stay pretty strictly to the share price being at par to NAV and these trusts are advertised as such. Retail holders of such investment trusts are not going to take too kindly to a sudden loss of confidence in a manager leading to a huge run on the trust leading to a discount being inevitable which adds impetus to the run on the trust.

"I didn't realise I couldn't redeem at 24 hours notice" or "I didn't realise a wide discount could develop" which is worse? I'd say it's splitting hairs for the short-term psyche of the investor, there'll be panic either way.

mm


Discount control is permissible (since 1999), not mandatory. There is a wide divergence on whether to use it all. Although most boards like to have the power up their sleeves, often they do not exercise it. Annual reports are full of directors explaining why they have issued or bought in shares, or not as the case may be.

Those which do apply discount control regularly often do so only at the margin, to keep price and NAV aligned within a percentage point or two. The power to issue new shares without specific shareholder approval up to a pre-set limit is mainly to deal with surges of demand, e.g. for Scottish Mortgage in recent times. ITs almost never try to close a gaping discount by retiring a lot of issued capital absent a formal tender offer.

It is the same with gearing. Most mainstream trusts have gearing limits way above what they choose to borrow. They carry little or no net debt, and the nature of their business makes debt repayment easier than for most, since their assets are liquid and transparently valuable.

Structural debt is less common than formerly-- as are complex capital structures, e.g. warrants, convertible prefs-- and much of it, dating from the early 1980s, is now being funded with dramatic savings on the coupon thanks to Quantitative Easing. Tactical borrowing only is the norm, unless debt is back to back with portfolio holdings such as fixed interest.

Retail investors in ITs tend to be more knowledgeable, calm and loyal than their counterparts in unit trusts. In theory a large discount might suddenly emerge from a run on an equity-based investment trust because of a general alarum, but it is hard to think of such episodes.

Anyhow, the main point is that you can always sell, if reluctantly; whereas with an OEIC the decision is out of your hands pending the authorities' good pleasure.

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Re: Woodford Equity Income Fund Suspends Trading

#227684

Postby peka » June 7th, 2019, 10:00 am

I decided a long time ago that I would never invest in any of Woodford's funds when I read that his Patient Capital Investment Trust and his Equity Income Fund both have large holdings in a firm called Industrial Heat:

https://citywire.co.uk/investment-trust ... t/a1157456

Industrial Heat claims to be developing cold fusion, but any competent physicist could have told Woodford that the probability of that ever being successful is very close to zero because it is against all our current knowledge of physics. It really made me question his judgement.

According to the above article: 'Link Fund Solutions, the trust’s appointed alternative investment fund managers, dramatically upgraded the value of Industrial Heat by 357% to $112.9 million (£85.2 million)'. As Industrial Heat is an unquoted firm and has, in my opinion, zero probability of ever making a profit, I don't understand on what basis they did that.

Link Fund Solutions are the Woodford Patient Capital investment trust’s appointed alternative investment fund managers, so they cannot be considered to be an independent party. Increasing the valuation of Industrial Heat has the effect of increasing the management fees paid to Woodford by the Equity Income Fund and increasing the Net Asset Value and therefore the share price of the Woodford Patient Capital investment trust. I leave readers to draw their own conclusions.

Here is an article about Woodford's recent actions with the holdings of Industrial Heat and other unquoted companies in his Equity Income Fund:

https://citywire.co.uk/funds-insider/ne ... s/a1229488

Here are some articles which explain why I believe the probability that cold fusion will work is vanishingly close to zero:

https://en.wikipedia.org/wiki/Energy_Catalyzer

https://scienceblogs.com/startswithaban ... -of-why-we

https://www.popularmechanics.com/scienc ... ming-whom/

https://scienceblogs.com/startswithaban ... ossible-is

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Re: Woodford Equity Income Fund Suspends Trading

#227689

Postby PhaseThree » June 7th, 2019, 10:07 am

[quote="Snorvey"]Yes but....well. it's total cobblers isn't It?[/quote]

Err no, It's reproducable scientific reality. Whether its any more than a curiosity is still to be determined.

[quote="Alaric"]
There's a discipline known as "quantum chemistry". That uses the mathematics of quantum mechanics in conjunction with more conventional chemistry. Do "Industrial Heat" have any experts on this on board?

Either way, 9% of the IT is a lot of money to put into a controversial technology.[/quote]

It is extremely difficult to find out anything about "Industrial Heat" beyond the fact that they are investing in multiple LENR developments. I would be a lot happier if more information was available, particularly the level of the scientific expertise available at both Industrial Heat and WPCT.

I agree 9% is too high, even for Patient Capital. WPCT represents around 1% of my portfolio, so Industrial Heat represents slightly less than 0.1% so not a killer if it all comes to naught.

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Re: Woodford Equity Income Fund Suspends Trading

#227697

Postby PhaseThree » June 7th, 2019, 10:20 am

[quote="peka"]

Industrial Heat claims to be developing cold fusion, but any competent physicist could have told Woodford that the probability of that ever being successful is very close to zero because it is against all our current knowledge of physics. It really made me question his judgement.
[/quote]

Please read the article I linked above. Industrial Heat are not working on cold fusion they are looking at Low Energy Nuclear Reactions. Fusion has a very specific meaning in physics and is not what is seen in any of these reactions. Despite this the press continue to report Woodford suport for"Cold Fusion" as fact, I'm beginning to think this is deliberate rather than just typically poor scientific reporting.

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Re: Woodford Equity Income Fund Suspends Trading

#227710

Postby Alaric » June 7th, 2019, 10:56 am

PhaseThree wrote:Industrial Heat are not working on cold fusion they are looking at Low Energy Nuclear Reactions. Fusion has a very specific meaning in physics and is not what is seen in any of these reactions. Despite this the press continue to report Woodford suport for"Cold Fusion" as fact, I'm beginning to think this is deliberate rather than just typically poor scientific reporting.


I think "cold fusion" would be a lay term for "low energy nuclear reactions".

The more general question is to whether a widely marketed and thus mainstream Investment Trust should be financing what seem to be exotic and perhaps dead end research projects.

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Re: Woodford Equity Income Fund Suspends Trading

#227711

Postby Snorvey » June 7th, 2019, 11:00 am

Err no, It's reproducable scientific reality. Whether its any more than a curiosity is still to be determined.

Err, yes.

For years I watched Andrea Rossi weasel and squirm his way out of giving a fair and open demonstration of his wonderful planet saving ecat contraption.

The forums were split between 'believers' (in cold fusion) and scientists. It was all a bit like religion.

Sorry, it's a LOT like religion.

The fact the Industrial Heat and Woodford bought into this claptrap is beyond belief.

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Re: Woodford Equity Income Fund Suspends Trading

#227734

Postby peka » June 7th, 2019, 11:50 am

Here's a quote from the following Wikipedia article about cold fusion:

https://en.wikipedia.org/wiki/Cold_fusion

'A small community of researchers continues to investigate cold fusion,[6][11] now often preferring the designation low-energy nuclear reactions (LENR) or condensed matter nuclear science (CMNS).[12][13][14][15] Since articles about cold fusion are rarely published in peer-reviewed mainstream scientific journals anymore, they do not attract the level of scrutiny expected for mainstream scientific publications.[16]'

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Re: Woodford Equity Income Fund Suspends Trading

#227747

Postby Pendrainllwyn » June 7th, 2019, 12:19 pm

peka wrote:Link Fund Solutions are the Woodford Patient Capital investment trust’s appointed alternative investment fund managers, so they cannot be considered to be an independent party. Increasing the valuation of Industrial Heat has the effect of increasing the management fees paid to Woodford by the Equity Income Fund and increasing the Net Asset Value and therefore the share price of the Woodford Patient Capital investment trust. I leave readers to draw their own conclusions.

Here is an article about Woodford's recent actions with the holdings of Industrial Heat and other unquoted companies in his Equity Income Fund:

https://citywire.co.uk/funds-insider/ne ... s/a1229488
Not a single share has been traded in 18 months since listing. A listing in name only. Looks like some people are asleep at the wheel here. Surely there should be other requirements such as a minimum trading volume requirement (e.g., more than x% of the shares should be traded over a given period) and a free float requirement (e.g., one investor cannot own more than X% of the listed shares) for the fund to be able to classify this holding as listed. What stops the "market" value of these shares being manipulated? One small buy-order arranged quietly could send the price up significantly. It also raises questions of Guernsey's International Stock Exchange. What were they thinking? Other than wanting to pocket listing fees that is. I wonder who has been picking up the listing fees, the fund's investors or Woodford Investment Management? I hope the latter. Fortunately I have never been involved with any of their funds.

Pendrainllwyn

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Re: Woodford Equity Income Fund Suspends Trading

#227762

Postby Alaric » June 7th, 2019, 1:21 pm


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Re: Woodford Equity Income Fund Suspends Trading

#227764

Postby Pendrainllwyn » June 7th, 2019, 1:29 pm

Thank you.

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Re: Woodford Equity Income Fund Suspends Trading

#227765

Postby XFool » June 7th, 2019, 1:32 pm

PhaseThree wrote:
peka wrote:Industrial Heat claims to be developing cold fusion, but any competent physicist could have told Woodford that the probability of that ever being successful is very close to zero because it is against all our current knowledge of physics. It really made me question his judgement.

Please read the article I linked above. Industrial Heat are not working on cold fusion they are looking at Low Energy Nuclear Reactions. Fusion has a very specific meaning in physics and is not what is seen in any of these reactions. Despite this the press continue to report Woodford suport for"Cold Fusion" as fact, I'm beginning to think this is deliberate rather than just typically poor scientific reporting.

"typically poor scientific reporting."?

Curious then that Woodford's own site uses the term "Cold Fusion" in the description of Industrial Heat.

https://woodfordfunds.com/words/blog/in ... -to-speed/

"Industrial Heat has built a platform of new energy technologies focused on harnessing hitherto poorly understood or neglected energy science, including cold fusion."

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Re: Woodford Equity Income Fund Suspends Trading

#227773

Postby XFool » June 7th, 2019, 1:54 pm

PhaseThree wrote:
Snorvey wrote:Yes but....well. it's total cobblers isn't It?

Err no, It's reproducable scientific reality. Whether its any more than a curiosity is still to be determined.

"reproducible"? So why hasn't it been successfully "reproduced" over three decades? Or, more to the point, produced?

PhaseThree wrote:It is extremely difficult to find out anything about "Industrial Heat" beyond the fact that they are investing in multiple LENR developments.

It is extremely difficult - so far I have found it impossible - to even discover a website for Industrial Heat LLC. If anyone knows differently, could they post a link. It would at least be 'interesting' (or something!) to have a gander.

I think the generally accepted view is that Cold Fusion, which refuses to die, is a form of pathological science.

https://en.wikipedia.org/wiki/Cold_fusion

If you look up anything on the subject, same with LENR, you end up looking at loads of blog sites where people spend their time either claiming contested 'successful demonstrations', explaining failed demonstrations as due to omission of the special secret sauce needed to make it work, dreaming up ever more complicated 'explanations' of how it might work, or simply slagging each other off.

It reminds me of this, courtesy of a TMF poster: http://dispatchesfromthefuture.com

I see that idea too is now apparently undergoing resurrection! Like the living dead, these things never actually die. ;)
Last edited by XFool on June 7th, 2019, 1:59 pm, edited 1 time in total.

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Re: Woodford Equity Income Fund Suspends Trading

#227776

Postby Alaric » June 7th, 2019, 1:56 pm

XFool wrote:Curious then that Woodford's own site uses the term "Cold Fusion" in the description of Industrial Heat.


For it to be commercially viable, which is presumably the point of Woodford's investment on behalf of shareholders, whatever technique or process used has to be reproducible, something that appears elusive in the experiments so far.

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Re: Woodford Equity Income Fund Suspends Trading

#227778

Postby simoan » June 7th, 2019, 1:59 pm

Crikey... and Dod accused me of going off at a tangent further up this thread :-) Now we're onto discussions about nuclear reactions. Flipping 'eck!

All the best, Si

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Re: Woodford Equity Income Fund Suspends Trading

#227789

Postby jonesa1 » June 7th, 2019, 2:39 pm

simoan wrote:Crikey... and Dod accused me of going off at a tangent further up this thread :-) Now we're onto discussions about nuclear reactions. Flipping 'eck!


More like a discussion about fantasy science not producing nuclear reactions and someone having been dumb enough to invest in it. There was I thinking that cold fusion had been consigned to the same dustbin as flat earth theory.

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Re: Woodford Equity Income Fund Suspends Trading

#227794

Postby PhaseThree » June 7th, 2019, 3:04 pm

Last months "Nature" published a paper (https://www.nature.com/articles/s41586-019-1256-6) discussing the Google/MIT/Lawrence Berkeley National Laboratory collaberation into Cold Fusion with the following abstract.

"Revisiting the cold case of cold fusion
The 1989 claim of ‘cold fusion’ was publicly heralded as the future of clean energy generation. However, subsequent failures to reproduce the effect heightened scepticism of this claim in the academic community, and effectively led to the disqualification of the subject from further study. Motivated by the possibility that such judgement might have been premature, we embarked on a multi-institution programme to re-evaluate cold fusion to a high standard of scientific rigour. Here we describe our efforts, which have yet to yield any evidence of such an effect. Nonetheless, a by-product of our investigations has been to provide new insights into highly hydrided metals and low-energy nuclear reactions, and we contend that there remains much interesting science to be done in this underexplored parameter space."

So no signs of cold fusion but still some interesting stuff to look at in the LENR area. But I agree this is not somethng that an investment trust should be putting money into at this stage.

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Re: Woodford Equity Income Fund Suspends Trading

#227830

Postby AsleepInYorkshire » June 7th, 2019, 5:54 pm

City watchdog 'missed Neil Woodford fund warning signs'
https://www.bbc.co.uk/news/business-48552660

He also highlighted the role of Link Fund Solutions, the supervisor to the Woodford Equity Income Fund, which had been appointed by Mr Woodford himself.

https://www.bbc.co.uk/news/topics/c5qvn ... l-woodford

AiY

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Re: Woodford Equity Income Fund Suspends Trading

#227914

Postby OhNoNotimAgain » June 8th, 2019, 9:55 am

I love the quote from Gerry Grimstone:

"Never invest in a fund named after the manager"

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Re: Woodford Equity Income Fund Suspends Trading

#227917

Postby Howard » June 8th, 2019, 10:20 am

OhNoNotimAgain wrote:I love the quote from Gerry Grimstone:

"Never invest in a fund named after the manager"


So should I regret my eight years investing in Fundsmith? Only up about 300%. :cry:

If his fund price halved in the next week his investors couldn't complain too much. It would probably take something pretty serious to destroy half the value of his portfolio.

regards

Howard

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Re: Woodford Equity Income Fund Suspends Trading

#227928

Postby peka » June 8th, 2019, 10:57 am

I've just noticed that this page on the Woodford Funds web site about their so-called 'investment' in the Industrial Heat company:

https://woodfordfunds.com/funds/holding ... rial-heat/

says: "the theory of cold fusion cannot be explained by the known laws of physics".

The same web page says that the Woodford Funds exposure on 30 April 2019 to Industrial Heat, a company whose sole product "cannot be explained by the known laws of physics" and which has never made a profit nor paid a dividend, was 9.02% in the Patient Capital investment trust and 2.59% in the Equity Income fund!

I suppose the name of the Patient Capital investment trust might warn its shareholders to have some patience for it to produce a return on its investments. However, are they prepared to wait for an infinite amount of time, because that is how long it might take to produce a return? And it is outrageous that an investment in such a company should be held by an equity income fund.


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