The Lemon Fool

Interesting note by AMATI on liquidity in OEICs, and why they consider that they do not have Woodford's problem
http://amatiglobal.com/press.php?date=20190620

Thanks for the pointer. An interesting read.

One thing in particular struck me with reference to Woodford:

In 2008 there was a range of open-ended funds called Arch Cru which held only unlisted investments, but did so by packaging these investments up into cell companies listed on the Channel Islands Stock Exchange.

Woodford Patient Capital factsheet tells us WPCT acquired some illiquid assets from the troubled open-ended fund back in February - a timescale that could very well coincide with firefighting by the manager. WPCT paid for those assets by issuing new WPCT shares to the fund. Sounds like a rather similar wheeze to that described in the quote from Amati, yesno?

Possibly also worth reading the note on the HL site on the Woodford problem
https://www.hl.co.uk/news/articles/wood ... expect-now
where HL indicate that they were concerned in November 2017 about the proportion of small and unquoted assets in the Woodford Equity Income Portfolio. And they maintain that the Woodford fund promised to inform HL if the UCITS guidelines were breached - but they did not report such breaches in February and March 2018.
I would have thought that any concern HL may have about a fund should automatically have resulted in it being dropped from their Top 50 picks.
Whatever happens (and I'm fortunately not a holder of any Woodford investments), I have learned from this experience to be extremely wary of any fund that uses the dodge of Channel Islands registered investments to cover up extremely illiquid investments. And returning to the AMATI note, I would like to see the Bucket Table becoming a necessary disclosure for all funds.

As I understand it, the agreement for HL to be notified, by Woodford, of any breach of the 'unquoted' level, only applied to the month-end data. As such there were no reported breaches of their agreement.

One sentence caught my eye "If there are lots of sellers, but no buyers, then the stock is liquid for buyers but not sellers, and vice versa." since I have read on TLF many times that for every seller there is a buyer. Maybe Amati's knowledge of the markets needs some fine tuning!

Pendrainllwyn

Pendrainllwyn wrote:One sentence caught my eye "If there are lots of sellers, but no buyers, then the stock is liquid for buyers but not sellers, and vice versa." since I have read on TLF many times that for every seller there is a buyer. Maybe Amati's knowledge of the markets needs some fine tuning!
Pendrainllwyn

I think what is meant is "if there are lots of want-to-be sellers". But they won't have much luck selling - hence there is no liquidity for sellers.

StOmer wrote:As I understand it, the agreement for HL to be notified, by Woodford, of any breach of the 'unquoted' level, only applied to the month-end data. As such there were no reported breaches of their agreement.

The devil's in the detail! Sailing close to the wind comes to mind.