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What would a run on Woodford's fund mean for investors?
by Danielle Levy on Oct 15, 2013 at 15:48
Investors in Neil Woodford's Invesco Perpetual Income and High Income funds have warned the fund is an immediate sell because of the liquidity issues associated with his small cap holdings in the event of a run on his funds.
Renowned fund manager Woodford is to leave Invesco Perpetual on 29 April next year to launch a rival fund management group. His Income and High Income funds are among the most widely held in the country and his departure has implications for fund buyers far and wide.
Mark Barnett will lead the Invesco Perpetual UK equity team following Woodford's (pictured) departure, assuming control of the Invesco Perpetual High Income and Invesco Perpetual Income funds.
The equity components of the Invesco Perpetual Monthly Income Plus and Invesco Distribution funds will be managed Ciaran Mallon, alongside the existing fixed income managers Paul Causer and Paul Read.
The news brings the curtain down on Woodford's 25 years and has been met with surprise by investors who have held his fund for years.
One fund selector from a private client house, who preferred to remain anonymous, said the fund was likely to be an immediate sell due to Woodford's holdings in small caps which could cause liquidity issues if there is a run on his funds.
'He is big shareholder in lots of small caps, so there could be liquidity issues if there is a run on the fund because he will have to redeem his positions,' he explained, adding: 'We have major question marks.'
Nonetheless, he expects the long-established funds may not be sold in reaction to the news, as advisers and discretionary managers will not want to create capital gains tax liabilities for their underlying clients.
Alan Sippetts, an investment director at Heartwood, said the firm was likely to sell its small position in the Income fund as a result of the news.
'My immediate reaction is that Neil Woodford is so pivotal in running that fund that I would recycle the money immediately into our staple preferred investments,' he said.
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