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MoneyBank of England to probe risks of Woodford-style funds

17:00  11 july  2019
17:00  11 july  2019 Source:   cityam.com

Woodford fund goes into second month of suspension

Woodford fund goes into second month of suspension Fund manager Neil Woodford will keep his flagship £3.7bn fund frozen for at least another month, leaving thousands of investors without access to their money. Mr Woodford, one of Britain's best known money managers, released a video - the second since the Woodford Equity Income Fund was suspended on 3 June - in which he said there was "no prescribed time limit" on how long it could cease trading for. However, the fund's authorised corporate director Link Fund Solutions said in a letter to investors posted on its website that it remained in the "best interests of all investors" to continue the suspension.

The Bank of England will investigate the potential risks of funds like beleaguered trader Neil Woodford ’s suspended investment vehicle. Fund managers are currently able to offer investors daily liquidity when their savings are actually tied up in illiquid and unquoted stocks, which are difficult to

The Bank of England will assess the way open-ended funds might be better aligned to minimise risks to financial stability.

Bank of England to probe risks of Woodford-style funds © Getty

The Bank of England will investigate the potential risks of funds like beleaguered trader Neil Woodford’s suspended investment vehicle.

Fund managers are currently able to offer investors daily liquidity when their savings are actually tied up in illiquid and unquoted stocks, which are difficult to transfer quickly into cash.

Woodford’s Equity Income fund was suspended indefinitely after a spike in redemption requests, leaving investors unable to access their money.

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Speaking today as the Bank of England launched its Financial Stability Report deputy governor Jon Cunliffe said it will explore how to “better align the liquidity and the underlying asset with the redemption promise given by the fund.”

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Bank of England looks at rules after gating or UK property fund and Neil Woodford saga. Woodford ’s flagship fund was initially suspended in June because of a surge in redemptions that he That incentive could cause a run on funds . “This has the potential of becoming a systemic risk , as

Mark Carney told MPs funds with a so-called liquidity mismatch pose a potential risk to the global financial system.

The central bank will work with the Financial Conduct Authority on its recommendations.

Cunliffe said: “So long as everybody else in the market is offering it [daily liquidity]… it’s difficult for one fund not to offer it.

“For many people these funds are long term investments. If you’re leaving your money there for a long time you don’t really need to be moving it around on a daily basis so it’s not clear just how strong the consumer demand for absolute daily liquidity is.”

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Bank of England to probe risks of Woodford-style funds

Bank of England governor Mark Carney last month slammed open ended funds.

He told the Treasury Select Committee that the funds were “built on a lie, which is that you can have daily liquidity for assets that fundamentally aren’t liquid”.

Carney said offering clients instant access to their money from funds that were illiquid could make investors complacent about risk.

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