Avoiding the same mistakes: Three takeaways from Woodford fund suspension

Tackling poor liquidity

Iain Barnes, head of portfolio management at Netwealth, offers three lessons to learn from the trading suspension of Neil Woodford's Equity Income fund.

Liquidity and the three pot theory The issue of poor liquidity in everyday funds rears its head once again. We have now seen two high profile instances in the past year of funds managed by stars and sold to unsophisticated investors 'gating' assets [GAM and Woodford], as a result of a mismatch of liquidity. Unusually, the 'gating' has not taken place at a visible point of crisis, in contrast to hedge funds during the credit crisis and property funds after the Brexit referendum. Evidently, in an effort to differentiate themselves from the pack of similar managers, the temptation to h...