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Why the greatest failure in investing history could happen again

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Why the greatest failure in investing history could happen again

The dealer, Britain’s largest, promoted the fund through its Wealth 150 after which Wealth 50 “best-buy lists” up till the day it was suspended. It additionally despatched out advertising materials to buyers reassuring them that Mr Woodford knew was succesful and had a superb long-run funding report.

Hargreaves Lansdown scrapped its platform charges for the fund in response to the fallout and has since ditched its Wealth 50 record.

May the same fallout occur once more?

The Woodford scandal highlighted the risks involved with unlisted stocks and illiquid assets, however consultants say historical past is primed to repeat itself.

Robin Powell, a shopper advocate, mentioned: “I’m removed from satisfied that classes have been discovered and there’s no doubt this might occur once more.

“The identical factor may occur to any fund closely loaded with unlisted belongings. There are nonetheless these which breach the regulator’s threshold on most of these holdings and there’s a hazard that we’re going to have comparable issues sooner or later.”

Underneath guidelines enforced by the FCA a fund is allowed a most of 10pc of its belongings in unlisted corporations.

Sure sectors are  notably susceptible. Rory Maguire, of analysis agency Fundhouse, mentioned: “Property funds usually spend money on belongings that can’t be offered over brief intervals and we have now seen comparable gating of funds in that sector over current occasions.

“Now we have suggested our purchasers to keep away from property funds because of this. In a world of declining rates of interest, we noticed substantial inflows into the property sector as property costs climbed and borrowing charges fell.

“We anxious that this might unwind in a means that labored towards the top savers inside these funds if, for instance, rates of interest rose.”

In a letter to buyers on Thursday, Hyperlink Fund Options mentioned its redress settlement had been entered into expressly on the idea that “there isn’t a admission of legal responsibility”. The corporate has beforehand mentioned it had acted appropriately always to guard the curiosity of all buyers within the fund and oversee regulatory compliance.

Hargreaves Lansdown declined to remark. Mr Woodford couldn’t be reached for remark. 

An FCA spokesperson mentioned: “As we have now beforehand set out, we had intensive contact with Hyperlink within the run as much as the suspension of the Woodford Fund. It’s the function of the agency, not the regulator, to handle the liquidity of the funds it’s liable for operating.”

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