"Big questions remain" as to whether the asset management industry has learned its lesson from the collapse of Neil Woodford's LF Woodford Equity Income fund this time last year, according to investment professionals, who warn that liquidity mismatches in open-ended funds remain the "elephant in the room".
On 3 June 2019, so-called star manager Neil Woodford's LF Woodford Equity Income fund suspended trading following withdrawals of approximately £560m over a four-week period, which was exacerbated by the vehicle's significant proportion of illiquid holdings.
On 15 October, Link Fund Solutions (LFS), the firm's authorised corporate director (ACD) sacked Woodford and wound up the flagship fund. Woodford shut his entire business down hours later.
The fund is now technically run by LFS and named LF Equity Income, although Park Hill is responsible for shifting its £500m portfolio of illiquid assets, which remain in the fund. BlackRock was tasked with repositioning the quoted part of the portfolio at the end of last year.
Adrian Lowcock, head of personal investing at Willis Owen, said selling this unlisted portion of the portfolio was "always going to be problematic".
"These investments were hard to sell in 2019 but now in 2020, with the UK facing the deepest recession in history along with most of the rest of the world, that outlook has worsened," he warned.
"Holders of the fund may find that the remaining investments are almost worthless, and they may not get much back after costs on any further disposals by the fund."
As frustrated investors continue to wait for their money back, Ryan Hughes, head of active portfolio management at AJ Bell, said "big questions still remain about whether the asset management industry has learned its lesson" and "where the FCA could still take stronger action to improve consumer confidence."
"The risk of a liquidity mismatch remains a real threat to investors so long as potentially highly illiquid and unquoted assets are allowed to be held in daily traded open-ended funds.
"A number of fund managers have attempted to address this, but unquoted companies are still held in funds and there has been little word from the FCA about an outright ban."
He added that there has not been "any public industry discussion" on the appropriateness of daily dealing for those funds that hold less liquid assets, and that "this has been highlighted once again by the recent suspensions in the property sector."
"It is the elephant in the room and there is no first mover advantage for asset managers to do this, meaning it will have to be led by the regulator," he said.
Sam Slator, head of communications at Chelsea Financial Services, said there are "very few managers" who invested in unquoted illiquid assets prior to the Woodford scandal and expects there will be "even more caution" exercised now, with those areas of the market left to a "very small number of managers with skills in that area".
"Certainly at the height of the [last crisis] liquidity was an issue - but in everything, not just unquoted stocks; even government bonds were hard to buy and sell," she said.
"Investors need to be aware they are holding these [types of] stocks in their portfolio and keep an eye on flows in case the fund goes into redemption."
Ben Yearsley, co-founder of Fairview Investing, said the Woodford saga has "clearly hardened the view that unlisted holdings should not be held in daily-dealing open-ended funds".
"It has also made it harder for a ‘star manager' to go it alone," he added. "Boutiques as a structure are absolutely fine, but there needs to be strong management and culture within that firm."
A more holistic fallout from the Woodford saga, according to Boring Money's Holly Mackay, is that retail investors' trust in asset managers has now been "damaged in a wholesale manner after the closure of Woodford's equity income fund, the column inches and the Panorama programme".
"In February this year, three in ten people reported feeling more negative about the investment industry over the last 12 months. Trust goes hand in hand with clarity and understanding, but I do not think we have seen any asset manager really try to tackle the trust gap, and spend either money or senior brain power on genuinely trying to fix this," she reasoned.
"The wave of recent Value Assessments are a case in point - trust, clarity and knowing what to expect are among the largest contributors of value for the end investor. And yet these fundamental elements of value barely get a look in when it comes to the first cohort of statements. Sometimes it feels as though we have learnt nothing from the mistakes of the past."