RE: Great discount5 Mar 2021 09:37
Abba, there is also the difference in structure between funds like Woodfords and investment trusts like SMT.
SMT is closed ended, so big holders can't "pull money out", all they can do is sell their shares to someone else. SMT would not have to sell any underlying investments if this happened. The share price would fall, but it wouldn't be a run on the exit and big liquidity problems like in Woodfords case.
In open ended funds, like woodfords income fund, he had to sell underlying holdings to give people their money back. When these companies are unlisted or small cap, it can be hard to find a buyer, so he had to sell at a big loss.
Woodford also had an Investment trust that went belly up, but i think this was mainly due to association, rather than him having to sell investments held in that trust.