Financial Conduct Authority (FCA) chief executive Andrew Bailey said in an interview with the Times that he did not think mixing institutional and retail investors in funds is ‘“is necessarily a good idea” and the matter will have to be examined “when the dust settles” after the saga.
Woodford’s flagship Equity Income Fund (WEIF) was frozen in June after becoming overwhelmed by investor withdrawals.
The nail in the coffin appeared to be Kent County Council attempt to withdraw £263m of pension investments from the £3.7 billion fund.
This was unable to meet the redemption request because of the large proportion of illiquid assets in its portfolio.
Bailey commented “That’s why I raise the question of mixing retail and non-retail. That was a relatively big part of the residual fund. Even if technically you could have liquidated holdings to meet that order, you are not satisfying the collective investment test,” he added.
Bailey said the matter will have to be examined “when the dust settles” after the saga. “It has caused me to think, I don’t think [mixing retail and institutional investors] is necessarily a good idea.”
Bailey also defended the FCA’s stance in the Woodford scandal, saying: “the suggestion we did nothing was wide of the mark”.
As a result of the scandal, Woodford closed his investment company earlier this month after being fired as head of WEIF by the fund’s administrators.
In a speech given in the City last week, Bailey said “part of the criticism” faced by the watchdog “is justified”. “The public needs to receive clear meaningful disclosure on the risks they are taking,” he said.
Responding to Bailey’s speech, Investment Association head Chris Cummings said the organization wants “to see the investment management industry and the regulator striking the right balance between investment risk and investor protection”.
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