Liquidity 2: the blame game

If there is to be a widespread liquidity crisis in the UCITS fund sector, or indeed in other areas of the market, how much blame will be apportioned to the boards of the funds that run into trouble?

This is where regulators will look to for answers. What about investors? It is interesting to note that in the Woodford crisis last year Link seemed to get as much blame for what happened as Neil Woodford did. (Link is the ACD, the corporate director, for Woodford Investment Management.) If the worst comes to the worst one can imagine many lawsuits being taken out against the directors of funds that run into trouble whilst, at the same time, these individuals are also having to explain themselves to their regulators.

No one, of course, can blame the directors of funds for the market crisis caused by this coronavirus pandemic. The criticism that will likely be levelled against them is that they allowed managers to hunt for higher yields too aggressively in this low interest rate environment before the crisis. It is unlikely to be just Woodford who was allocating to illiquid and potentially higher yielding areas of the market in order to eke out a decent return.

To read more on this story see the April issue of The NED.