How investors can avoid a fund liquidity crunch
Investors were rocked by problems at household fund names, such as Woodford and M&G, last year. So here I take a quick look at what went wrong and how investors can mitigate the risk of a repeat.
Open ended nightmares?
Certain types of open-ended fund are more likely to suffer this problem, albeit it can affect almost any type of open-ended fund where the underlying assets are illiquid.
Ways to invest
Anyone worried by the events of last year could consider three routes to achieving a diversified exposure, all of which I have covered previously as Killik Explains videos. Each has its pros and cons, so you may also wish to discuss them with an Adviser. There is also further information available in the Winter 2020 issue of Confidant on pages four and five. In summary;
· Stick to open ended funds that make good disclosure about what they hold
· Consider an alternative structure that achieves a similar aim, such as an Investment Trust
· Look at direct equity investing within a portfolio