GoSeigen wrote:Charlottesquare wrote:Alaric wrote:Suppose it were known that a large institutional holder was having to sell holdings and furthermore that this holder had concentrated on building positions in a relatively small number of shares. Would the news have an adverse effect on the prices of shares known to be held?
This is in the context of the Woodford suspension and whether it has a knock on effect.
Possibly/probably.
Of course 2008 et al already begged the question re unit trusts and similar and their liquidity, one of the reasons I much prefer Investment Trusts. (Though I do hold one poor liquidity IT with a real gaping spread (Athelney))
Would not the converse be supposed: that the holder was off-loading shares
because the share price was depressed? His masters after all are a bunch of sheeple sent to him by Hargreaves Lansdown et al. Hence his drastic action of prohibiting future withdrawals.
GS
They play off one another, dropping unit price leading to redemptions, redemptions push liquidity issues, lack of liquidity forcing fund disposals thus maybe (maybe not) weakening fund values ,but certainly causing issues if what is more and more left are illiquid assets as these always tend to suffer from the risk of pricing issues in fraught/short notice markets, as we saw in the banking crash with CDOs etc
My point is more that funds that require to finance their own reduction via redemptions have an inherent weakness, hence why I avoid, an IT getting into bother with its investments merely means others in the market take the losses if they want to sell, but when the investments held by the fund need liquidated then those prepared to be continuing holders as well as the sellers take the pain ,despite those prepared to hold longer term possibly having a different view re the underlying investments- in effect the ongoing holders become forced sellers of components of their investment within the fund and they are forced to hold a differently invested fund than they previously held.