Terry Smith accuses industry of failing to grasp platforms’ role in Woodford

Reported today on Portfolio Adviser

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Terry Smith accuses industry of failing to grasp platforms' role in Woodford

Fundsmith founder Terry Smith has shone a spotlight on the role platforms played in driving demand for daily-dealing open-ended funds that contributed to the Woodford Equity Income fund suspension.In the final pages of his annual letter to Fundsmith Equity investors, which is primarily focused on the performance of the fund, Smith examined various issues at play in Neil Woodford's demise."It seems impossible to comment upon developments in equity investing in the UK in 2019 without mentioning the word Woodford," the global equities manager said, stating he had previously avoided doing so out of courtesy to the fellow high-profile fund manager but now saw no way he could exacerbate the situation further.Platforms demand daily-dealing fundsSmith detailed a number of issues he thought had contributed to Woodford's problems, but highlighted one for slipping under the radar in the extensive coverage of the fund suspension.He said: "Amongst the causes which commentators seem to have failed to realise is the effect which the rise of investment platforms has had on this, and indeed other areas of the fund management industry."It is now the case that no one can expect to effectively market an open-ended fund on any of the major investment platforms which retail investors and wealth managers use to manage their investments unless it is a daily-dealing fund."As none of these platforms will admit an open-ended fund, unless it allows daily-dealing, that is what fund managers will use even for strategies for which this structure is wholly inappropriate."The Bank of England is currently in the process of assessing the financial stability affects of liquidity mismatch in daily-dealing open-ended funds. The F

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