Other “cockroaches” lurk behind Woodford and Natixis

Far from being idiosyncratic instances of mismanagement, recent woes at Woodford and Natixis funds in the UK and France suggest a deeper malaise, MI2 Partners says on July 2. There is never a single cockroach, the piece says, arguing that scratching beneath the surface shows that there are dozens of funds that promise instant liquidity and have used liquidity transformation to produce a fiction of lower volatility. If a bit-player like Woodford is struggling to find liquidity, the idea that behemoths like Pimco or Blackrock can sell their holdings is seen as absurd. The implications are far-ranging: algorithmic trading, risk parity funds, private equity and even buybacks funded by corporate bonds are all vulnerable if the current extremely benign conditions change.