Run On The Fund

A “run on the fund” happens when a bunch of investors try to pull their money out of one investment fund all at once. When other investors cotton onto what the first group are doing, they pull their money out, which triggers other investors pulling their money out, and so on. It’s like a run on the bank, but with investment funds instead of checking and savings accounts. When this occurs, it’s usually because the fund is performing so badly that everyone wants to recoup as much as they can before it’s completely worthless.

Want an example? No prob.

Let’s consider the case of Woodward Investment Management, a big asset management firm in the UK. Back in 2014-15, Neil Woodward, the fund manager, invested heavily in companies he thought would profit as a result of Brexit. He convinced a lot of investors he was right, and was at one time managing upwards of £10 billion in assets. Buuuut...as it turns out, those companies he was so stoked about have not performed the way he thought they would, in part because the whole Brexit thing didn’t go according to anyone’s plan.

As the fund’s performance started faltering, investors started pulling out. It faltered more, and more investors pulled out. Then it really started tanking in 2018-19, which caused a mass investor exodus, and when the fund dropped to about £3 billion, Woodward froze the account so no one else could take any money out.

That’s a seven billion pound run on the fund. We can’t even imagine managing that much money, let alone losing it. We bet Mr. Woodward had a hard time imagining himself in that situation as well.