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Hargreaves Denies Outflows, Fidelity Blocks Woodford Investments

As the Woodford saga continues, Hargreaves Lansdown has denied mass outflows from its funds and Fidelity has stopped new investments into Woodford Income Focus

Holly Black 18 June, 2019 | 1:41PM

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Hargreaves Lansdown has denied reports of mass outflows from its multi-manager funds, which invest in Woodford Equity Income.

The investment giant, which holds the fund in six of its 10 multi-manager portfolios, has reportedly seen investors withdraw millions of pounds from the strategies since the suspension of the flagship Woodford fund earlier this month.

Hargreaves Lansdown is the largest investor in the embattled fund, which accounts for some 12.8% of its £2.9 billion HL Multi-manager Income & Growth portfolio and 9% of its HL Equity & Bond fund. The funds are down 8.1% and 3.6% respectively over the past year.

But Hargreaves Lansdown said reports that investors were ditching the multi-manager funds were untrue. It said there had been “very minimal outflows” from the portfolios since the suspension of the Woodford Equity Income fund.

Hargreaves Lansdown said: “Over the past year, the average monthly flows into the funds are positive. Any redemption on our Multi-Manager portfolios would be easily met through cash first and then through taking profit from positions that have done well.”

But some commentators have said it would not be surprising if investors were to ditch their investments in the multi-manager range, which has heavily backed the Woodford funds.

Brian Dennehy, managing director at Fund Expert, said: “Frankly, it is rare that investors should be in multi-manager funds anyway, due to the higher charges and usually mediocre performance. If Woodford serves as a wake-up call for investors in such funds then it has served a useful function.”

While Hargreaves Lansdown cannot buy or sell shares in the Woodford Equity Income fund when it is suspended, the firm has ditched its holdings in the smaller Woodford Income Focus fund, which is still open to investors.

However, rival investment platform Fidelity has made the decision to stop new investments into the Woodford Income Focus fund. Investors using the Fidelity platform will still be able to withdraw money from the fund but will not be able to make new investments.

A Fidelity spokesman said: “We believe this is in the best interest of our platform clients unless and until uncertainties are resolved, and we are not restricting withdrawals from Woodford Income Focus.” Fidelity said it was a temporary measure and it does not affect the Woodford Patient Capital investment trust.

Under Fire

Hargreaves Lansdown has come under fire in recent days for its decision to continue promoting Woodford Equity Income on its Wealth 50 list of favourite funds even as its performance lagged and its exposure to unquoted and illiquid investments ramped up.

It is understood the firm had raised concerns with Woodford Investment Management about the changing shape of the portfolio up to two years before the fund suspended trading, but still continued to publicly back it. 

Woodford Equity Income is also among the largest holdings in the HL Multi-Manager Special Situations Trust, accounting for 4.9% of its £1.8 billion of assets. It makes up 4.5% of the £1.2 billion HL Multi-Manager Balanced Managed Trust.

Nicky Morgan, chair of the Treasury Select Committee, last week wrote to the Financial Conduct Authority raising concerns about the suspension of the Woodford fund. She also wrote to Chris Hill, chief executive at Hargreaves Lansdown, to ask questions about the firm’s links with the fund.

Holly Mackay, chief executive of Boring Money, said the debacle had knocked consumer trust in the investment industry and in best buy lists. Research carried out by the firm found that 77% of people scored the investment industry as 6 out of 10 or lower for trust. Some 25% of respondents said their confidence in fund best buy lists was 2 out of 10 or lower.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

About Author

Holly Black  is Senior Editor, Morningstar.co.uk

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