Since trading in Neil Woodford’s Equity Income Fund was suspended in June, Hargreaves Lansdown (HL.) has largely held its own.
To many analysts and commentators, this has come as a surprise. Through its multi-manager funds and “Wealth 50 list” the retail investment platform provider remained a staunch backer of the fabled stock-picker, despite external criticism, rising redemptions and poor performance in Mr Woodford’s flagship fund. But despite an initial wobble in its share price, and contrition from its management team, Hargreaves maintained its operational momentum in the three months to September, adding £1.7bn in net new business.
With news that the fund is to be wound-up, Hargreaves could soon face its greatest test in this messy saga.
Link Asset Services, acting as corporate director of the equity income fund, this week sacked Mr Woodford as manager, and appointed BlackRock and investment bank PJT to expedite the sale of the underlying assets, thereby exacerbating the possibility of further losses.
Had they wanted to, the 291,520 Hargreaves customers with direct or indirect holdings in the Equity Income Fund could have shown their frustration and moved the rest of their portfolios elsewhere. If anything, the platform’s recent decision to waive exit fees has made this process easier.
But the addition of 35,000 net customers in the last quarter suggests that affected customers have blamed Mr Woodford, rather than the platform which recommended and secured discounts on his funds. But with the push by Link to “return part of investors’ cash as soon as possible”, Hargreaves shareholders will be eager to know whether the true fallout has simply been delayed.
One reading of Hargreaves ‘third quarter results is that inflows from existing clients actually softened, as the lion’s share of new business came from direct back book transfers from JP Morgan and Baillie Gifford, and flows into the group’s “active savings” portal. The platform said investor nerves had been inflamed by “Brexit and political uncertainty in the UK and wider global macro issues such as trade tariffs”.
