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Hargreaves Lansdown drops fee on Woodford fund

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Hargreaves Lansdown has said it will waive its platform fee on Woodford Equity Income while trading in the fund is suspended.

The UK’s largest fund platform has also called on Woodford Investment Management to do the same and cancel fees.

Emma Wall, head of investment analysis at Hargreaves Lansdown, said: We have taken the decision to waive the platform fee on the Woodford Equity Income fund while dealing is suspended, effective immediately.

“We do not think it is fair to charge our clients a fee while they cannot trade in the fund. This is a frustrating and difficult time for clients and we are doing what we can to support them.

“We have been in communication with Woodford Investment Management to explain why we think this is the right thing to do and have put pressure on them to do the same.”

Trading in Neil Woodford’s flagship fund was suspended on Monday after an increase in demand from investors wanting to withdraw their money.

Investors won’t be able to buy or sell units in the fund for at least 28 days.

Woodford said the decision to suspend trading was taken to “protect investors”.

Yesterday, Hargreaves Lansdown removed both Woodford Equity Income and Woodford Income Focus from its influential Wealth 50 recommended list.

Hargreaves Lansdown clients have been major supporters of the funds: according to the most recent set of accounts, Hargreaves Lansdown holds 31% of the Equity Income fund at 31 December 2018 and 62% of the Income Focus fund.

The Wealth 50 is Hargreaves Lansdown’s shortlist of its experts’ favourite funds. It looks for ‘a distinguished career’, ‘a fantastic track record’ and a robust process.

This morning, Woodford apologised to investors for suspending trading.

He said: “The situation that we confronted was that we were seeing a lot of outflow in the portfolio. As a result of that increased level of redemptions, we were seeing the stock market anticipating that we would have to be sellers of stocks to meet those redemptions, and we felt the prices that we would be able to achieve in order to meet those redemptions would be disadvantageous for our investors.”

Disappointing performance

The Woodford Equity Income fund has come under pressure after a prolonged period of disappointing performance and a run of bad news at a number of the companies held in the portfolio. Over the past three years, the fund has posted a loss of 18.1 per cent which compares to 23.3 per cent return by the average fund in the Investment Association’s UK All Companies sector.

This poor performance has led to a continual flow of money out of the strategy. The fund has shrunk from £10.7bn in the summer of 2017 to £4.3bn at the end of April.

While the firm has been able to accommodate these redemptions by selling shares in more liquid FTSE 100 stocks, its allocation to unlisted stocks – which is understood to have previously amounted to 18 per cent – has created problems.

In response, Woodford has pledged to take this allocation down to zero. However, this exercise will take time because of the illiquid nature of these investments. The fund manager said the suspension will provide the team with time to complete this process.


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