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Woodford survives Hargreaves Lansdown’s Wealth 150 fund list cull

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Written by: Danielle Levy
09/01/2019
Hargreaves Lansdown has slashed the number of funds on its preferred ‘Wealth 150’ fund list and negotiated further discounts from fund management groups.

The UK’s largest online investment platform has reduced the number of funds on its recommended list from 85 to 60.

The research team, headed by Mark Dampier, has taken the decision to keep Neil Woodford’s Equity Income and Income Focus funds on the list, despite a period of poor performance for the well-known fund manager (pictured).

The Wealth 150 has been renamed the Wealth 50 and will provide Hargreaves Lansdown’s clients with an average discount of 30% on the funds that are featured.

For example, Woodford Investment Management’s funds have an annual management charge of 0.75% if bought elsewhere. Hargreaves Lansdown had formerly negotiated a fee of 0.6%, which has now fallen to 0.5%.

Over the past 12 months, the Woodford Equity Income fund is down 14.3%, compared with a 9.6% fall by the average fund in the Investment Association’s UK All Companies sector, according to FE Analytics.

In a recent note, Hargreaves Lansdown’s investment analyst Kate Marshall admitted it had been an uncomfortable time to hold the Woodford Equity Income fund, adding: “Our own conviction has been tested.”

Nevertheless, she believes there is a greater probability that Woodford will turn around performance and deliver attractive returns over the years to come.

Fundsmith remains excluded

While Hargreaves used the overhaul to add three new funds to the list – Unicorn Outstanding British Companies, Artemis Global Income and Aviva Investors UK Equity Income – there was still no mention of top-selling Fundsmith Equity, managed by Terry Smith.

In spite of the fund’s consistent performance and ongoing popularity, it is understood that the exclusion is down to Fundsmith’s unwillingness to provide Hargreaves Lansdown with a discount on the 0.95% management charge.

Speaking to The Times, Smith criticised the online broker, arguing that the company picks funds solely on price rather than performance.

“Hargreaves Lansdown’s recommended funds continue to be chosen mainly for fund managers’ willingness to comply with a charging structure which enables Hargreaves Lansdown to maximise its own profitability, and not because they perform well for investors,” he explained to The Times. 

Alternatively, there are six global equity funds available on the Wealth 50. These include Lindsell Train Global Equity, managed by star manager Nick Train, which is available on the list for a 0.52% charge, which compares to its headline charge of 0.72%.

Hargreaves said the cheapest actively managed fund on the Wealth 50 is now available for 0.22%, while the cheapest passive fund (which simply follows the market) is priced at 0.04%.

Funds dropped from list

The revamp saw a number of well-known funds dropped from Hargreaves’ preferred list. These include one of the most widely-held bond funds, M&G Optimal Income.

Likewise, Liontrust Special Situations, Standard Life UK Smaller Companies and Jupiter European were other absentees.

“The new Wealth 50 is the result of months of extensive consumer research, during which we canvassed the opinions of thousands of investors, who told us they would prefer a simpler, more focused list,” explained Chris Hill, chief executive of Hargreaves Lansdown.

In response to research which suggested that some investors weren’t sure how Hargreaves Lansdown picked funds, the broker will now publish a clear and thorough explanation of their fund selection process, along with analysis of how their fund picks have performed.

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