In a note published on Thursday, chief executive Chris Hill defended the research team’s decision to recommend the UK equities fund in Hargreaves’ Wealth 50 buy list, pointing to previous periods of underperformance Neil Woodford has recovered from and the fact he had experience investing in small-cap companies at Invesco.
Hill (pictured) also highlighted that Hargreaves had raised concerns about liquidity in the portfolio as far back as November 2017.
HL clients are ‘probably more than a little angered’
However, he concluded the note by saying: “We are angered by the lack of resolution so far but remain actively engaged with the regulator, Woodford, Link and the Treasury Select Committee to ensure that all investors, not just those invested through Hargreaves Lansdown, are able to access their investment as soon as possible.”
Nutmeg chief investment officer Shaun Port said Hargreaves clients had the right to be much angrier than the platform. “The nearly 300,000 Hargreaves Lansdown customers who invested in this fund through the investment platform are probably more than a little angered,” Port said.
“We’ve seen that Hargreaves Lansdown has attempted to defend its due diligence process, but the reality is that they’ve said they were concerned about the fund in November 2017 – so, why did they sit back and watch the situation steadily worsen for a further 18 months? All the while, continuing to promote the Woodford fund on their best buy list.”
He said the liquidity profile of the fund as far back as June last year, was akin to a hedge fund that required 90 days’ notice to redeem and was unlikely to be appropriate for the average retail investor on the platform.
‘They have to accept the brickbats’
Hargreaves needs to accept the good with the bad, according to Clive Waller, managing director at CWC Research.
“The Wealth 50 indicates to customers that theses funds have been researched and are recommended. If a firm makes recommendations, they get the credit when it works. They have to accept the brickbats when it doesn’t.
“Woodford has been a disaster for investors, for the industry as a whole and for customers. That investors are locked into a suspended fund is as bad as it gets. The research agencies must take a good look at their due diligence and not just focus on performance.”
Gbi2 managing director Graham Bentley said “angered” was an interesting choice of term for Hargreaves that it was obvious the fund would have to remain suspended in the near term.
“That’s clearly for their investors’ consumption,” Bentley says. “It implies resolution is slow since the suspension and so not their fault, but of course the fund cannot open until liquidity is increased – and on a significant proportion of the fund that may take over six months. Neither the Treasury select committee nor Link can do anything about that.”