Downplaying fears of a possible Woodford contagion effect, the D2c firm assured readers its billion pound multi-manager funds are operating as normal and are “highly diversified”.
Neil Woodford’s flagship Equity Income is one of over 60 funds that makes up the ten multi-manager portfolios.
It is held in six of Hargreaves’ portfolios, including Balanced Managed, Special Situations, Income & Growth, Equity & Bond, UK Growth and Strategic Assets and the weighting in these portfolios ranges from 2.6% to 12.4%. The fund makes up 6.2% of the total assets in the the multi-manager range.
“As a result, the negative impact of one of these funds underperforming, or in this case having dealing suspended, is limited,” Hargreaves explained in a note posted to its website on Monday.
“This means that in the event you would like to buy or sell any of our Multi-Manager funds we have the units or cash available to meet your request.”
Martin Bamford, managing director at Informed Choice, said as Woodford only makes up a relatively small part of the Hargreaves multi-manager funds, the firm should be able to meet redemption requests under normal trading conditions.
But, he added: “If however there is a rush for the exit doors, then investors in these funds will face exactly the same issue as investors in the Woodford Equity Income fund, as the liquidity just isn’t there.”
‘Very unlikely to gate’
That said Chelsea Financial Services managing director Darius McDermott said it is unlikely Hagreaves’ multi-manager funds will have to gate to cope with clients pulling their money out.
“I don’t know whether the HL funds are enjoying inflows or themselves suffering redemptions,” he said. “The performance hasn’t been great recently, so it may well be that they are in redemptions – I can’t say for certain. But it is very unlikely that that the Hargreaves multi-manager funds would have to gate themselves.”
“I think it’s unlikely that HL have lost investor confidence to such an extent that they will face mass redemptions from this fund,” Bamford agreed.
“They might experience investors questioning why a position like this was allowed to materialise within the multi-manager fund, which should have been subject to even greater scrutiny than their recommendation to buy Woodford in the Wealth 50.”
A Hargreaves spokesperson told Portfolio Adviser that outflows from the multi-manager funds have been minimal and in line with normal trading patterns.
Lessons to be learned
This news from Hargreaves follows an apology by its CEO Chris Hill (pictured) earlier this week stating it would be keeping investors informed.
Hargreaves reiterated in the article posted to its website that it shares the “disappointment and frustration investors in Woodford Equity Income feel at this time and would like to apologise to all clients who have been impacted by the recent problems”.
“And, once the dust settles, we will undertake a thorough review of what happened and see what lessons can be learned,” it said.
“In the short term, however, our priority is to do everything we can for clients affected, including those in our Multi-Manager range.”