Hargreaves Lansdown managers’ giant stakes in several funds that appear on its newly overhauled recommended funds list have raised eyebrows with commentators saying it should be more upfront with clients about potential conflicts following the blow-up of the Woodford Equity Income fund.
Four funds that appear on Hargreaves’ revamped Wealth Shortlist, including a new entrant, are funds it owns significant stakes in via its Multi-Manager range, the Sunday Times reports.
Morningstar figures cited by the newspaper show the HL Multi-Manager Strategic Bond fund owns a 25% stake in the Artemis Corporate Bond fund. Stephen Snowden’s (pictured) £294.4m investment grade fund was one of 17 funds that was added to Hargreaves’ 68-strong buy list, despite only launching last October.
HL Multi-Manager Strategic Bond managers David Smith and Richard Troue also own 24.8% of the Morgan Stanley Corporate Bond fund, another Wealth Shortlist fund.
The Morningstar analysis also found Hargreaves’ managers own 12.2% of Eden Tree Higher Income and a 24.6% stake in the Axa Framlington UK fund, run by Chris St John.
Last week Hargreaves announced it had overhauled its Wealth 50 list with enhanced governance and oversight to the fund selection process.
Crossover between its best buy list and Multi-Manager range has been amplified since the suspension of the Woodford Equity Income fund. Neil Woodford’s fund featured in six of Hargreaves’ multi-manager portfolios, making up 6.2% of the range’s total assets, and was also a constituent of the Wealth 50 buy list right up until the fund suspended dealing.
See also: Industry questions why Hargreaves assets in Woodford got so high
Hargreaves should be upfront with clients about owning giant stakes
Langcat consultant Mike Barrett said as well as managing potential conflicts of interest internally Hargreaves should also be upfront with clients about owning giant stakes in funds that appear on its buy list.
“The Wealth Shortlist discloses when a fund invests in Hargreaves Lansdown, for example Baillie Gifford Managed, however there appears to be no such disclosure for the Artemis Corporate Bond fund, to inform investors of the stake held by the HL MM Strategic Bond fund,” Barrett notes.
Open Money CEO and co-founder Anthony Morrow said “it would be strange” if there wasn’t crossover between funds on the Wealth Shortlist and Hargreaves multi-manager range.
“In many ways you would hope that the fund management arm would follow the same investment selection criteria that HL promotes through its DIY arm,” he said.
“Regardless of that it’s still a big exposure to a single fund, especially an actively managed fund,” Morrow said of Hargreaves’ stake in the Artemis Corporate Bond fund.
The Artmeis Corporate Bond fund features in the HL MM Strategic Bond fund’s top 10 holdings, accounting for 6.2% of the £955m fund.
Hargreaves head of investment Emma Wall reiterated that since the overhaul of the best buy list fund “decisions for the Wealth Shortlist and Multi–Managers range are made by two entirely separate teams, independently of each other”.
She added: “We have introduced additional layers of challenge and oversight for both of these teams’ separate processes, including a new conflicts committee. We’ve improved the governance of the proposition team and created a new governance committee for the Wealth Shortlist selection process.”
