Hargreaves Lansdown has rated its £149m Multi-Manager Asia & Emerging Markets and £732m Strategic Bond funds as ‘poor value’ in its latest value assessment report.
Both funds were given a ‘red’ rating for performance, meaning they will undergo changes in order to improve value to investors.
Of the 13 HL funds assessed, three strategies were given an amber rating which means they have delivered value to investors but require attention.
Those funds were the HL Multi-Manager High Income, HL Multi-Manager UK Growth, and HL Multi-Manager European.
The assessment of value (AoV) process has been mandated by the Financial Conduct Authority (FCA) since 2019, requiring firms to assess their product ranges on whether they have delivered value for money for investors.
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Strategy overhauls
On the Asia & Emerging Markets fund, HL noted performance was “disappointing” due to “poor stock selection”, as it missed out on a rally favouring Taiwanese and Indian stocks over cheaper Chinese and Hong Kong-listed shares.
The fund was down 3.3% in 2023, compared to the average IA Specialist sector fund which rose 7.9%.
HL said that it had removed two managers on the fund in order to improve outcomes in the longer term. They have added Invesco Global Emerging Markets as part of those changes.
“We currently believe this fund is not delivering value to investors through performance. The upgrades to the investment processes and the changes detailed have been made to enhance future performance and we continue to review the fund proposition,” HL noted.
On the red-rated Strategic Bond strategy, HL added: “Over the last 12 months we have executed a near-total overhaul of our portfolio. This largely reflects the significantly more attractive yields on offer from bonds compared with a year earlier. It also reflects a desire to have more control over the fund’s allocations.
“Previously, we delegated such decisions to managers of ‘strategic’ bond funds. Going forward, we will decide how much we wish to allocate to government bonds, investment grade corporate bonds, higher-yielding debt and bonds from emerging markets.
“We believe these changes will allow us to deliver the fund’s objectives and to improve long-term performance relative to the IA £ Strategic Bond peer group aided by high-calibre bond fund managers, including those running global funds and with a broad opportunity set.”
