The Hargreaves Lansdown Wealth 50 has come under criticism again as the Sanditon European Fund becomes the latest to be given the boot as the boutique that manages it winds down.
Sanditon announced this week it would transfer Chris Rice’s European fund to Crux’s Richard Pease and James Milne as well as Julie Dean’s Sanditon UK fund to Jamie Ward.
Hargreaves senior investment analyst Kate Marshall confirmed that day that Wealth 50 constituent Sanditon European would be removed from the buy list, noting the Wealth 50 already features Pease’s £1.7bn Crux European Special Situations fund.
“We feel it’s prudent to remove the fund from the Wealth 50,” Marshall said. “Pease also currently runs another fund on the Wealth 50, and we don’t feel both funds are needed on the list.”
She said Pease remains one of Hargreaves’ favourite fund managers in the Europe Ex UK sector.
“Overall, we believe we have a great track record of picking European fund managers,” said Marshall. “Our selections have on average outperformed both the European market and the average fund in the Europe sector over the long term.”
Sanditon European’s exit from the Wealth 50 comes four months after Woodford Equity Income was booted from the list after it suspended trading in June. Hargreaves was one of the fund’s biggest cheerleaders up until it was frozen, trapping 291,520 of its customers with direct or indirect exposure to Woodford, accounting for £1.6bn.
HL need to scrap Wealth 50 and fast
“Surely they get that they need to scrap it and fast,” said Fundexpert managing director Brian Dennehy in response to the latest Wealth 50 change. “They will get some respect for acknowledging the problem, and can start again with a blank bit of a paper.”
CWC Research founder Clive Waller said it is surprising Hargreaves even allowed funds from a “tiny little upstart” onto its premier list in the first place. “More interesting, how come it failed as one of the select (sic) Wealth 50?”
Portfolio Adviser understands that Hargreaves is agnostic as to house size when it comes to selecting funds for the Wealth 50 and focuses more on managers’ remuneration, team structure, investment conviction and company culture.
Rice had been on Hargreaves’ best buy list since its inception in October 2003, first appearing as the lead on the Cazenove European fund.
But with value managers out of favour, his performance with Sanditon European has struggled.
The fund, which launched in September 2014, is in the bottom half of IA Europe Ex UK performers over three and five years, according to data from Trustnet, returning 17.1% and 47.8% against the sector’s 18.2% and 57.9% respectively.
Over the last year performance has seen a pick up with the fund rising to the first quartile over three and six months, despite losing investors money over the last quarter.
Sanditon European Fund performance
| 3m | 6m | 1y | 3y | 5y | |
| Sanditon European | -0.6 | 5.3 | 8.3 | 17.1 | 47.8 |
| IA Europe Excluding UK | -2.7 | 2.1 | 7.3 | 18.2 | 57.9 |
Source: Trustnet
Hargreaves points to FCA support
The latest hiccup for Hargreaves’ Wealth 50 highlights the problem with buy lists generally “that they can never quite answer what it all means for a customer without giving advice,” said Mike Barrett, consulting director at the Lang Cat.
“On one hand it makes sense that they are monitoring the list and removing funds from the list when there is a manager change, but the question of ‘so what’ for anyone who is invested in the fund remains unanswered,” he said.
“Customers need to understand that whilst the best buy list might help narrow down the range of funds to choose from, they are still on their own for selecting and monitoring their investments to ensure they are suitable.”
A Hargreaves spokesperson told Portfolio Adviser that the FCA recognises best buy lists provide investors with better value and outcomes.
“Our research has resulted in the selection of funds onto the Wealth 150/50 which have on average outperformed both their relevant benchmark index and their sector average after charges, by 5.8% and 11.8% respectively over the period they have been on the Wealth 150/50 list,” they said.
