Investments 

Peter Hargreaves blasts regulators over fund competition

Peter Hargreaves blasts regulators over fund competition

Hargreaves Lansdown co-founder Peter Hargreaves has said new fund management firms will find it extremely difficult to launch due to “draconian” levels of regulations.

Mr Hargreaves, who stepped down from the HL board in 2015, has invested around £25m in the Blue Whale Growth fund, a product launched by Blue Whale Capital, a firm he founded six months ago.

He said he has backed the fund due to the level of faith he has its manager Stephen Yiu. 

Other managers who want to strike out on their own are not so fortunate, he said, claiming thy are held back by what he argued are overly restrictive rules.

“There are lots of guys out there who want to be a fund manager and to run their own show. But it shouldn’t be that only someone like myself [who can provide the seed capital to launch a new fund] can do this.

"The level of regulation is draconian and the cost is high”

Mr Hargreaves, who has been involved in the asset management industry for around four decades, said it used to be "relatively easy" to launch a new fund, " but not now".

"The private investor is of course very important but it is the discretionary fund managers who control the market now, and they are not able to buy new fund launches now.

"This is because if they buy it, they have to show they have ticked all of the boxes, and one of those boxes is likely to be about a track record.

"So unless a fund manager has worked at a very big firm, and the track record has their name on it, they can’t do it.

"Advisers are hog-tied in terms of what they can recommend.”

He added even his connections in financial services industry have been of limited benefit.

“It is no use knowing 5,000 brokers, if they can’t buy the fund," he said, and branded regulation "a tax on the law abiding". 

The Blue Whale Growth fund, a global equity product, has been on the market for six months, and has assets of £43m, with the first £25m having come from Mr Hargreaves personally.

Other smaller, newer players in the fund industry have also criticised barriers to entry.

As FTAdviser has previously reported, Dan Brocklebank, UK director of Orbis UK,  a fund management company, told the Financial Conduct Authority (FCA) that platforms were restricting competition in the UK market.

Mr Hargreaves said: “Of course it is a problem for new firms. Platforms have to see a certain critical mass before they put a fund on, as it costs money, they have to download the prices and maintain it.”

He said he is happy with the level of exposure his product has on platforms.

Mr Hargreaves views on the subject differ from those of Steve Lansdown, his co-founder at Hargreaves Lansdown who said he doesn’t believe cost is a valid reason for a platforms to decline to list a fund.