Woodford Investment Management  

FCA questions buylist role in Woodford suspension

FCA questions buylist role in Woodford suspension

The Woodford Equity Income fund’s position on the Hargreaves Lansdown best buylist could have contributed to the fund’s suspension, according to the Financial Conduct Authority.

Speaking at a press conference after the regulator’s annual meeting today (July 17), Andrew Bailey, chief executive of the FCA, said it was a "valid question" as to whether the effect of being on the Hargreaves Lansdown’s best buylist had caused a large influx into the fund that exceeded the investment strategy.

Mr Bailey said the size of Hargreaves Lansdown’s base could have caused an inflow of funds that put a strain on the ability to manage the fund’s strategy, contributing to the end result for Woodford’s flagship fund.

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Mr Woodford’s fund was on Hargreaves Lansdown’s Wealth 50 buylist from 2014 right up until the day it was suspended on June 3.

Mr Bailey pointed to the growth of assets in the fund over the past five to six years, noting there was "quite a big curve" that "goes up very rapidly and then of course, it’s now come down".

He added: "So I think [whether the Hargreaves Lansdown buylist had an impact] is a valid question to ask."

The fund remained on the platform’s best buylist despite an extended period of poor performance from the fund and Hargreaves Lansdown has since confirmed it had concerns about the fund for 18 months before its eventual suspension.

In fact, the fund was the absolute worst performer in the IA UK All Companies sector over the three years prior to its suspension and lost 20 per cent in the year before.

Mr Woodford’s £3.75bn fund was suspended on at the start of June over liquidity concerns, following outflows of £9m every working day in May.

Following the closure, the FCA was urged to probe the way platforms ran their fund buylists amid concerns of potential vested interest.

Shaun Port, chief investment officer at Nutmeg, said vested interests between fund houses and platforms' best buylists should be investigated, while Bella Caridade-Ferreira, consultant at Fundscape, said she believes fund buylists should be regulated altogether.

But Christopher Woolard, executive director of strategy and competition at the FCA, who was also speaking at the meeting, thought buylists weren’t "wholly inappropriate" as a source of information but added the issue of transparency around their creation was an important one.

He told the press conference: "We looked at the question of best buylists when we looked at the role of platforms very recently.

"We came to the conclusion that best buylists, provided they are transparent, are impartial of how they’re put together and can play a helpful role for mass-market investing."

Mr Woolard said the Woodford saga had "caused the FCA to pause on" the issues that surround that sense of transparency and the claims there were "no interests here".

Hargreaves Lansdown and Woodford Investment Management did not want to comment on the matter.