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Fund giants stick with Hargreaves after Woodford debacle

Fund giants stick with Hargreaves after Woodford debacle

Hargreaves Lansdown shares have remained an attractive investment despite the controversy presently engulfing the company, according to two large investors.

Nick Train, who holds a stake of about 10 per cent in the FTSE 100 company via funds he manages and is the fund manager with the largest investment in Hargreaves Lansdown shares, said he remains convinced by the investment case for the business.

In his latest update to shareholders, Mr Train said he has taken advantage of Hargreaves' recent share price fall to increase his holding in the company.  

Mr Train's stake was worth just under £800m in February 2019, but fell by about £150m in the days after the Woodford Equity Income fund suspension on June 3.

Hargreaves Lansdown shares fell from £22 to £19 in the days following the suspension as investors worried about the reputational damage to the firm. The shares are presently (July 22) £20.62. 

The reason was that the suspension of the fund on cast the regulatory and political spotlight on the issue of platform buylists, as the fund featured on the Hargreaves Lansdown Wealth 50 buylist until the day it was suspended. 

The Financial Conduct Authority has even been urged to regulate buylists following the Woodford debacle.

But in his update to investors Mr Train wrote: "Of course we hope that HL will continue to prosper as a business and be a good investment for our clients. But we would say that, wouldn’t we? So I will limit my comments to a factual account.

"HL’s shares fell 15 per cent in June and were thus the biggest detractor to our performance over the month.

"We were not surprised by the fall and agree that HL’s reputation has taken a blow.

"We also agree it is appropriate that the media, regulator and politicians should review HL’s role in the affair, if for no other reason than to help us all understand and address areas where we can better manage risks and serve the needs of investors.

"As I write this report HL shares have recovered from the lows of June – up some 9 per cent from that level. We take this as investors coming to the conclusion that HL’s reputation can recover – over time. We agree and accordingly have added to our holding over the last few weeks."

Hargreaves Lansdown recently removed funds managed by Lindsell Train from its buylist, citing concerns about a perception of conflict of interest, due to the funds being substantially invested in Hargreaves Lansdown shares. 

Richard Marwood, who jointly runs the £2bn Royal London UK Equity Income fund, is another investor in Hargreaves Lansdown shares.

He said: "What we like about the company is it generates a lot of cash, but is very capital light, so doesn’t need to use that cash, so the dividend looks secure.

"We also think it has a major advantage in terms of customer service, you never hear anyone complain about the service, they undoubtedly have a PR problem now, but I think the company can still grow."