Woodford suspension costs Hargreaves £360k a month

Woodford suspension costs Hargreaves £360k a month

The suspension of the Woodford Equity Income fund is costing platform giant Hargreaves Lansdown £360,000 a month, its latest accounts have shown.

Hargreaves Landown said on June 5 it was waiving its 0.45 per cent platform charge on investments in the fund in light of its suspension two days prior.

In its annual results statement released yesterday (August 8) the firm stated: "The suspension commenced in June 2019 and we took the decision to waive our platform fee where clients directly held this fund. The loss of revenue is estimated at £360,000 per month."

Woodford Equity Income was suspended on June 3 following a period of severe underperformance and outflows running at £9m every working day in May.

The suspension has since been extended and the fund is not scheduled to re-open until at least December, meaning Hargreaves could forgo as much as £2.1m in revenue.

But the platform continues to receive a fee on its range of multi-manager funds which are also invested in the Woodford Equity Income fund.

The platform had called on Woodford Investment Management to follow suit and waive its fund management fee but the fundhouse declined.

Clients of Hargreaves Lansdown received a discount on the annual management charge of the Woodford Equity Income fund, as they do for all of the funds on the Wealth 50 list, which the fund featured on right up to its suspension.

Hargreaves' chief executive Chris Hill and chief financial officer Philip Johnson meanwhile agreed to waive their bonuses for this year as a result of the Woodford debacle

Last year Mr Hill and Mr Johnson received bonuses of £1.7m and £997,000 respectively,

Neil Woodford’s stricken Equity Income fund remained on Hargreaves Lansdown’s Wealth 50 buylist, despite three years of underperformance at the end of which it was the absolute worst performer in the IA UK All Companies sector.

In the weeks after the suspension Mr Hill faced questions from MPs on the relationship between his firm and Woodford Investment Management and the role of the firm's buylists.

But he insisted that funds were chosen based on performance, and not on the basis that a fee discount be granted to its clients.

Meanwhile Hargreaves' results showed a profit of £305.8m for the year to June 30. The company had assets under administration of £99.3bn, a rise of 8 per cent over the year, and 1.2m clients. Total revenues were £480m. 

As the fund suspension only started on June 3, this set of results was largely immune from its impact.