Hargreaves Lansdown is facing a loss of about £1.9m in fees from the Woodford debacle as investors pulled millions from the firm’s in-house funds following the fallout.
Data from Morningstar showed the level of outflows from the Hargreaves Lansdown multi-manager funds that had invested in Woodford’s Equity Income fund jumped significantly after the fund was suspended on June 3.
Over the four months since the suspension (June to September) investors pulled approximately £250m from four of its funds, according to Morningstar and FE estimates.
Hargreaves’ multi-manager funds are non-advised portfolios managed by the firm’s own investment managers. As each fund charges a 0.75 per cent management fee, Hargreaves Lansdown has lost around £1.9m worth of fees as a result of the outflows.
Hargreaves continued to promote Woodford’s Equity Income fund long after it started underperforming and the fund was still highlighted on the site’s Wealth 50 list right up until the day it was suspended.
Morningstar’s data showed the HL Multi-Manager Income & Growth fund experienced £102m of net outflows in the month of June — up from just £4m in May.
Although the level of outflows peaked that month, the redemptions continued throughout July, August and September at £51m, £25m and £19m respectively.
The Woodford Equity Income fund accounts for 11 per cent of HL’s Income & Growth fund, which has £312m invested in the suspended portfolio.
According to data from FE, over the past five years HL Multi-Manager Income & Growth has ranked 54th out of 75 in the IA UK Equity Income sector and has lost 5.4 per cent in the past 12 months alone (compared to a sector average loss of 0.2 per cent).
Source: FE.
HL’s £300m Multi-Manager Equity & Bond fund tells a similar tale. In May, investors placed £670,000 into the fund, but £8.7m was pulled from it come June.
The fund — which has £18.5m (6.2 per cent of its holdings) invested in Woodford Equity Income — has also underperformed its peers in the IA Mixed Investment 20-60% Shares Sector.
Over the past five years the fund has ranked 102nd out of 130, but most of its underperformance occurred in the past six months, as the graph below illustrates:
Source: FE.
In the past year alone, the fund lost 1.5 per cent while the sector produced an average return of 4 per cent.
Source: FE.
The £1.2bn HL MM Balanced Managed strategy, which has 4.1 per cent in the suspended fund, has been viewed less dimly by investors. It too saw outflows over the summer, but these amounted to just £30m, according to FE estimates.
On the whole, however, the range has been unable to escape the impact of the suspension. Even HL’s £189m Multi-Manager Strategic Assets fund currently has 2.3 per cent (about £4.3m) invested in the Woodford strategy.
This fund had already seen outflows in the lead up to the Woodford saga — of around £900,000 and £680,000 in April and May respectively according to Morningstar — but redemptions rose to £2.9m in June and £2.6m in July.
Hargreaves Lansdown said the HL multi manager portfolios were “highly liquid” and daily flows had been “in line with normal trading”. The firm has been approached for comment regarding the lost fees.
Woodford Equity Income was suspended on June 3 following a period of prolonged outflows. The fund had been targeting a December reopening but last week (October 14) the decision was made to wind it down instead. Woodford Investment Management subsequently announced its intention to close the company.
imogen.tew@ft.com
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