Hargreaves Lansdown raised concerns about suspended Woodford fund as early as 2017
Hargreaves Lansdown raised concerns about the performance of the Woodford Equity Income Fund more than two years ago, but continued to recommend it to its customers.
The investment adviser was also selling millions of pounds in stock in the fund, according to analysis by the Sunday Times.
The Woodford Equity Income fund was frozen earlier this month after a run of redemptions that meant it was struggling with liquidity.
Since the suspension the fund, run by stock picker Neil Woodford, has been selling stakes in a range of companies and seeking to reduce its exposure to illiquid unlisted stocks.
Hargreaves Lansdown first raised concerns about the performance of the fund more than two years ago, The Sunday Times reported, but only told customers of its concerns more recently.
On 5 June, Hargreaves Lansdown’s chief investment officer Lee Gardhouse said: “We’ve been speaking to Woodford for some time about the number of unquoted and hard-to-trade companies in his portfolio.”
Hargreaves Lansdown sold 12.4m units of Woodford stock in four of its multi-manager funds between March 2017 and March 2019, while its total holdings across two other funds grew 2.7m.
In total, the value of its holdings in the equity income fund fell by £189m over the period. It still has about £610m in the fund.
Emma Wall, head of investment analysis at Hargreaves Lansdown, said: “Our multi manager funds are actively managed and deals are placed depending on a range of factors including asset allocation decisions, new investment opportunities, and fund flows into and out of the multi manager portfolios.
“We’ve held Woodford in our HL MM Income and Growth fund since 2002, and during that time the amount held has varied. Until we removed it last week, Woodford Equity Income was part of our Wealth 50 list of favourite funds. It remains one of 60 funds in our Multi Manager portfolios.”
Regulator the Financial Conduct Authority has been criticised by figures such as ex-City minister Paul Myners for failing to act on signs Woodford’s fund was in trouble.
However, City veteran David Buik said it was not the regulators job to oversee the performance of Woodford and his colleagues.
“It cannot be the job of the FCA to keep tabs on the quality of Mr Woodford’s stock picking or that of his colleagues. When an individual or a pension fund buys into an investment, there is no guarantee of a capital gain. Frankly, investors ‘live by the sword, therefore they must be prepared to die by the sword!’” Buik said.