How despite raising fears over Woodford in 2017 Hargreaves STILL promoted the toxic fund – earning more than £40m of fees
- Hargreaves carried on plugging Equity Income in its Wealth 50 list of best buys
- It and has raked in £41m of fees since the fund launched in 2014
- 133,769 of Hargreaves’ clients have directly put their savings into the fund
Hargreaves Lansdown first raised concerns about Neil Woodford’s suspended fund two years ago, but carried on promoting it – earning millions in fees.
The online fund supermarket raised worries about Woodford’s Equity Income fund in private in 2017 but continued plugging it in its top list of best buys, and has raked in £41 million of fees since the fund launched in 2014.
A massive 133,769 of Hargreaves’ clients have put their savings into Equity Income, many after seeing it recommended on the Wealth 50.
Hargreaves Lansdown first raised concerns about Neil Woodford’s suspended fund two years ago, but carried on promoting it – earning millions in fees
Another 157,751 clients have invested in another fund which has ploughed money into Equity Income. In total, Hargreaves customers have £1.6 billion in Equity Income or around 44 per cent of its total assets.
Woodford was forced to lock up Equity Income investors’ money this month, after poor performance prompted too many to rush for the exit at once. Savers are now unable to get their cash out.
In a letter replying to questions about the scandal from MPs on the Treasury Select Committee, Hargreaves chief executive Chris Hill said his firm met Woodford to voice concerns about the potential for such problems. Hill said he was worried that too much was being ploughed into unquoted companies.
These generally smaller firms, which are not listed on the stock market, are difficult to sell so can cause problems if savers ask for their money back.
Hargreaves chief executive Chris Hill
City rules state only 10 per cent of a fund should be invested in such companies, to protect savers, but Woodford breached this boundary twice. As more investors wanted to pull money out, he had to sell the easier-to-sell listed assets, leaving a greater proportion of the remaining money in the riskier unquoted companies.
Hill said: ‘In November 2017 we identified an increase in the proportion of these small and unquoted assets in the Woodford Equity Income fund. We met the fund manager that month and urged him to address the issue.’
Hargreaves said it did not find out about the two breaches last year of unlisted company investment levels until this week.
Hill claims Woodford agreed to inform it if more than 10 per cent of the fund became invested in unquoted businesses – a claim denied by Woodford.
By January 2018, Hargreaves said it was holding monthly calls with Woodford to check on the unquoted stocks levels. Yet it still kept the fund on its best-buy list.
Director faces losses
One of Neil Woodford’s biggest corporate champions has a huge chunk of his pension in the money manager’s funds.
Hargreaves Lansdown research director Mark Dampier, 62, has made millions while promoting Woodford to clients, and has bragged about how he has invested a large proportion of his nest egg with Woodford.
An insider said Dampier has not sold down his stakes, meaning he could face hefty losses. Hargreaves declined to comment.