Hargreaves Lansdown suffers significant withdrawals on multi-manager funds trapped in LF Equity Income

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Redemptions from HL's ten-strong multi-manager range between June and December totalled £594m
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Redemptions from HL's ten-strong multi-manager range between June and December totalled £594m

Investors withdrew more than £500m from the six Hargreaves Lansdown (HL) multi-manager funds that are trapped in the LF Equity Income fund in the final seven months of 2019, as the funds all underperformed their sector averages, data shows.

Morningstar estimates redemptions from HL's ten-strong multi-manager range between June and December totalled £594m, with £508m of those outflows coming out of the six with exposure to Neil Woodford's former fund.

The two largest of those mandates - the £2.8bn HL Multi-Manager Income & Growth fund and the £1.8bn HL Multi-Manager Special Situations fund - have bled the most, with outflows of £277m and £110m respectively.

These two funds hold positions in LF Equity Income of 10.9% and 4.1% respectively.

The outflows had been stemmed by December, though, with the £205m HL Multi-Manager UK Growth fund, which has a 5.8% weighting to the LF Equity Income fund, receiving £1.2m of inflows in the month.

In addition, data from FE fundinfo shows all six of those funds underperformed their Investment Association sector average returns over one and three years to 29 January 2020.

Capital distribution

Link Fund Solutions this week told long-suffering investors in the Equity Income fund how much cash they would receive per unit held for their first capital distribution (see table, below), which was slated to be paid "on or around 30 January", or slightly later for those invested through platforms such as HL.

The fund has offloaded three-quarters of the assets, or £2.2bn, from its liquid portfolio, with investors receiving between 46p and 55p depending on which of the nine share classes they own.

The majority of HL's funds own the Z Inc class, with Investment Week calculations suggesting they received around £222.7m across all six mandates.

The managers will therefore have some cash to deploy, with an HL spokesperson telling Investment Week the firm has "a number of exceptional equity income fund managers to choose from and will deploy the cash as it comes in as quickly and efficiently as possible".

"We will make decisions on where the best value can be found for our clients and we will keep investors updated of any significant changes," the spokesperson added.

In HL's recent blog post on funds to watch for 2020, written by investment analyst Kate Marshall, one suggestion had a UK equity income mandate, the £1.1bn Aviva Investors UK Listed Equity Income fund run by Chris Murphy and James Balfour.

Meanwhile, the firm has recently published research notes on the £5bn Artemis Income fund managed by Adrian Frost and the £4.4bn Threadneedle UK Equity Income fund run by Richard Colwell who, alongside RWC partners' Nick Purves, replaced Woodford on a number of mandates run for wealth manager St James's Place.

Since inception, four of the six HL MM funds have beaten their sector averages, although UK Growth is level with its IA UK All Companies peers and the Strategic Assets fund has underperformed, returning just 17.2% since its April 2016 launch compared to the 47% average in the IA Flexible Investment sector.

 

This article was first published by InvestmentWeek, a sister title to International Investment

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