Hargreaves plans to cut Woodford off its own funds

Hargreaves Lansdown has launched a consultation on whether Neil Woodford's Equity Income Fund should be removed from its own-brand product line, in its latest move to differentiate itself from the troubled manager.

The UK's largest online broker has invested about £ 600 million in the Woodford equity fund through its multi-manager packaged investments. The Woodford fund was suspended last week following a spike in redemptions.

Hargreaves cut the fund off his list of favorite investments last week and issued Sunday apology from CEO Chris Hill for the benefit of customers affected by the issues.

He told the Financial Times that he was now considering withdrawing the Woodford fund from its multi-manager offering due to issues related to the "structure and liquidity of the portfolio".

"We are constantly reviewing our funds, but special attention will be triggered by events such as a period of underperformance, a change in manager or a liquidity problem such as blockage," he said.

"It would not be sincere to say that things go as usual and that we will take the time to reflect on our position. Any decision made will first be communicated to the investors of the funds concerned. "

Hargreaves would not be able to sell the fund before the resumption of trading, the timing of which is unknown.

On Sunday, the broker said that he had reported cash problems with Mr. Woodford as early as 2017. He nevertheless continued to include the Woodford Equity Income on his Wealth 50 list until the fund prevents investors from selling their securities last week.

Woodford Equity Income represents approximately 14% of the HL Income & Growth multi-manager fund worth £ 3 billion. The company continues to allow investors to buy and sell its multi-manager funds, even if one of its largest underlying securities is not traded.

To return money to investors, Hargreaves should use the money in the funds' portfolios or sell other badets that have worked well, which could increase the weight of Woodford Equity Income. The outflows of its multi-manager funds are currently minimal and are in the normal range, the report says.

Any customer who buys these investments represents a bigger loss for Hargreaves, which gets almost double its money fees compared to third-party funds sold on its platform.

Hargreaves levies an annual management fee of 0.75% on its own funds, as well as platform fees of 0.45%. The Company is also facing a loss of revenue as a result of the removal of the 0.45% fee charged on the platform for all badets invested in the Woodford Fund.

Hargreaves has already seen a 14% drop in its shares since Mr. Woodford suspended his fund because of his large investment in the fund.