Lee Gardhouse, Chief Investment Officer 10 June 2019
On 3 June the Woodford Equity Income Fund suspended dealing. Woodford Equity Income is held in a number of our Multi-Manager funds, so we wanted to provide some context.
Woodford Equity Income is one of more than 60 funds that make up the 10 Multi-Manager portfolios. Our Multi-Manager funds are, by their very nature, diversified. We pick from a broad range of underlying funds. These funds, in turn, invest in a wide range of underlying investments. As a result the negative impact of one of these funds underperforming, or in this case having dealing suspended, is limited.
The total invested in Woodford Equity Income is just 6.2% of the total value of our Multi-Manager funds. It is held in six of our portfolios – Balanced Managed, Special Situations, Income & Growth, Equity & Bond, UK Growth and Strategic Assets. The weighting in these portfolios varies dependent on the portfolio, from 2.6% to 12.4%, as at 7 June 2019. Please see the fund factsheets for more details.
The HL Multi-Manager funds cannot trade in the Woodford Equity Income fund until the suspension is lifted. However, because we operate a highly diversified portfolio, the Hargreaves Lansdown Multi-Manager funds are operating as normal. These funds are well diversified and have daily liquidity. This means that in the event you would like to buy or sell any of our Multi-Manager funds we have the units or cash available to meet your request.
The situation with Woodford Equity Income is clearly deeply unsatisfactory. We have long been investors in Woodford’s funds – first at Invesco Perpetual and, since 2014, at Woodford Investment Management. Over the long term, Woodford has delivered exceptional returns to investors, holders of our HL Multi-Manager funds included.
We share the disappointment and frustration investors in Woodford Equity Income feel at this time and would like to apologise to all clients who have been impacted by the recent problems. And, once the dust settles, we will undertake a thorough review of what happened and see what lessons can be learned.
In the short term, however, our priority is to do everything we can for clients affected, including those in our Multi-Manager range.
The current suspension of the Woodford Equity Income Fund is supposed to allow Woodford time to reduce the number of unquoted stocks that he holds in an orderly way. This will mean his fund will be invested in more liquid stocks, which can be easily traded on the stock exchange. When the fund’s trading suspension is lifted, the more liquid portfolio should mean investors can buy or sell units in Woodford Equity Income as usual.
We will continue with our analysis of the Woodford Equity Income fund and will keep our clients up-to-date as soon as we have more details. As always we’re determined to deliver the best long-term outcomes for investors in our Multi-Manager funds.
The HL Multi-Manager Funds are managed by our sister company HL Fund Managers Ltd.