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Woodford: Hargreaves’ helping hand may help us all

Hargreaves Lansdown looks set to give Neil Woodford's new fund a huge marketing push. Business as usual or something more exciting?

 
Woodford: Hargreaves’ helping hand may help us all

Having launched his new investment company the next step for Neil Woodford is to formally unveil the CF Woodford Equity Income fund he will run.

The former Invesco Perpetual star has enjoyed a great start. Thanks to St James’ Place, Woodford Investment Management begins with £3.5 billion under management, immediately placing it 33rd out of 96 retail fund managers according to the Investment Management Association.

How much further Woodford’s firm rises up the ranks depends on how much more he raises from private and institutional investors when the fund launches. This is a matter of intense speculation but one thing is clear: if Hargreaves Lansdown has anything to do with it, the amount involved could be large.

Although the UK’s largest fund supermarket is not commenting until Woodford’s fund is authorised, all the signs are Hargreaves Lansdown is preparing to give Woodford Equity Income an almighty marketing blitz when it arrives.

It has notified customers that Mark Dampier, its head of research, is compiling a report on the fund and invited investors to register their interest. Today, in a press release entitled ‘Woodford is back’, Dampier states his admiration for Woodford’s track record and investment philosophy.

‘I believe him [Woodford] to be the finest fund manager of his generation and look forward to introducing his new fund to our clients,’ he says.

There's nothing wrong with the first part of that sentence but to my mind the second bit virtually guarantees that Woodford Equity Income will become the 28th fund to join Hargreaves Lansdown’s new Wealth 150+ list.

That little + means a fund manager, having impressed Dampier’s research team, has cut its annual management charge and in return gets extra promotion on its website and other communications to its customers.

Why do I think the stars are lining up in this way? It’s pretty simple really.

Woodford's price pledge

In interviews with the Financial Times and Telegraph at the weekend Woodford disclosed his firm would not sell its funds direct to the public. In other words they will only be available from fund supermarkets like Hargreaves and financial advisers.

He also said his new fund would be cheaper than the Invesco Perpetual Income and High Income funds he used to run. That won’t be hard as Invesco Perpetual levies an annual ‘ongoing charge’, including trading expenses, of around 0.92%. This is a lot higher than the standard ‘clean’ or commission-free annual management charge (AMC) of 0.75% (although that doesn’t include all costs).

Woodford Investment Management could decide to offer the standard 0.75% AMC to all platforms, advisers and investors and leave it at that. By itself that would be a good reason for investors in his old Invesco funds – which still have nearly £22 billion in them – to transfer to his new fund.

There is a chance we could get a price war if Invesco responds and investors are forced to set cost aside and choose between the management skills of Woodford versus his impressive successor at Invesco, Mark Barnett.

Leaving that possibility to one side, however, my money is on Woodford’s commercial team cutting a deal or two to encourage more investors to switch riders (the weekend profiles also revealed Woodford rides horses and is undertaking his first equestrian event shortly).

Help from Hargreaves

Who better than Hargreaves Lansdown (HRGV.L), the FTSE 100 broker which, like Invesco charges a premium price for its services, and is the only platform big enough to have squeezed cuts in charges from fund managers? Hargreaves Lansdown has been pining for Woodford ever since he announced his departure from Invesco last October. The Invesco Perpetual funds were promptly dropped from its broader Wealth 150 list of recommended funds, possibly as a prelude to replacing them with Woodford’s new fund.

In its most recent trading statement chief executive Ian Gorham displayed the firm’s eagerness for a Woodford boost to post-ISA season business by noting his ‘new venture will clearly create interest’.

How much interest may depend on how price competitive Woodford Investment Management is prepared to be. Here Woodford’s video interview with us yesterday gave an intriguing clue. The Citywire A-rated fund manager talked about his enthusiasm for starting a new company ‘fit for the 21st century … without any legacy infrastructure costs’, adding ‘I think we’re going to keep the business low cost’, in case we didn’t get the point.

If Woodford and his commercial team really want to get the full Hargreaves treatment they need to forget about Invesco and focus on at least price matching their rivals, in particular Artemis Income and Threadneedle UK Equity Income . Both funds are on Wealth 150+ having cut their AMCs to 0.66% and 0.65% respectively (although once other expenses are included the ongoing charges on both funds are 0.71%).

If Oxford-based Woodford Investment Management is genuinely low cost and wants to exploit its head-start from St James’ Place, it should be able to afford to undercut Artemis and Threadneedle.

Despite the fanfare over Woodford’s return there is much about these events that is merely business as usual. Indeed Woodford has said as much in recent days as he stressed the continuity of his investment style and thinking. The sight of Hargreaves marshalling its marketing resources is hardly novel either and may cause misgivings for investors who remember its promotion for Anthony Bolton’s Fidelity China Special Situations fund a few years ago.

Nevertheless, the prospect of buying a fund run by a star like Woodford for a genuinely competitive price would not be ‘business as usual’. That would be an exciting development and show that cost-conscious investors don’t have to turn to passive, index-tracking funds.

20 comments so far. Why not have your say?

MoneyObserver

May 07, 2014 at 16:39

So Hargreaves are going to hype another fund manager who was once a star performer, but he hasn't achieved very much in recent years.

What's new ?

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DC

May 07, 2014 at 16:54

Invesco Perpetual High Income Fund seems to be performing better since he left ! Listening to the Citywire interview with him was I right to think that some of his major decisions like dropping Lloyds Bank, were actually down to a good slice of fortune regarding timing, which he seemed to admit himself ?

I'm not in any way decrying his talents but I'm old and cynical when it comes to over-hyping someone.

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Happy Farmer

May 07, 2014 at 17:06

He should be able to cut his costs even further,perhaps Hargreaves will suggest that to him as he already has a blueprint and lower overheads compared to Invesco. I hardly think he needs financial incentives himself so lets hope he is motivated by something else. It is not always easy to repeat success (if you believe he was a successful fund manager in the first place!!)

He might like to start a low cost Investment Trust as well.

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Chander Hingorani

May 07, 2014 at 17:19

Is Neil Woodford adopting the old Brirish foreign policy - Divide and rule?

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horshamtim

May 07, 2014 at 17:22

I am old and cynical too (particularly where HL are concerned due to their business model), but Mr Woodford's previous stewardship of Edinburgh IT (a cheaper way to access his talents) has served me well. I will therefore look at his new offering with interest and will invest if it looks sensible.

However, he will need to take time and care to place all the money coming in so anyone looking for a quick buck should look elsewhere - but he is anyway a manager for investors not speculators!

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Brian Langdon

May 07, 2014 at 17:23

Whether investors need Mr Woodford as much as he needs them, I wonder.

If I was going to buy anything I would wait until his company is floated. Meanwhile, Edinburgh Investment Trust which has been in my portfolio for several years now continues to please under its new manager.

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Rob Walker

May 07, 2014 at 17:35

Any fund is only as good as its investments (which have yet to be defined) so how can you do 'research' on that? Probably the same way HL did 'research' on Anthony Bolton's China escapade which is still struggling to break even though HL trousered their commission from a successful launch.

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kWIKSAVE

May 07, 2014 at 18:11

Define finest fund manager of his generation. What does it mean. Does Mr Dampier 'know' all fund managers to be able to say this. I am bored.

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Anonymous 1 needed this 'off the record'

May 07, 2014 at 19:52

yes woodford is a good fund manager but he is not a god.

tesco,vodafone,morrisons show he does not get them all right.

ps i have a slight misgiving that he is taking up equestrian events at 54....his new company is going to be very dependent on him...

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howie

May 07, 2014 at 20:24

i have noticed that barclays appear not to be offering the woodford fund when it launches.is this barclays being sensible or not being able to compete with the deal that has been offered to hargreaves

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Franco

May 07, 2014 at 20:30

HL have only managed to negotiate a discount from 27 funds out of a total of about 3000, but we never seem to stop hearing about it, mostly from Lumsden.

Even then they had to offer inclusion in their 150+ list, which, destroys any confidence in it and further more, the "discount" is all but nullified by HL's higher platform charges. Add to that the extra charges they impose at every stage and the whole thing becomes an expensive confidence trick.

I remember many other publicity cons from HL, besides that notorious China Recovery trust and I would not buy a bean from them until it was tried by other fools. As the Chinese say, he who stumbles twice on the same stone, deserves to break his neck.

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MoneyObserver

May 07, 2014 at 21:27

While it is natural when thinking of Hargreaves Landsdown 'hyping' to this of Adrian Bolton, we must never forget their ridulous hyping of Dr Bill Mott and the modestly performing Psigma Income fund.

Bill's an outstanding manager,etc, etc they trilled.

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Codger

May 07, 2014 at 22:07

I recollect New Star being championed but I believe some of the funds were disappointing. Better to let Neil Woodford establish a track record for a few years.

Also, Woodford should be wary of HL or any other supermarket championing his funds. If the new funds disappoint, they may be dumped by the supermarkets and suffer a massive outflow of money as has happened recently with the IP income funds when Woodford said he was leaving.

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rich banker

May 08, 2014 at 03:39

Eventually we may see the Wood from the Trees as splashing stops in the ford.... if you will forgive the pun.

Funny how all these gurus still put the caveat "you can loose all your dosh in this investment.....!

Why does Mr Woodford need to start off on his own at 55?

I shall continue to invest direct I think for the time being.

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William Phillips

May 08, 2014 at 03:48

"Despite the fanfare over Woodford’s return there is much about these events that is merely business as usual."

Would business as usual include undisclosed, undue risk-taking by NW at Invesco for almost five years? You remember, the stuff that resulted in an £18.6m fine from the Financial Conduct Authority after he left.

Obvously the fourth largest penalty ever for a retail product mis-sale does not bovver Hargreaves Lansdown or St James's Place, but how would the punter in the street feel?

A curious omission from this hagiographic piece- but then it did happen all of, er, one week ago.

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Micawber

May 08, 2014 at 06:31

Mobius, Bolton, Woodford.... ah yes, those were the days , those were the stars....

Morrisons didn't turn out such a good investment, Neil; but buy and hold, buy and hold, and come 2025 it might be showing a profit.

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Tony Dunford

May 08, 2014 at 11:25

Don't denigrate Neil Woodford. Nobody has done more for my returns than him; since mid '90s. But as earlier posts imply " the past is no guide to the future".

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rich banker

May 09, 2014 at 15:07

Clearly to those with vision and insight the middle ground grocers+ are going the way of M&S clothing - slow decline in spite of spending fortunes trying to recover. Their con as your family friend has been spotted and they charge too much to home deliver.

For quality we buy our meats from a local farmer we have known for years as well as the Duke & Duchess of Devonshire at Chatsworth down the road so to speak.

What about SAGA I wonder as we wuz conned by Eton boys out of the Royal Mail bun fight give away - SHAME. They should be prosecuted for such.

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James Bell

May 10, 2014 at 10:08

Does anyone remember the fanfare with which HL trumpeted the launch of Jupiter Absolute Return 5-6 years ago and what a waste of time and patience that was for cautious investors?

No, we're not *advising* you to buy this fund, only sending you lots of glitzy mail shots and emails and videos and graphs about how great it could be!

I hope Mr Woodfood does well with his new fund, but remember once the marketing machine cranks up HL have a considerable financial interest in you buying a large slice of the new fund.

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Mike1

May 10, 2014 at 12:10

A little toe dipping may be appropriate, early days.

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