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Why Hargreaves Lansdown rejected 0.2%
by Danielle Levy on Jan 15, 2014 at 12:59
Hargreaves Lansdown turned down offers of active equity fund annual management charges (AMCs) as low as 0.20% for its new Wealth 150 plus core list.
Hargreaves’ head of research Mark Dampier said the decision to reject such low pricing offers shows the underlying selection process for the core list, alongside the Wealth 150, remains investment-led. He said the list was slightly shorter at 27 than had been anticipated on account of the team’s focus on quality.
‘It goes back to the best funds at the best prices. We got offered some incredible prices but we did not think the funds were good enough. Some were 0.2% to 0.25% on equity funds. They were trying to buy the business and saying “put us on" and they would give us that price. We looked at fund performance and it did not stack up for us,’ Dampier (pictured) said.
The best price offered fpr an active equity fund on the Wealth 150 plus list is 0.30%, 0.15% for an active corporate bond fund, while a passive fund on the list will be offered at 0.06%.
The research head said he liked to think of the new core list as the ‘cream of the crop’ and expects it will get bigger over time.
Hargreaves today unveiled that it has negotiated an average AMC on its Wealth 150 of 0.65% and 0.54% for its Wealth 150 plus list as part of its new RDR pricing structure.
Dampier said there had been ‘very little change’ to the Wealth 150 following the tender that was sent out to fund groups back in May, which asked them to put their best price forward. The Wealth 150 currently stands at around 90 funds, which Dampier said reflects the fact that some of the funds that traditionally appeared are now closed to new money. He said one new fund would appear on the Wealth 150 plus list following the tender.
At a press briefing, chief executive Ian Gorham said that not all of the discounts negotiated were exclusive deals for Hargreaves clients, with the discounts passed on to clients through rebates in the majority of cases or access to different share classes. While this will pose a problem for those investing outside of tax wrappers, Gorham pointed out the firm’s challenge to HMRC following its decision to tax rebates.
‘As know, we are currently fighting with HMRC on that, so this is dependent on the outcome of that case,’ Gorham said.
He said Hargreaves had not opted to impose favoured nation clauses with the fund groups it works with.
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