Woodford debacle may force freezes at HL
and HARGREAVES LANSDOWN, Britain’s biggest investment broker, could be forced to prevent withdrawals from some of its multi-manager funds that hold stakes in the suspended Wood- ford Equity Income fund (WEIF), experts have warned.
Multi-manager funds are professionally managed portfolios that consist of other funds. Hargreaves Lansdown offers 10 such funds, five of which own stakes in Woodford Equity Income. They are HL Multi-manager High Income, HL Multi-manager Balanced Managed, HL Multi-manager Strategic Assets, HL Multi-manager Special Situations and HL Multi-manager UK Growth.
The portfolio with the largest exposure to Woodford is UK Growth, which has 8.6pc of its money in the fund. Multi-manager High Income has 8.2pc.
The risk of suspension of these funds arises because their holdings in the Woodford fund are now untradable. If large numbers of investors wanted to make withdrawals – although there is no sign of such a run at present – the manager would, once cash reserves had run out, have to sell holdings. The Woodford fund could not be sold, so the proportion of the portfolio ac- counted for by WEIF would increase.
“If redemptions continued, the multimanager portfolio could become so unbalanced that it would have to be suspended,” said one industry executive, speaking on condition of anonymity.
Hargreaves said it would not have to suspend the funds, thanks to their diversification, cash reserves and “minimal” levels of redemptions. “We absolutely understand that investors may be concerned but these are highly liquid portfolios,” a spokesman added.
The warning came as Lord Myners criticised City regulators yesterday for not anticipating problems at WEIF.. The former City minister said the Financial Conduct Authority had failed to anticipate events “even though there were clear warning signs”.