Should you stick or twist when your funds are ditched by experts?

WHAT do you do when a firm whose ideas you respect suddenly pulls the rug from under your investments?

Hargreaves Lansdown last week revamped its Wealth 150 list of favourite investments into a Wealth 50 (actually 63 funds).

The new slimline list meant a stack of funds used by its 1.1million investors — in some cases for more than a decade — were cast into the wilderness.

Hargreaves isn’t telling investors to sell and anyone can still invest in them. But it argues that the Wealth 50 funds are better value and cheaper.

This list is hugely influential with investors.

The update provoked a massive spat with stock picker Terry Smith, whose own fund, Fundsmith Equity, was not included even though it has given investors — me among them — a 270 pc return in eight years.

Hargreaves argues that Lindsell Train Global Equity — which I also hold — covers a similar investment span and has produced better returns recently for a lower charge — 0.52pc a year against Fundsmith’s 0.95 pc.

How far the similarities go is debatable: Fundsmith is 63pc in the U.S. while Lindsell Train is about a third there and a third in the UK.

Hargreaves says it bases its selections on a distinguished career, a fantastic track record and a robust investment process — and charges.

But consider Jupiter European, a fund I have held for many years which is now excluded, despite a maximum five stars and gold rating by fund analyst Morningstar.

Manager Alexander Darwall has been at the helm since January 31, 2001. Since then, the fund has been ranked number one against similar European funds, giving an average 9.81pc return a year. Put another way, a £10,000 investment would have grown to £53,508. It is also a top performer over one and ten years. I won’t be selling.

Charges are important and can make a significant impact on returns. Jupiter European charges 1.03pc a year, while Barings Europe Select, which does make the cut, charges 0.7 pc to Hargreaves clients.

On an initial £10,000 investment that grew by 6 pc a year, this difference would wipe £8,545 from the growth over 20 years. But investment returns are key and Jupiter beat Barings over six months, one, five and ten years.

Among other funds I hold that have vanished are Artemis Strategic Assets, Fidelity Special Situations, Merian (formerly Old Mutual) UK Smaller Companies and Standard Life UK Smaller Companies.

While Hargreaves can be praised for giving a spanking to fund managers who won’t reduce their charges, there are serious implications for investors.

Hargreaves will continue to provide detailed research on excluded funds for 12 months, but after this it will depend on how popular each is with clients. Some will be wondering whether to stick or twist. My feeling is that, in general, we should stick.

Use this as an opportunity to take a look at your funds and ask whether they still meet your needs and whether you are happy with the returns you have been receiving.

Are they still doing what you want them to do?

If they still tick the boxes, then with markets this volatile it is no time to be trading in unit trusts.

The archaic trading system — where most funds are valued once a day at midday — means you have no idea what price you will receive.

If you clicked sell at 9am today, your fund would be traded based on its valuation at midday tomorrow.

Its value could fall 2 or 3pc in that time as we go through a dayand-a-half trading in the UK, a full day in the U.S. and overnight in the Far East.

Once you have sold, markets could leap again before you buy something else, adding to potential losses.

Investors may be surprised to see one name still on the list: that is Neil Woodford, whose Income fund has been the source of much disappointment.

I lost patience last year after more than two decades of investing with Woodford as I felt that there were better homes for my money.

No doubt they will be proved right eventually — but so were the doom-mongers who predicted a downturn for each of the past ten years.

It’s just that both will have missed out on some nice profits in the meantime.

A final thought. If Hargreaves is putting price at the forefront of its strategy, then investors can justifiably claim hypocrisy as it refuses to tackle its own fees.

With a basic management fee of 0.45 pc a year, it is expensive compared with most peers.

Its service may be superb but so are its profits, which hit £265.8 million last year with a net margin of 52.88 pc.

Tesco, a real supermarket rather than an investment one, has a margin of 1.64 pc.

Hargreaves can afford to cut clients’ fees and should make this a priority in 2019.