Storm rages for Hargreaves

THE hurricane has passed for Hargreaves Lansdown but the storm is not over. The investment platform, which began as a two-person operation in Bristol in 1981 and expanded rapidly into a FTSE 100 giant, has been battered following the ‘gating’ of Neil Woodford’s shrinking flagship fund. Hargreaves’s

trick was to make saving easier by boiling down the 33,000 investment funds offered by the financial world to just 50 choices.

A further onslaught for Hargreaves could well come if Woodford’s frantic share disposals – he has sold £97m of stock in the last ten days – fails to restore the cash cushion needed to reopen trading.

Oxford-educated Hargreaves chief executive Chris Hill is pledging cultural change and moved quickly to ease savers’ concerns by axing charges on Woodford’s fund investments at a cost of £400,000 a month. But with an estimated 160,000 savers (out of its 1.2m clients) in the three Woodford funds, Hargreaves has much repair work to do.

It might have been easier if Woodford, who charges Hargreaves investors a discounted 0.5pc management fee (against his normal 0.75pc), was more co-operative. The great man was hauled into the Bristol headmasters’ study to explain why he was dumping illiquid stock in his open Woodford Equity Income fund into Patient Capital.

Instead of raising a red flag, Hargreaves calmly carried on and its efforts to persuade Woodford to drop fees have fallen on deaf ears. This wouldn’t look so bad had not Woodford and associates taken dividends of £97m over the past five years.

Hill’s approach to the crisis is to say sorry and keep updating investors. There is new uncertainty each day with shares in another key Woodford investment, the construction firm Kier, falling a further 35pc yesterday.

Hill will not take bonuses from Hargreaves until the Woodford affair is resolved. That is not enough. Head of research Mark Dampier, who was long a champion of Woodford, continues to look foolish because of his latest ramblings in Hargreaves’s magazine about the choices he has made on redesigning his garden.

This doubtless was made easier by he and his family’s £5.6m of Hargreaves share sales as the platform shares reached a new peak. Dampier is soon expected to spend more time in his garden after he retires.

Fundamental reforms in Hargreaves’s list of top 50 funds, if it is retained, are also needed. There must be more independent scrutiny of decisions on inclusion.

Woodford was temporarily saved from the axe by lowering his charge to Hargreaves investors from 0.6pc to 0.5pc. There are real questions as to whether the firm, which enjoys fabulous profit margins of 65pc, really is the friend of the savers.

Hargreaves must also build into its investment model stringent governance rules. Star managers including Woodford, Terry Smith of Fundsmith and Nick Train of Lindsell Train need to operate with the same kind of transparency and responsibility as more established investors Aviva Investors, Legal & General and M&G. There looks to have been serious breaches of good practice at Hargreaves and the Woodford empire.

The Financial Conduct Authority must come down on both groups like a ton of bricks. After all, it is our money which they are handling.

China syndrome

TENSIONS there may be between London and Beijing over telecoms firm Huawei but it has not stopped another Chinese firm, the brokerage Huatai Securities, choosing London for a £1.4bn listing.

The City already is the largest market for renminbi trading and the Huatai listing will deepen links.

This in the week that the UK signed a trade deal with South Korea which, among other things, will expand the strong links of the Square Mile’s magic circle law firms with Seoul. ‘Global’ Britain is not all myth.

Rajan’s prize?

WHAT impact would the choice of Boris Johnson as Prime Minister have on the selection of the next governor of the Bank of England?

If Johnson wanted a Brexiteer he could turn to his former chief economic adviser Gerard Lyons, a veteran of Standard Chartered. It would probably be curtains for Remain supporter and chairman of Santander Shriti Vadera.

Johnson may plump for former IMF economist Raghuram Rajan, the Chicago monetarist increasingly seen as best qualified.