Woodford and Hargreaves Lansdown

[fred]

I'm badly affected by the Woodford disaster. I hope the man is
permanently banned from the financial sector. As the main fund is
suspended, we have to wait to see how much the damage is.
Partly my fault as when I invested in Woodford at his own start, I
thought I was buying the likes of BP, Diageo, BAT. But more and more
low price crap got included which I should have spotted.

I also have lots invested in the Hargreaves Multi-Manager Funds, and
am now shocked how much Woodford is part of EVERY HL-MM fund.
Examples:
HL-MM Income and Growth: 14% Woodford
HL-MM Equity and Bond: 10.2% Woodford
HL-MM Balanced Managed: 4.8% Woodord.

As Woodford's Patient Capital went down, he used his main fund to buy
and shore up Patient Capital - and at an INFLATED price (NAV - which
is lower than trading price.). This resulted in Woodford's main fund
and the HL-MM funds being invested in crap that differs from the fund
name "style".

I have just (2 days ago) sold half of my HL-MM Income and Growth and
half of my HL-MM Equity and Bond. Despite the Woodford suspension
these sales went through.
SO HAVE I BEEN PAID ZERO for the Woodford element? I should at least
get an IOU for the Woodford element. I will try to determine this
tomorrow

If this carry-on was in the US, there would be a class-action lawsuit
both on Woodford and HL. (think Madoff). I will also be calling the
Financial Ombudsman and FCA for some opinions.

Any views or opinions?

Fred

[Theo]

Post by fred
I'm badly affected by the Woodford disaster. I hope the man is
permanently banned from the financial sector. As the main fund is
suspended, we have to wait to see how much the damage is.
Partly my fault as when I invested in Woodford at his own start, I
thought I was buying the likes of BP, Diageo, BAT. But more and more
low price crap got included which I should have spotted.

My sympathies. Technically the fund's investment policies say (in the
KIID):

"To seek to invest at least 70% in shares of UK listed
companies. It may also invest in unlisted companies, overseas
entities and derivatives. It is not anticipated that the use of derivatives
will have a significant adverse effect on the risk profile of the fund."

So only when it goes above 30% unlisted companies (or 30% non-UK) would
this be a justification for calling them out for mismanagement.
(there may be other reasons, of course)

Post by fred
I have just (2 days ago) sold half of my HL-MM Income and Growth and
half of my HL-MM Equity and Bond. Despite the Woodford suspension
these sales went through.
SO HAVE I BEEN PAID ZERO for the Woodford element? I should at least
get an IOU for the Woodford element. I will try to determine this
tomorrow

No, you sold XXX units of a HL-MM fund. The HL manager is forced to fund
that somehow. Since Woodford cannot currently be sold, they would have to
fund that by selling other investments the fund holds.

In practice, that means everyone remaining now holds a higher proportion of
Woodford than they did before.

This was precisely the problem Woodford Equity Income had when there was
substantial selling - they were forced to sell the easy to liquidate
holdings, leaving everyone holding more and more unlisted stocks, which
caused the performance to become worse (the market expects people will soon
want to unload those stocks hence their price falls), which caused more
people to sell, etc.

This is a hazard of open-ended funds. If it was a closed-ended structure
(like the Woodford Patient Capital investment trust) then the price would
fall but there wouldn't be this kind of selling death spiral, because there
would never be a need to sell underlying holdings to meet redemptions.

Post by fred
If this carry-on was in the US, there would be a class-action lawsuit
both on Woodford and HL. (think Madoff). I will also be calling the
Financial Ombudsman and FCA for some opinions.

There are certainly questions to answer about the close relationship between
HL and Woodford...

Theo

[fred]

Theo,
Thanks for your excellent reply.

Post by Theo
"To seek to invest at least 70% in shares of UK listed
companies."

I expect that was violated.

Post by Theo
No, you sold XXX units of a HL-MM fund. The HL manager is forced to fund
that somehow. Since Woodford cannot currently be sold, they would have to
fund that by selling other investments the fund holds.
In practice, that means everyone remaining now holds a higher proportion of
Woodford than they did before.

That sounds like the Woodford Fund experience being repeated in the
HL-MM funds.
A selfish response is I hope that was true, but it's Woodford and HL
that I want in the dock.
(I am aware that if all bank depositors form a line and demand cash
out, a bank cannot pay.)

Post by Theo
This is a hazard of open-ended funds. If it was a closed-ended structure
(like the Woodford Patient Capital investment trust) then the price would
fall but there wouldn't be this kind of selling death spiral, because there
would never be a need to sell underlying holdings to meet redemptions.

There is something particularly dodgy here. As the demand for Patient
Capital dried up, he loaded it into the main fund to shore up the PC
price (and hence also the HL-MM funds).

Post by Theo
There are certainly questions to answer about the close relationship between
HL and Woodford...

Interesting selling of HL stock a few months ago by HL's Dampier and
Guardhouse.. They knew this was coming, yet only days ago removed
Woodford from the Wealth Top 50 list.

Do you believe the guilty will be punished, and their fines allocated
to the affected?

Fred

[fred]

The Woodford situation is not improving. The selling suspension has
been extended, maybe indefinately per "thisismoney".

The arrogance of this guy knows no limits. He is still taking a
maintenace fee! Further, he says he will be proved right!
He is still trading - just bought £10m in Atom Bank which duly fell.
This has all the hallmarks of a gambler who has lost a series of bets,
and thinks he can trade his way out of trouble. It never works.

As Woodford's biggest promoter, Hargeaves Lansdown come out very
badly. I think they need to be dipping into their reserves. The
Woodord Income and Growth fund was set up with mega-cap, high divi
stocks (tobacco, oil, booze, etc). I never received any notification
that the style was changing to small unlisted, illiquid companies. The
Hargeaves Multi-Manager Funds will be dead until they get out of
Woodford.

I think the FSA and Financial Ombudsman need to be involved.

Any thoughts?

Fred

Post by fred
Theo,
Thanks for your excellent reply.

Post by Theo
"To seek to invest at least 70% in shares of UK listed
companies."

I expect that was violated.

Post by Theo
No, you sold XXX units of a HL-MM fund. The HL manager is forced to fund
that somehow. Since Woodford cannot currently be sold, they would have to
fund that by selling other investments the fund holds.
In practice, that means everyone remaining now holds a higher proportion of
Woodford than they did before.

That sounds like the Woodford Fund experience being repeated in the
HL-MM funds.
A selfish response is I hope that was true, but it's Woodford and HL
that I want in the dock.
(I am aware that if all bank depositors form a line and demand cash
out, a bank cannot pay.)

Post by Theo
This is a hazard of open-ended funds. If it was a closed-ended structure
(like the Woodford Patient Capital investment trust) then the price would
fall but there wouldn't be this kind of selling death spiral, because there
would never be a need to sell underlying holdings to meet redemptions.

There is something particularly dodgy here. As the demand for Patient
Capital dried up, he loaded it into the main fund to shore up the PC
price (and hence also the HL-MM funds).

Post by Theo
There are certainly questions to answer about the close relationship between
HL and Woodford...

Interesting selling of HL stock a few months ago by HL's Dampier and
Guardhouse.. They knew this was coming, yet only days ago removed
Woodford from the Wealth Top 50 list.
Do you believe the guilty will be punished, and their fines allocated
to the affected?
Fred

[Theo]

Post by fred
The Woodford situation is not improving. The selling suspension has
been extended, maybe indefinately per "thisismoney".
The arrogance of this guy knows no limits. He is still taking a
maintenace fee!

Given this fund is the lion's share of Woodford's operation, and WPCT has a
fee structure that at present pays them nothing, if they stopped taking fees
they would eventually run out of cash to pay salaries and thus the company
would fold. I'm not sure trying to get your money out of a bankruptcy would
be easier than getting out of a suspended fund.

Post by fred
Further, he says he will be proved right!
He is still trading - just bought £10m in Atom Bank which duly fell.
This has all the hallmarks of a gambler who has lost a series of bets,
and thinks he can trade his way out of trouble. It never works.

To get out of the mess he's in, he has to trade - swapping unlisted stocks
for listed ones. I don't think the fund has a remit to hold a significant
portion in cash, so he has to buy more stocks. I can't comment on the
particular choices he's made to buy, though.

Post by fred
As Woodford's biggest promoter, Hargeaves Lansdown come out very
badly. I think they need to be dipping into their reserves. The
Woodord Income and Growth fund was set up with mega-cap, high divi
stocks (tobacco, oil, booze, etc). I never received any notification
that the style was changing to small unlisted, illiquid companies. The
Hargeaves Multi-Manager Funds will be dead until they get out of
Woodford.

The kinds of funds he's allowed to buy is set out in the prospectus. It is:

"To seek to invest at least 70% in shares of UK listed
companies. It may also invest in unlisted companies, overseas entities and
derivatives. It is not anticipated that the use of derivatives will have a
significant adverse effect on the risk profile of the fund."

'Mega-cap, high divi' are not stipulated. Past performance is not a
guide... etc.


I agree there should be scrutiny about the unlisted funds and whether he's
breached any limits.

Post by fred
I think the FSA and Financial Ombudsman need to be involved.

The FSA no longer exists. The FCA is involved:
https://www.fca.org.uk/news/statements/update-lf-woodford-equity-income-fund

It's possible to complain to the FOS about your particular case, but you
have to go through the Woodford complaints process first:
https://portfolio-adviser.com/fscs-and-fos-receive-queries-over-woodford-suspension/

Theo

[AnthonyL]

On 10 Jun 2019 12:48:34 +0100 (BST), Theo

Post by Theo
There are certainly questions to answer about the close relationship between
HL and Woodford...

A bit reminiscent of the way they (HL) pushed Anthony Bolton's China
Special Sits in which I (and Bolton) got "burnt". Well it's recovered
somewhat since but lesson learnt and I ignored everything being thrown
at me regarding Woodford. There's investing and there's gambling and
he seems to have got caught up with too much of the latter.

What's he getting? I think I heard £100,000/day.