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Fund closures set to hit investor confidence

By Tony Levene

Three Woodfund fund shutdowns have harmed Hargreaves Landsdown and could cause crisis for fund managers

Shares in online stockbroker Hargreaves Lansdown (LON:HL) continue to fall – down a quarter since problems arose in Woodford funds which HL had promoted. They now stand at a six-month low.

But the unvoiced fear is the fallout from HL, closely associated with Woodford, will be toxic for others in the platform and online stockbroker arena.

Adrian Lowcock, head of personal investing at rival to HL Willis Owen, said: "We have seen the complete demise of the most famous fund manager the UK has seen for years. Sadly many people will be looking at significant losses."

These losses could trigger a crisis for others. Investors bought Woodford because his funds were recommended. They may have limited options given low interest rates on cash and bonds but whether they will continue to push money towards “recommended funds” must be doubtful. The fallout in the slow-moving sector has yet to materialise fully.

Online stockbrokers and platforms rely on funds for income, although investors may not always be aware of links. HL picked up £41 million ($53 million) from its promotion of the main Woodford Equity Income fund.

So far, the damage has been largely limited to HL and to Woodford, which has seen funds closed leaving investors locked into losses. HL and its chief investment adviser Mark Dampier were prominent among cheerleaders for Woodford.

Woodford made his name at Invesco. When he set up on his own in 2013, HL – and others – hailed him as the fund manager with the golden touch.

A series of ill-advised investments in unquoted and other hard-to-sell stocks saw his flagship Equity Income Fund, along with the smaller Income Focus Fund, closed and set to return remaining cash to investors.

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