Hargreaves Lansdown has revamped its fund recommendations list – but has controversially left out highly regarded managers Terry Smith and Nick Train.
Britain’s largest fund shop was forced to redesign the hugely influential best-buy list less than 18 months after its previous restructure – when it renamed the Wealth 150 to the Wealth 50. This was due to complaints over the firm’s continued support for failed fund manager Neil Woodford and criticism the composition of list was not rigorous enough.
The firm has now changed the way it picks funds. Previously a fund was expected to offer a discount for inclusion on the Wealth list, but this obstacle has been removed.
It has also removed the managers of the Hargreaves Multi-Manager funds, such as the £2.6bn Income & Growth fund, from the process of designing the list. This previously created a conflict of interest as the managers bought the funds also being tipped to Hargreaves users.
However, the new list – simply called the “Wealth Shortlist” – has still not found space for two of Britain’s best performing and popular managers, Terry Smith and Nick Train
Mr Smith, who has been outspoken about his omission in the past, has not been included, despite Hargreaves Lansdown customers owning more than 10pc of the £20bn Fundsmith Equity fund.
Nick Train was previously included in the Wealth 50 but was removed as his company, Lindsell Train, owned a 13pc stake in Hargreaves Lansdown. The fund shop said this created a potential conflict of interest in recommending his funds.
Mr Smith’s fund – Britain’s largest – was not included because Hargreaves has introduced new rules that require recommended funds to update the fund shop with a full breakdown of the portfolio every month. Mr Smith currently only provides this on a biannual basis. Emma Wall, of Hargreaves, said the Fundsmith Equity fund would be included if Mr Smith complied with the new regime.
The new requirement was brought in following the firm’s dogged backing for Mr Woodford’s defunct Equity Income fund.
The fund suspended trading in June 2019 after the manager invested too much in difficult-to-sell and unlisted stocks. The fund was subsequently closed in October and investors are still waiting for their savings to be returned.
By demanding more regular updates from fund managers, Hargreaves will be able to spot issues and warn investors off funds earlier. The fund shop recommended the Woodford fund up until the day it trapped investors’ savings.
The new list will now consist of 68 funds, an addition of 17 portfolios (see table). It will also include more passive funds and ethical portfolios.