Woodford Concerns

[Deleted User]

It does not charge any transaction fees or commissions for transactions (if that's what you mean by the term "movement") in funds under their aegis. - masonic

If you are on the HL website now, access your fund: click on the sixth tab: this will detail your transaction costs.

masonic

ZingPowZing wrote: »

It does not charge any transaction fees or commissions for transactions (if that's what you mean by the term "movement") in funds under their aegis. - masonic

If you are on the HL website now, access your fund: click on the sixth tab: this will detail your transaction costs.

I left HL quite some time ago, but I never paid any transaction costs when buying and selling funds. If you think you have been charged some transaction costs, please feel free to share a screenshot, suitably redacted and perhaps someone can help you understand what they are.

Here is why you should not be charged any transaction fees:

https://www.hl.co.uk/investment-services/isa/savings-interest-rates-and-charges
https://www.hl.co.uk/pensions/sipp/charges-and-interest-rates
https://www.hl.co.uk/investment-services/fund-and-share-account/charges-and-interest-rates

[Deleted User]

Again, nobody is saying HL charge when you buy and sell funds.

But you do pay transaction charges when you hold funds promoted on their platform; as the fund managers adjust their portfolios.

masonic

ZingPowZing wrote: »

But you do pay transaction charges when you hold funds promoted on their platform; as the fund managers adjust their portfolios.

It doesn't matter whether funds are being promoted on a platform or not. Within all investment funds the fund manager bears costs for transactions within the fund and charges these to the fund. This is not a brokerage fee and it is not paid to the company where your investments are being held.

[Deleted User]

And, given the above, a possible explanation for Hargreaves Lansdown's terrible loyalty to Woodford (promoting his funds up to the day they were suspended).

There may be a more plausible explanation; we're all ears.

masonic

ZingPowZing wrote: »

And, given the above, a possible explanation for Hargreaves Lansdown's terrible loyalty to Woodford (promoting his funds up to the day they were suspended).

As stated above, it isn't a possible explanation. HL had nothing to do with the transactions within WEIF.

There may be a more plausible explanation;

The most plausible explanation is the "exclusive discount" the fund offered to investors through HL, which allowed HL to attract more customers and charge more custody fees.

we're all ears.

Is there more than one of you?

[Deleted User]

masonic wrote: »

It doesn't matter whether funds are being promoted on a platform or not. Within all investment funds the fund manager bears costs for transactions within the fund and charges these to the fund. This is not a brokerage fee and it is not paid to the company where your investments are being held.

I understand when you say the fund manager bears costs, you mean his investors bear that transaction fee. Does the broker collect the transaction fee?

masonic

ZingPowZing wrote: »

I understand when you say the fund manager bears costs, you mean his investors bear that transaction fee. Does the broker collect the transaction fee?

All of the costs incurred by the fund manager are paid for using the assets held within the fund, so yes investors ultimately bear those costs. The fund manager will buy and sell assets using their own agents, brokers and dealers. These generally won't be the same as the company that sold you the investment.

If you, for example, buy WEIF at HL, then WEIF makes a load of trades that incur direct transaction costs, then HL wouldn't get a penny of those costs.

bowlhead99

ZingPowZing wrote: »

OldMusicGuy wrote:

There are no charges in the SIPP for fund transfers.

Not the question.

Well, your assertion was 'they do charge brokerage fees to their clients' and you were surprised that on that basis, they wouldn't also charge their own two funds who wished to move an investment from one to the other.

However, actually they don't charge a brokerage/ transaction fee to a client who wishes to redeem out of one fund such as WEIF and subscribe into another. Because they are not brokering any transaction on a market, simply passing on orders to WEIF's fund manager. The way they choose to be compensated is to simply levy an all-in percentage-based fee on the NAV of funds held for the time they are held.

So there is no reason to presume that they would charge an incremental fee to one of their funds who wants to dispose of its holding in WEIF and then a similar fee to one of their funds who chooses to invest in a holding of WEIF. They don't really go in for transaction based charging, rather percentage-based - on AUM or AUA.

Investors in a fund are exposed to transaction costs of the fund, but it is not HL that's getting those transaction costs as income (or at least, not getting them any more than normal if one fund reduces their investment in another OEIC as at a time that another increases).

The issue is: if two "house" funds "rebalance" by moving one investment from one to the other, is there a brokerage fee? I don't know, but would appreciate it if a HL spokesperson or other could clarify.

The issue is: you have come in all guns blazing with your 'suspicion' that they rolled the ownership of Woodford Fund from one of their managed funds to another managed fund and collected fat fees as they did it.

However, you seem to have done this without actually looking at the history of the holdings of their ~10 managed funds to see if one was disposing of Woodford within their strategy while another was acquiring it, rolling from one to the other. This does not seem to have been the case.

If they have not done it (and they probably haven't, because it would be unusual for example for their UK Growth MM fund to decide it is not worth holding just as their UK Income & Growth MM fund decide it is a great thing to add to the portfolio), then the point about whether they would charge an incremental fee for such a transaction, seems moot.

It is unlikely that an HL spokesperson is going to spot your suspicious musings buried in a thousand+ post thread about Woodford, and come on here to set you straight, however much you would appreciate them directly clarifying the point and think it would be a 'good opportunity' for anyone connected with HL to clear it up. If you are curious, why not contact them and ask, then come back here and tell us whether you were right in how you think their business model works.

You also mention:

Pay-off for Woodward was that their diaspora of investors were largely unaware of HL's artificial protection against proper scrutiny of the performance of their fund.

The performance can be seen through the daily price net of charges which is published about 250 times a year, and HL do not really prevent scrutiny of that performance, given they put it on their own website with interactive charting feature (albeit, only 5 years worth of data; but WEIF only lasted 5 years before being gated so nobody who invested can complain they were missing some of the history).

HL also link to the fund financial statements on their site to save curious investors the effort of going to Woodford's own site to see the full list of the fund's holdings on a semiannual basis (Woodford's site provided them on a monthly basis, prior to gating).

Not sure which of those things is providing Woodford with 'artificial protection against scrutiny of fund performance'.

Perhaps you just mean that the fact that they offered a discounted share class together with positive commentary was tempting for investors so investors did not bother to look at the fund performance or read the reports or factsheets or see what type of investments were held. Such investors - selecting investments on a DIY basis without looking at fund performance, holdings information or other useful data - have themselves to blame, even if you would prefer to paint HL as the bad guy. I am not saying that HL are good guys or come out of this well, and agree with the 'conflict of interest' noted by other experienced commentators.

[Deleted User]

If you are curious, why not contact them and ask, then come back here and tell us whether you were right in how you think their business model works.

I did.
And HL said that HL investors in funds under their aegis incur charges, but I don't know in which circumstances these would these are waived, if any; nor if there are incentives for fund managers to load up with HLs favourite investments.
I would imagine they do use that leverage, it helps to make sense of HL's perseverance with Woodford's brand that has impacted 1/4 million of their clients.
It's hard to imagine that they don't.