Woodford and HL?

Reluctantpensioner

I was browsing through the Hargreaves Lansdown site (I'm not a customer BTW) and came across something that made me think.
If you investigate one of their standard portfolios, if you look at underlying holdings ... you still find... LF Woodford Equity Income as a holding ( in one example - 4.6% - for conservative! growth).
Now I suppose, as you can't sell it, existing customers are stuck holding this.
But I wonder about new customers? Are they still buying Woodford?
Or new money? If you are contributing monthly: is 4.6% of each contribution effectively going down the toilet?
They had to have stopped buying more Woodford into the underlying HL MM funds, but I do wonder if new money is effectively being used to dilute existing customer exposure.

Apologies if this has already been discussed, there are thousands of Woodford posts. I can't have (speed) read more than a few hundred.

talexuser

Woodford is still being priced, you just can't sell it. So that price is reflected in the portfolio valuation every day. As for new money I guess it is going into the other funds (if anyone is foolish enough to put new money into any of those portfolios) unless they have some internal rule to keep the existing ratios. That would theoretically mean a slight reduction in Woodford %, but that will be pretty insignificant if non existent in my opinion.

bowlhead99

If people want to buy into one of the HL funds-of-funds, HL will take the money received into the fund and use it to buy investments - but they can't buy WEIF because it is not open for new subscriptions, so they would have to put the money into other investments instead.

If people want to sell out of one of the HL funds-of-funds, HL will (if there isn't enough spare cash floating around in that fund) get as much cash as the investor wants by redeeming out of some of the other underlying (not Woodford) funds in whatever proportion they think suitable to keep the overall fund on track, and give that cash to the investor.

To the extent that new subscriptions to the HL funds match new redemption / sell requests, they won't need to do anything at all, because the new cash coming in will pay for the people who want to leave.

HL won't be able to 'keep the existing ratios' within the HL funds if there is net new money coming in or going out, because they are unable to put new money into Woodford or get money from it, so the ratio would generally be expected to change.

However, if for example they are trying to meet a redemption request in the HL fund: they can only take cash out of the non Woodford funds, but the Woodford fund may be falling in value faster than the non-Woodford funds anyway due to performance; so by actively selling Fund A and B and C and not selling Woodford (just letting Woodford fall anyway), they might still have the same ratio at the end of the month as they had at the start.