Woodford Equity Income Fund- require explaining please

Jupiter55

Hello

I have been looking at the HL ready made isa portfolio,  when I select my risk I see the following in the portfolio summary.

Having googled it I wondered if someone could explain it in simple terms please

ie if its suspended should I be investing in the portfolio. 

• This portfolio includes an underlying holding in LF Equity Income (formerly the Woodford Equity Income Fund), in which dealing is currently suspended. The portfolio continues to trade as normal.

thanks 

ColdIron

In simple terms Woodford's Equity Income fund has been a spectacular failure. Trading has been suspended since June 2019 which means no one can buy or sell, including Hargreaves Lansdown (a major supporter), so they are stuck with it for the present. It is now being wound down

However the main reason to avoid any of HL's ready made or Multi Manager funds are the high charges. A brief look shows an annual fee (an Ongoing charge or OCF) of 1.41% and an annual platform fee of 0.45%. That's 1.86% of your investment each year. With little effort you could achieve less than 0.50%. It's a cash cow

Jupiter55

HI Coldiron

thanks so much for your answer, it makes sense.

also thanks for the HL advice 

I posted yesterday with my details asking for advice and Eskbanker gave me some advice

• single global multi-asset fund from the ranges available from the likes of HSBC Global Strategy, Vanguard LifeStrategy, L&G Multi-index or Blackrock Consensus.

so I am having a look at these types of funds

I have since decided I dont want to buy or sell anything, I want medium to low risk ready made portfolio I just invest in 

This is my first venture into stocks and shares , but I want 2020-2021 isa to be part S/S

My other thoughts were Vanguard Life 60/40

thanks 

Mickygg

Most of the woodford debacle will be in the price already as only a small amount remains in suspension while stocks are sold.
As above I would avoid the multi manager fund. I looked at this but the fees are too high. You should aim to keep fees below 1% including the hl fee. Over many years an extra 1% really mounts up. You can replicate the multi manager yourself for lower fees.
I have some funds above 1% but equally have some trackers at 0.5% but none at 1.86% and never will.

ColdIron

Jupiter55 said:
I posted yesterday with my details asking for advice and Eskbanker gave me some advice

• single global multi-asset fund from the ranges available from the likes of HSBC Global Strategy, Vanguard LifeStrategy, L&G Multi-index or Blackrock Consensus.

That is good advice. Another ready made portfolio if you like, but at considerably less cost

Jupiter55 said:
My other thoughts were Vanguard Life 60/40

That is one of the funds mentioned above. Any of them would suit someone new to investing with or without earrings

bowlhead99

Their 'portfolio+' product is a way of splitting your money between the 'multi-manager funds' that HL manage - these are basically funds operated by HL which in turn invest in other funds are offered by other third-party investment management firms.  For example the HL 'multi-manager income and growth' fund invests in other funds which invest in the UK equity income sector, such as those offered by Marlborough, Jupiter etc.

It is quite an expensive way to do it because on top of the 0.45% a year platform fees you pay to hold funds at HL, you will be incurring a share of the management fees and operating costs of all the underlying funds that are actually doing the investing into stocks and shares, which you could have bought direct, and you are paying another layer of management fees and running costs for running the HL multi-manager fund on top.  However, it saves you from doing your research and making decisions so it is a product liked by some.

HL made a poor decision in the past to heavily back the Woodford Equity Income fund, which they promoted to all their customers and bought within their 'Multi-Manager Income & Growth' fund among others.  The fund had to wind up and fired Woodford as its manager, but it is now suspended while they go through an orderly wind-up process. It returned the money that it could, but the remaining value in it is tied up in investment assets that can't be sold any time soon. Investors in that ex-Woodford fund (including HL's Multi-Manager Income & Growth Fund whose share of the fund is still worth about £70 million on paper) can't take their money out on demand and are just sitting around to see how much of their investment will be returned in due course.

About 3% of the current value of the HL Income & Growth fund is invested in this dead ex-Woodford fund. You can still buy and sell shares in the HL fund, but the HL fund can't buy and sell its shares in the ex-Woodford fund so it just sits there.  If you invest in the HL Income & Growth Fund alongside everyone else who owns the HL product, you will therefore effectively be buying a piece of that £70m piece, and putting 3% of your money into the old Woodford product. Many people fear that the Woodford product won't ultimately return the current stated value, and it's known that the current operators of that fund are just trying to sell everything off rather than nurture and grow any of the underlying companies it owns. So, it doesn't seem very wise to buy a share of an HL fund which has the embarassment of allocating some of your money into that dying asset which is probably a bad investment.

HL are disclosing to investors of their multi-manager Income & Growth Fund that some of your money will be allocated to buy you a slice of that dead fund which is currently suspended - and will never become un-suspended because it's winding up over the next year or two , and from an 'income and growth' perspective is useless because it is unlikely to produce much of either.  If you use their Portfolio+ product which splits your money across HL multi-manager funds, you will get some of your money in HL I&G and so they warn you, "This portfolio includes an underlying holding in LF Equity Income (formerly the Woodford Equity Income Fund), in which dealing is currently suspended".  As they mention, the HL portfolio itself is not suspended and can be bought and sold as normal. But if you buy it, you are effectively buying a piece of a dead fund that nobody would choose to buy even if it wasn't suspended.

Jupiter55

HI Bowlhead99
Thanks for taking the time to answer. I am glad that there are sites like this and people will to share information to newbies.
Goodness knows how folk managed before they could get support. 

cheers  

mcooke999

Forget any of the actively managed funds from HL and simply plough your money into one of the Vanguard LifeStrategy funds, preferably via their new SIPP or ISA. Anything other than that is a complete waste of your money in terms of fees over the long term

ColdIron

mcooke999 said:simply plough your money into one of the Vanguard LifeStrategy funds, preferably via their new SIPP or ISA.

Vanguard Investor charge a 0.15% platform fee of the amount invested with them, capped at £375 pa. Cheap enough if you have a £25,000 investment

mcooke999 said:Anything other than that is a complete waste of your money in terms of fees over the long term

Maybe not. If you had a £250.000 investment then that £375 pa would really sting

Consider iweb That same £250,000 would cost you £0 pa

So in terms of fees over the long term, I disagree that 'Anything other than that is a complete waste of your money'

Horses for courses, and all that good stuff

Alexland

Also default advice to plough money into a SIPP is dangerous when many of us have a more efficient option of ploughing money into a salary sacrifice workplace pension (and then occasionally partially transferring lump sums out into a SIPP if the charges are lower, etc). Vanguard's 0.15% platform fee is much higher than the charges I pay on my SIPP. It all depends on circumstances, valuations and available options.

Jupiter55

May I muddy the waters and ask the benefits of the vanguard etc 60/40 typed funds to the tracker following the 100 or 250 FTSE ( aware that the FTSE is having a rest just now) 

Being mindful this is for my very first venture into S/S 
Thanks