ALEX BRUMMER: Why wasn’t HL more wise to fissures in the Woodford approach

Most savers with direct or indirect holdings in funds run by Neil Woodford are nursing nasty losses. 

It is worse than that. Investors in two of the firms that promoted the Woodford cult – investor platform Hargreaves Lansdown (HL) and advisers St James’s Place – have had a nasty shock.

Not everyone is a loser. Hargreaves head of research Mark Dampier, together with his spouse and a colleague, Lee Gardhouse, who ran HL’s multi-manager funds which put cash into Woodford, demonstrated foresight by cashing in HL shares as they reached peak levels in mid-May, collecting £6million.

Fallen star: It is reasonable to ask why Hargreaves Lansdown, which pumps out investment analysis each day, wasn’t more wise to fissures in the Neil Woodford approach

Stephen Lansdown, one of the super-wealthy founders of HL, sold down his holdings a few days later, collecting £170million.

Whatever personal or regulatory reasons triggered these disposals, the optics are terrible. 

The 1.1m-plus clients on HL’s books have the right to expect behaviour from senior executives and connected parties that is beyond reproach.

Now that Woodford and his standards of governance are under fierce scrutiny, we learn that specialists have been concerned about the way his funds are structured.  

In a Times letter, Ian Sayers, chief executive of the Association of Investment Companies, argues that illiquid assets (in Woodford’s case, unlisted stocks) should not be held in open-ended funds. 

Sayers reminds us that illiquid funds had to be gated after the financial crisis and the 2016 EU referendum. 

The reminder is useful but there is an element of what the Americans call ‘Monday morning quarter-backing’, meaning analysts of American football being wise after the event.

Nevertheless, it is reasonable to ask why HL, which pumps out investment analysis each day, wasn’t more wise to fissures in the Woodford approach. 

The same can rightly be said of the Financial Conduct Authority which is suffering from a severe case of regulatory over-stretch. 

In far off Tokyo, where bankers from the Institute of International Finance are gathered, Mark Carney added his two-penneth.

The Bank of England governor noted that, in more than half of funds, there is a mismatch between the ability of investors to pull cash out and the stickiness of the holdings.

It is an ominous warning that a Woodford-style catastrophe is by no means a black-swan event.

New life

Maurice Tulloch is moving with admirable speed to stamp his mark on Aviva.

Among Britain’s big insurers, Aviva has been a serial disappointment. Chief executives have come and gone with rapidity, and while the Prudential and Legal & General have – in different ways – created great value for investors, Aviva has been stuck in a rut.

Tulloch’s big decision is to end the fiction that cross-selling is the way to go. People who buy Aviva motor insurance will not necessarily put it in charge of their pensions, ISAs and life cover. 

So he is opting for an operational split, putting life and general insurance into their own silos, with their own chief executives. In the past, such separations been a stepping stone to doing the splits. 

Tulloch sees it as providing focus and helping the group live within its means. He is not abandoning good stuff done by his spirited predecessor Mark Wilson, who invested heavily in digital and came up with the concept of Aviva Plus monthly car insurance payments without interest charges and no loyalty penalties. 

But he is taking an axe to capital expenditure which more than doubled in recent years to £600million.

Jobs are also to go, defying the image that working for an insurer is for life. The promise of a progressive dividend remains intact. 

It is to be hoped Tulloch can keep it at a time when other new bosses, notably Nick Read at Vodafone, reached for reverse gear.

Partner up

We now know that Sharon White’s name will not be among those being sifted by headhunters Sapphire as they help identify the next governor of the Bank of England.

The Ofcom director and former Treasury mandarin is the surprise choice to succeed Sir Charlie Mayfield as chairman of John Lewis. 

The basic salary of £990,000 a year will doubtless be useful, but the challenge of running a bricks-and-mortar retailer, even one as much-loved as John Lewis, should not be underestimated.

White did sort out Rupert Murdoch’s Sky sale and forced BT to separate out its Openreach broadband arm. So John Lewis’s Waitrose might feel like a walk in the park.


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