Woodford investors can now move frozen fund out of Hargreaves Lansdown, as share registrar clears the way for transfers
- Woodford is currently overhauling his fund and shedding illiquid assets
- Some frustrated Woodford investors have tried to leave Hargreaves
- But until now they were prevented due to the technical workings of ‘share classes’
Investors who hold Neil Woodford’s frozen Equity Income fund on the Hargreaves Lansdown platform can now switch it to a rival broker if they want, following a change of stance by share registrar Link.
Woodford is currently overhauling his fund and shedding illiquid assets, in a process initially intended to last 28 days but that is now thought likely to take until Christmas.
Frustrated Woodford investors have tried to leave Hargreaves, which backed the manager until the day withdrawals from his fund were suspended.
But until now they were prevented for a technical reason involving the workings of ‘share classes’.
Ongoing charges: Woodford is still taking £100,000 a day in management fees from investors while he revamps his fund
Richard Wilson, of investment platform Interactive Investor, said this week that people had contacted his firm to say they were unable to switch their account from Hargreaves.
This is down to ‘share classes’, which are simply different versions of the same fund.
We explain how they work and how to decode the abbreviations tagged onto fund names here.
Why did customers have trouble transferring Woodford fund away from Hargreaves?
Hargreaves customers hold an exclusive ‘Z share class’ version of the Woodford fund, because it negotiated a special cut-rate deal with his fund management firm.
The ‘Z’ version of Woodford’s fund is cheaper than the ‘C share class’ version offered by rival fund brokers.
However, because it is exclusive to Hargreaves it could not be held on those other platforms, and had to be converted to ‘C’ when people transferred out.
Share registrar Link, which handles and records such transactions, now says that although conversions cannot take place – because share dealing is banned while Woodford’s fund is suspended – Z share class holdings can be moved to other brokers’ platforms.
Link’s full statement is below. In practical terms, this change now enables investors to leave Hargreaves if they want.
Carrying out conversions between share classes is normal practice, when customers switch in or out of Hargreaves or between other platforms where necessary, and would usually pose no problem.
But because dealings in Woodford’s fund are currently frozen, Link is not allowing conversions between the Z and C share classes.
What fees do Woodford investors face?
The fee for investors in Hargreaves’ Z version of Woodford’s fund is 0.65 per cent, and in the C version it’s 0.75 per cent.
Woodford is still taking £100,000 a day in management fees from investors while he revamps his fund.
Because share class conversions can’t take place, investors who leave Hargreaves for another broker will now stay on their old cheaper Z rate.
However, they will lose the further 0.15 per cent discount or ‘rebate’ which it gives customers.
Hargreaves has also waived its usual 0.45 per cent platform fee on holdings in Woodford’s fund, which in theory actually makes it one of the cheapest places to currently hold it.
Link Fund Solutions said: ‘Our overwhelming priority is to protect and serve the best interests of investors.
‘Financial Conduct Authority regulations stipulate that no dealing is allowed during the suspension, which places significant obstacles to enabling a customer to move from one investment platform to another where it would mean a change of share class.
‘Link Fund Solutions had already enabled investors to transfer between platforms when no such change in share class is needed.
‘After lengthy discussion with Woodford, transfers between platforms across all share classes, but not share class conversions, will now be allowed with immediate effect (10th July 2019). This supports investors by providing them with the freedom to move their investments between platforms.’ Link has more information for investors here.