A law firm examining whether a legal case can be made against Hargreaves Lansdown over its championing of Woodford funds has received a steady stream of inquiries from disgruntled clients of the platform.
This month, the Financial Times reported that firm Leigh Day is examining whether Hargreaves should have removed Woodford Equity Income from its Wealth 50 buy list or its predecessor, the Wealth 150, earlier than it did.
Despite poor performance and liquidity breaches, the D2C platform giant only dropped Neil Woodford’s flagship fund from the buy list after it suspended in early June.
It dropped his smaller Income Focus Fund, now also suspended, at the same time.
HL’s ‘very optimistic’ representations about Woodford
Leigh Day solicitor Kamran Vojdani told our sister publication Portfolio Adviser the firm is getting multiple inquiries each day and has been liaising with affected investors as part of its investigation into the strength of the case. The process would take several more weeks before a decision is made on the next step.
“At the moment, my feeling is that there is an important and viable claim here,” he said.
The exact nature of the claim is to be determined by the investigation, but Vojdani pointed to the fact Hargreaves had been making “very optimistic” representations about the health of the fund.
“Those representations, we know now, were more optimistic than they should have been.”
Hargreaves backed Woodford until the suspension
A recent example of Hargreaves championing Woodford was in January this year when both the Woodford Equity Income and Income Focus funds were included in the streamlined Wealth 50 list, which was slimmed down from the Wealth 150 list.
Rival UK equity funds, such as Liontrust Special Situations, which is managed by Anthony Cross and Julian Fosh, and Fidelity Special Situations, managed by Alex Wright, were dropped at the time. Neither offered Hargreaves a discounted fee or had the brand recognition of Woodford.
Hargreaves’ head of research Mark Dampier acknowledged at the time he had been getting flak about continuing to champion the equities manager.
Dampier said the research team kept Woodford on the Wealth 50 due to their long-term, conviction approach. But at that stage Hargreaves had already been in monthly communications with Woodford for 12 months due to concerns about his illiquid holdings, according to subsequent correspondence with the Treasury select committee.
Leigh Day investigation continues
Hargreaves clients that have approached Leigh Day have been questioned about their exact situation, including what prompted their decision to invest in Woodford Equity Income. The firm is continuing to email and phone Hargreaves clients who have made contact.
Vojdani said there are investors that have contacted Leigh Day that also have holdings in other Woodford funds or the Hargreaves multi-manager range, which also has exposure to Woodford Equity Income.
If Leigh Day decides to pursue a claim, it would reach out to Hargreaves clients it has been in contact with to see if they want to be represented by the firm.
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