Update: Hargreaves Lansdown (HRGV) is preparing for a bumper ISA season as star fund manager Neil Woodford prepares to launch his Income Focus fund, while the online stockbroker readies the launch of its own HL Select UK Income Shares fund.
Citywire A-rated Neil Woodford will launch his Income Focus fund, which is targeting a higher yield than his £9.6 billion Woodford Equity Income fund, next month in time for the ISA season.
Hargreaves Lansdown was a big driver behind the heavy inflows into the Equity Income fund, securing a discount to 0.6% on the fund’s charge and placing it in its Wealth 150+ list.
Hargreaves chief executive Ian Gorham said the online stock broker was in ‘ongoing conversations’ with Woodford Investment Management over the new fund, and that its launch should provide a boost to assets.
‘Obviously, Neil is popular manager, and that does help in getting new assets,’ he said.
Hargreaves will also be launching its own income fund, HL Select UK Income Shares, next month, building on the strong inflows into its HL Select UK Shares fund, launched in November.
Like the UK Shares fund, the new income fund will be managed by Steve Clayton and invest directly in the stock market in a break from Hargreaves’ previous focus on launching ‘funds of funds’.
The UK Shares fund raised £168 million at launch last year, making it the broker’s second biggest fund launch, behind only the £1.6 billion it raised for Woodford’s Equity Income fund.
Hargreaves said it expected to launch further new funds in 2017 ‘until we are satisfied demand for funds from clients is materially covered across sectors’.
Hargreaves revealed its fund plans as it reported a 51% surge in client share dealing post-Brexit vote, which helped drive pre-tax profit growth of 21% in the second half of 2016.
The company announced pre-tax profit for the period of £131 million, up from £108.1 million year-on-year, while net revenue rose 16% to £184.8 million in the six months to the end of December.
Total assets under administration increased by 19% to hit £70 billion, despite net business inflows dipping by 16% to £2.34 billion. This was largely down to market movements and sterling weakness.
Despite the equity trading boom in the aftermath of the referendum result, Hargreaves reported that its asset gathering slumped by 22% in the third quarter – the first quarter of the company’s financial year- before recovering in the last three months of the year, up 10% from the previous year.
The fourth quarter was also volatile however, and the firm said fund sales dipped in November following the US election result and redemptions increased, before the subsequent market rally tempted investors back.
Overall, the fourth quarter saw net new Vantage ISA business fall from £700 million to £600 million year-on-year, fund and share account new business similarly reduced from £800 million to £600 million, while new Vantage Sipp business was down at £1.1 billion from £1.2 billion in the same period last year.
Hargreaves shares have rallied nearly 15% in the past three months but fell 33p, or 2.4%, to £13.53 today.
Boss steps down
Gorham (pictured), who is stepping down to be replaced by chief financial officer Chris Hill, said: ‘The period was unusual in that it encompassed the effects of various political and macroeconomic developments. By far the greatest of these was the UK’s vote to leave the European Union on 23 June 2016. The immediate effect has been significantly elevated equity trading levels compared to the prior year which persisted throughout the period.
Meanwhile, HL Savings, the firm’s much anticipated cash deposit service, was tested in January and remains a ‘priority initiative’ although Hargreaves said ‘significant development work remain before the service will be ready to launch’, with it not expected to go live ‘until at least October’.
Hargreaves also confirmed its upcoming board changes. Gorham announced last September that he would step down from his role ‘no later than 30 September 2017.’ He received a £2.1 million pay package in 2016, including a £1.1 million cash bonus. Gorham will be replaced by Hill, who has also been deputy chief executive as well as chief financial officer (CFO). The company announced the hire of former Jupiter CFO Philip Johnson in January and he joins this month to take on the same role.
