Love or hate them, best buy investment fund lists are here to stay. Based on past mutterings, the regulator supports them and there is no doubt they do assist investors in navigating the investment marketplace, awash as it is with too many funds.
Yet it doesn’t mean such lists are perfect. It is therefore good to see Hargreaves Lansdown improve the way it goes about constructing its list – and, more importantly, putting in place monitoring procedures that will ensure all the chosen funds continue to earn their right to remain best buys.
The wealth manager’s move is long overdue, coming more than a year after it was deservedly criticised for labelling investment fund Woodford Equity Income a best buy right up until the day it was suspended.
‘Key will be how rigorous Hargreaves Lansdown is in ensuring the list remains free of Woodford-like disasters’, says Jeff Prestridge
It will do little to appease those who kept faith with Woodford – or bought into the Woodford fund – because of Hargreaves Lansdown’s unremitting (and erroneous) faith in his ability to make proverbial investment silk purses out of sows’ ears. The losses they made from investing in Equity Income on the back of its support for the fund will not be made good.
The revamp is not without its faults. Eyebrows will be raised at the continued involvement of Mark Dampier in the overseeing of the so-called Wealth Shortlist. It was Dampier, as head of research at Hargreaves Lansdown, who did more than anyone to champion Woodford and ensure his funds (Equity Income and Income Focus) remained on the Wealth 50 – the precursor to the Shortlist.
In keeping him on board, it could be argued that Hargreaves Lansdown has not made a clean enough break from its past problems.
Then, there is the omission of some of the country’s most respected investment funds – for example, Fundsmith Equity and Lindsell Train Global Equity – which casts doubts on the robustness of the list. There is also not one investment trust among its 68 fund favourites which seems crazy given many of these are among the country’s biggest listed companies.
In addition, you could argue the Wealth Shortlist is no more than an extension of Wealth 50 with 18 added funds. As one rival said: ‘It’s a bit boring. Where are the interesting new fund names and up and coming fund managers? It lacks innovation.’
Finally, it seems strange that after the Woodford meltdown – a result of Woodford going off piste and investing in unquoted companies rather than income-friendly companies – the Shortlist includes a fund with exposure to unquoteds.
As respected Peter Sleep, a portfolio manager with Seven Investment Management, told The Mail on Sunday: ‘I would prefer not to see any funds with unquoted stocks on the Shortlist because it is used heavily by newbie investors who may not be aware of the added risks of investing in unlisted securities.’
In rebooting its best buys list, Hargreaves Lansdown has taken a step forward that should provide comfort to customers. But key will be how rigorous it is in ensuring the list remains free of Woodford-like disasters.
Disastrous fund love affairs like the one Dampier had with Woodford Equity Income need to be a thing of the past. Vigilance is what is now required.
As a money section, our focus is on helping you with key personal finance issues – whether it’s maximising your wealth, ensuring your household finances are ship-shape, or ensuring you do not fall victim of financial scammers.
Yet, for once, I will change tack. With yesterday’s easing of lockdown restrictions, I urge you to do your bit for the economy by going out and supporting your local high street. It desperately needs a little of your hard-earned money.
Last night, I did my ‘bit’ by dining out at Italian restaurant Rossini in Wokingham, Berkshire. The Gnocchi alla Sorrentina was a knockout, especially when washed down with a glass (or two) of delicious Valpolicella Classico Le Caleselle.
I also couldn’t resist going into Waterstones and buying a copy of The Hairy Bikers’ One Pot Wonders. As a result, I will today be serving up a poor version of their ‘Uzbek plov’ (lamb and rice) with meat bought from local butcher Stefan’s.
Spend a little if you can.