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Hargreaves Lansdown to launch UK shares fund

Hargreaves Lansdown to launch UK shares fund

by Michelle McGagh Nov 14, 2016 at 15:25

Hargreaves Lansdown is to launch a UK shares fund to be managed by head of equity research Steve Clayton.

The fund will be the online stockbroker's first shares fund and a departure from the multi-manager approach it has employed for its existing £7 billion fund range.

Charges for the fund have been set at 0.6%, on top of the up to 0.45% Hargreaves Lansdown platform fee.

The HL Select UK Shares fund will invest in around 30 stocks that the manager deems to have ‘exceptional products and services’ as well as recurring revenues, high margins, healthy returns, strong cash generation and ‘little or no debt’.

Despite the focus on quality firms, Clayton said the fund would not solely be made up of defensive stocks or mimic the investment style of Citywire AA-rated Nick Train, manager of the CF Lindsell Train UK Equity fund, or Citywire AAA-rated Terry Smith, manager of the Fundsmith Equity fund.

‘We are not going for defensives in the sense of packing the fund full of utilities and drug companies but what we are trying to do is find companies with business models that provide high margins and profits that make them defensive in their own industry,’ said Clayton.

‘What we are trying to do is protect on the downside and focus on quality. In the last big downturn it was the leveraged businesses that got taken out and shot. If you can avoid those sorts of pitfalls then you can preserve as much as possible on the upturn.’

Clayton (pictured) said financial services or commodity-related stocks were unlikely to be a major feature of the fund.

‘We are trying to avoid highly-leveraged sectors, so large swathes of financial services are out…because it is hard to be different when your stock in trade is money,’ said Clayton.

‘We have a natural aversion to commodities because adding value is very difficult. One man’s pile of coal is much the same as another’s. If we find someone whose marginal costs of production is way below average then we may look at it but so much what happen to commodity companies is outside of their control. We are looking at companies that are in control of their own destiny.’

Clayton said he was not concerned that quality stocks were overvalued, arguing they were still attractive in a low interest rate and low inflation environment.

‘If you look at the opportunity available for outstripping bond yields then I do not think investor demand for those areas will recede given the greater uncertainties in recent weeks,’ he said. ‘I am not too concerned. We are asking: does a company have the ability to keep compounding? If it does then everything will be alright.’

As well as being low-cost the fund will try and demystify what Clayton describes as the ‘black art’ of investing.

The fund will disclose all shareholdings, not just the top 10, and break down exactly why it holds each stock. When a position is purchased or sold investors will be informed via blog entries straightaway and portfolio performance reports will be issued every month.

Clayton said he also wanted to avoid the benchmark-hugging that had become a feature of many funds.

‘If you take the industry as a whole there has been way too much focus on benchmarks and not enough innovation in how funds are structured,’ he said.

‘We want to focus on what is best for the investor.'

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Comments  (14)

  • Law Man: 

    What will the new fund offer which is distinctive from the thousands in existence?

    30 holdings is fairly concentrated; so it could do well.

    It seems to have a quality/ growth bias; not value or income.

    Initially no track record will be established. Wait and see.

    16:57 on 14 November 2016

  • Ladysaver: 

    Interesting, but I too would like to know about income - what the projected yield is likely to be.

    17:48 on 14 November 2016

  • Vince.: 

    Shame the HL fund couldn't negotiate a decent discount from the HL platform. And will it go straight onto their Wealth 100 list of favoured funds, I wonder?

    19:50 on 14 November 2016

  • Powerful Pierre: 

    I wonder what Nick Train or Terry Smith (et al ...) would say about this launch. Worried? I don't think so.

    21:22 on 14 November 2016

  • William Phillips: 

    HL adopts reporting standards for an open-ended which have been de rigeur among investment trusts for decades. Wow, how revolutionary.

    I remember when HL's pitch was 'here are the facts, choose what you want and we'll handle the admin, cheap. You gotta make up your own minds.' Then they became commission-hungry and we got the Wealth 150, with its biases and omissions, and the years of disparaging ITs... which did not pay commissions.

    Not exactly Vanguard-level good guys, but it got them into the Footsie.

    We know that very few active managers with secret sauces beat the market, and few OEICs beat their IT counterparts. Nor can they offer a steadily rising income as trusts can. So why and how should HL's middle-of-the-road fund soar above these difficulties?

    But I daresay I shall be getting the usual mail blitz shortly, and that a lot of HL customers will bite. That is what they have always been best at- mass marketing.

    13:20 on 15 November 2016

  • Dennis .: 

    I wonder if it will go straight into the HL150 list like some of their preferred funds which go nowhere? I have just got rid of my Woodford holdings which were rather pedestrian despite the HL hype.

    21:27 on 15 November 2016

  • Dennis .: 

    The email has just arrived !

    21:36 on 15 November 2016

  • FrankFrank: 

    Everybody is after Fundsmith and Lindsell Train's style now but I think it is a little too late and they will only be cutting each other's throat.

    12:48 on 19 November 2016

  • Hybrid Pierre via mobile

    I dare say one or two of us Pierres have known the odd HL fund to show a minus after the launch date. I caught a cold on Woodford Patient Capital, but had bought those post-launch. Someone I know made modest investment in Fundsmith a couple of years ago and that, I think, has always shown a slight loss.

    Time to make some money on Peter Hargreaves' newest Fund. Does he drive an Aston Martin Virage, or a Vanquish?

    03:46 on 29 November 2016

  • Alison Bundles: 

    It's December 1. Did the Fund launch as HL said it would? If so, what price is it now? Not a word from them for investors. I thought transparency was the watch word?

    15:58 on 01 December 2016

  • dlp6666: 

    @Alison Bundles

    Just checked my HL account - says order to invest 'submitted for dealing', but no other communication. Lets see what tomorrow brings!

    16:07 on 01 December 2016

  • Powerful Pierre: 

    I understand no price will be listed till Dec 5.

    16:39 on 01 December 2016

  • Dennis .: 

    I guess they have got all the money in and are now trying to decide what to buy with it. Is the new HL fund in the 150 yet?

    Fundsmith went down to 279.7 today (£/$ swing) which was good as I had just put an order in for another £1k worth.

    21:49 on 01 December 2016

  • gareth B: 

    I bought his fund soon after release, it has not done well, the managers seem to be very slow to react or even select companies with strong growth, the last 12 months there has been so much good stock with growth but there "Expert Fund managers" managed to miss all of them. All this fund has done so far is loose... I think its time to cut my losses and more on, I would never touch one of HL's own funds again.

    11:12 on 01 December 2017

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