As regular blog readers will be aware most of my clients use Hargreaves Lansdown and have a basic strategy of only investing in funds in their Wealth Shortlist. I accept that HL has not always got it right and made disastrous errors in connection with the Woodford funds but I remain convinced that it is a good strategy for selecting and monitoring funds and that they have learned from the Woodford errors.
Most of the time, following the strategy is very straightforward, but it throws up a difficult decision every now and again, and this is one of those times.
The decision to remove the Marlborough UK Micro – Cap Fund from the shortlist came as a great surprise to many of our clients as it has been one of their top performers.
Growth of 519% since the fund was added to the Wealth150 in July 2007 has been nothing short of spectacular. No wonder clients are reluctant to switch out just because it has been removed from the Wealth Shortlist.
I am determined to stick with the guidance that they should only invest in funds on the Wealth Shortlist for my new clients. I have learned, over many years, the importance of having simple, tried and tested, and deliverable guidance to help my clients in their fund selection. Within the Wealth Shortlist, there is another UK Smaller Companies Fund – the TB Amati UK Smaller Companies Fund which is an entirely suitable alternative so that is the guidance I will be providing.
But where does that leave existing Marlborough UK Micro- Cap investors of whom I am one?
Firstly, I understand and support HL’s decision and the reasons behind it. It is quite correct for them to look ahead and evaluate the possible effect on the future performance of running a Smaller Companies Fund of this size. Thank goodness they have learned their lessons from the Woodford Debacle and no longer keep funds on the Wealth Shortlist just based on past performance.
Secondly, I understand clients reluctance to switch out of a fund that has done so well, but where does that leave them in terms of monitoring ongoing performance. Far too many Woodford investors who had also benefitted from spectacular performance in the early days stuck with him right up to the day when his funds were suspended. Monitoring ongoing performance is not easy when your HL valuations only show performance based on dates of investment and not, for example, from when a fund is removed from the Wealth Shortlist.
To date, there has been no drop-off in performance, with the last twelve months continuing well, so I, for one, will be sitting tight. Don’t forget that this article is not personal advice. The value of investments will rise and fall, and past performance is no guarantee of future performance.
The question I have been considering is: “what can we do to support clients who decide to stay invested?”
Firstly, do a screenshot of any accounts which include this fund. It will then be far easier to monitor performance from when the fund was removed from the Wealth Shortlist.
Then tell us if you will remain invested and we will put you on the list of clients who, in the future, will receive half-yearly updates on performance and prospects in respect of this individual fund. We cannot, and, will not provide specific switching advice but we can make sure that you are well informed and will know when this needs your attention.
There are no right or wrong answers so, if you prefer, there is no reason why you should not stick to the original strategy of only holding finds on the Wealth Shortlist and consider a switch to the TB Amati UK Smaller Companies Fund.
For those clients who are subscribing to our ongoing guidance service or who have joined The Investment and Retirement Guidance Club, we will also be issuing quarterly HL Wealth Shortlist updates.
I hope you have found this helpful. If you are not yet a client, book in for a complimentary HL fund review here.
This document and our on going services are not personal advice. We'll give you all the help and guidance you need to make your investment and retirement decisions, but we can't advise you. If you're not sure whether you need regulated financial advice we can put you in touch with a suitably qualified and experienced regulated adviser. Because we are not regulated by the Financial Conduct Authority you will not have access to the Financial Ombudsman Service in respect of any complaints. If you use one of the "no advice" on line services to handle investment transactions they will be Regulated and you will have access to the Ombudsman and The Financial Compensation Scheme in respect of their services. The value of investments/pension plans can fall or rise depending on market performance. The Retirement Team and The Investment and Retirement Coach are trading names of Capture Success Ltd Reg No 01825075 Tel 07770575122