Hargreaves Lansdown grabbed headlines this week after announcing a new UK equity fund charging very competitive fees but the feature that grabbed my attention – and most of the asset management industry should also take note – is the commitment to real-time transparency. 
Launching at the start of December, HL Select UK Shares will be an actively managed portfolio of the financial services firm’s favourite growth shares. It will be headed up by Steve Clayton, who has been working in the stock market since 1987, and Charlie Huggins, who works in Hargreaves Lansdown’s investment research team.
The portfolio will focus on companies showing the potential for long-term durable growth, with characteristics such as exceptional products and services, recurring revenues, high margins, healthy returns, cash generation and little or no debt being sought after.
“I have been working in the stock market for almost 30 years. And it has become very clear to me if you can invest in high quality growth companies, those that can compound their earnings year after year, they have potential to create enormous value,” Clayton said.
“Very few companies make the grade. We have the flexibility to scour the market to find large, medium or higher risk smaller companies we believe have the most potential. We expect to hold around 30 companies at launch; whilst this increases the risk, it means each one could make a real difference to returns.”
Source: FE Analytics
One of the major selling points of the fund, however, is its fixed ongoing fund charge of just 0.60 per cent. This has rightfully caught the attention of many as it makes the fund cheaper than 85 per cent of funds in the IA UK All Companies sector.
Most of the funds with lower OCFs than the HL offering are trackers, although active products with lower fees include the likes of Franklin UK Opportunities, Franklin UK Rising Dividend (both 55 per cent OCF) and JPM UK Equity Core (40 per cent OCF).
However, it’s another feature of Hargreaves Lansdown’s launch that has really caught the eyes of the FE Trustnet team and is something we really hope to see more of across the asset management industry.
One of the key aims of the fund is to offer “superior investor insight” by allowing investors to see every share held, not just those in the top 10.
I appreciate that other fund groups are already doing this: you can see some funds’ full portfolios through professional tools such as FE Analytics while a small number of groups like Woodford Investment Management publish a full portfolio breakdown of their own accord.
But Hargreaves Lansdown appears to have gone a step further by planning real-time updates on when changes are made to the portfolio. “Learn what we buy and sell in the portfolio, when it's happened not months later” is one of the promises made in its marketing materials.
As a financial journalist I spend a lot of time looking at portfolios and trying to figure out what has been bought and sold within a fund can be a laborious task. Sometimes it feels impossible to know exactly what is going on within a fund, especially if the fund group is less than forthcoming with updates.
Example of HL Select UK Shares’ holding information
Source: Hargreaves Lansdown
The image above shows an example of any kind of information that the group is offering – details on why the managers have decided to own the individual stocks within the portfolio. The firm will not, however, disclose positions it is currently building or reducing.
Again, this is something that we need to see much more of in the asset management industry. Even if you are lucky enough to spot that a stock has been added to a fund (often you’ll only know once it enters the top 10), you’re still none the wiser as to why.
“We want our investors to get the level of detail normally associated with expensive wealth managers. We can offer this level of insight at a competitive price because the world has changed and the internet and email let us communicate to investors in ways that would never have been economic just a few years ago,” Clayton added.
“We’re going to show you every significant holding; not just the top 10. Companies that we are actively buying or selling will be off the radar screen. But when we’ve finished dealing, we’ll show you what we’ve been up to and explain why.”
While this article has focused on Hargreaves Lansdown and Woodford Investment Management, there are example of other fund groups that are making strides in improving the transparency offered to the end investor.
Just this week, Baillie Gifford announced that it would be publishing the annual portfolio turnover figure on its retail fund factsheets from December 2016 in order to allow investors to see how frequently assets within a fund are bought and sold.
James Budden, director of retail marketing and distribution, said: “These numbers are important because they provide evidence that we take a credible long-term approach to investing in an increasingly short-term environment. Low turnover also points to lower trading costs which is good for investors who in turn need this kind of transparency if they are going to be able to separate the genuinely active from the index huggers and high turnover traders.”
Baillie Gifford is also one of the fund groups that now publish the active share of their funds on factsheets. Others also offering this piece of information to investors include Neptune Investment Management and Majedie Asset Management.
Of course, there is a risk of information overload. Throughout FE Trustnet’s income transparency campaign, some felt that throwing more and more numbers at investors could lead to greater confusion as they attempt to weigh up an increasingly large list of metrics.
I have some sympathy with that view but I’d rather work with an industry that offers us more information than we can use than be starved of insight and have to just take a fund group’s word that they are making the best decision on our behalf.
In this column I’ve highlighted a few examples of where the asset management industry is getting it right on transparency but there’s still plenty to improve. There’s a much longer list in my head of the groups that are still too reluctant to engage with investors on what they are doing with their money – which is why I can only applaud Hargreaves Lansdown’s move and hope others follow soon.
Gary Jackson is editor at FE Trustnet. The views expressed above are his own and should not be taken as investment advice.