Woodford Freeze Boosts Investor Move to U.K. Platform AJ Bell

(Bloomberg) -- Investors poured more cash into U.K. investment platform AJ Bell Plc in the past quarter even as the country’s fund industry came under fire following Neil Woodford’s decision to freeze redemptions from his flagship fund.

Customers added 1.2 billion pounds ($1.5 billion) in the U.K. investment platform in the three months through June, adding to 1 billion pounds of net inflows in the first quarter of the year, according to a statement on Thursday. Shares rose as much as 8.4%, the biggest increase in three months.

Lawmakers and regulators have spoken out against the industry for failing to limit risk and protect investors after former star stock picker Woodford blocked investors from withdrawing their money from his main fund in June. While investment platforms have also come under scrutiny for their promotion of certain funds to individual investors, AJ Bell has managed to so far sidestep direct criticism. That’s partly because the firm removed the LF Woodford Equity Income Fund from its favorite funds list in September, well before other competitors stopped backing the money manager.

“It’s all about monitoring liquidity,” Andy Bell, chief executive officer of AJ Bell, said in a telephone interview. “If there’s been a drastic change, we take a closer look. On Woodford, we saw the profile change over time. That and performance led us to take him off our list.”

Woodford Suspension

Woodford froze his fund after he struggled to meet redemption requests following a period of poor performance. The suspension is intended to give him time to raise cash by offloading stakes in unlisted and smaller companies that he had built up in recent years. The move drew criticism from Bank of England Governor Mark Carney, who said it highlights the risks of money managers who offer investors daily access to their money but buy hard-to-sell assets.

Nicky Morgan, chair of the U.K. Parliament Treasury Committee, demanded answers from the U.K.’s financial watchdog on their oversight of the fund, as well as from Hargreaves Lansdown Plc -- AJ Bell’s competitor -- on their links to Woodford and the inclusion of his fund on their Wealth 50 list.

“I think it was a bloody nose for Hargreaves and they’ll move on,” said Bell. “They’re still a good business and tough competition. A lot of customers in the DIY world are comparing prices and that’s where we have an advantage over Hargreaves, and we saw some clients come over to us from them last month.”

Customers now total 224,644 up from 214,853 on March 31, according to the statement.

“People are now questioning the integrity of the fund lists and how they’re constructed and that’s good,” said Bell, referring to fund lists compiled by investment platforms.

The firm, which was co-founded in 1995 by Bell and Nicholas Littlefair in Manchester, England, debuted in London with a market valuation of 651 million pounds on Dec. 7. Shares are up 85% this year. The firm’s assets under administration rose 6.3% to 50.7 billion pounds from the previous three months, with the firm citing inflows as well as market performance as contributing factors.

To contact the reporters on this story: Suzy Waite in London at swaite8@bloomberg.net;Ali Ingersoll in London at aingersoll1@bloomberg.net

To contact the editors responsible for this story: Shelley Robinson at ssmith118@bloomberg.net, Patrick Henry

©2019 Bloomberg L.P.