Hedge funds are betting against UK’s largest broker Hargreaves Lansdown amid increasing competition from large low-cost asset managers and robo-advice offerings from banks.
According to regulatory filings, US fund AQR Capital Management and London-based Odey Asset Management have both taken short positions in Hargreaves. Short positions disclosed to the regulator are currently at their highest-ever level, the FT reports.
However, Bloomberg data shows the net short positions are currently relatively small compared to December.
Analysts have attributed the move to the increasing competition coming from large asset mangers entering the direct-to-consumer market as well as retail banks launching robo-advice offerings.
Fund Strategy’s sister title Money Marketing has previously reported analysts warning about pressures for businesses like Hargreaves or St James’s Place which despite consistent high net flows, risk losing their dominant hold on market share amid changing demographics and regulatory pressure.
In October, Money Marketing also revealed giant US passive fund house Vanguard was planning to enter the D2C space this year. The firm planned to launch by April but hasn’t confirmed yet an exact date for the launch.
Meanwhile, last year, banks such as Santander UK, Barclays and Royal Bank of Scotland started planning on offering automated online investment services for their mass-market clients.
Shore Capital analyst Paul Ginnis says Hargreaves has been “very resilient over the years” but indicates that the firms’ revenues are affected by market movements as its fees are charged as a percentage of assets under administration.
He says: “It would theoretically see larger than average downgrades on a material UK equity pullback. It might be that the short [sellers] are just looking for a highly rated vehicle that would suffer disproportionately in a market crash.”
Hargreaves chartered financial planner Danny Cox says a higher tax-free allowance for Isas or pensions investors is leading more people to invest.
He says: “These initiatives plus new innovations should help to widen the investing market and encourage more people to invest as well as save.
“Hargreaves Lansdown is ideally placed to continue to take advantage of these and other structural opportunities in the space.”