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Help to Buy ISA deadline is looming

Archive for the ‘Investments’ Category

Help to Buy ISA deadline is looming

Wednesday, October 2nd, 2019

After 30th November 2019, potential first-time buyers will no longer be able to apply for a new Help to Buy ISA.   

Savers who already have an account will be able to keep saving into it until 30th November 2029, regardless of when the ISA was opened, but accounts will close to additional contributions after that date. 

What is the Help to Buy ISA?   

The Help to Buy ISA was introduced to help first-time buyers over the age of 16. Individuals receive a bonus of 25% of their savings when it comes to purchasing a property, up to a value of £3,000. They can put £1,200 into the ISA in the first month, while subsequent payments are limited to £200 a month. The final criteria is that the property purchase cannot exceed £250,000 (£450,000 for London) if the buyer wants to receive the 25% boost. 

How does the Lifetime ISA differ?

The Help to Buy ISA is not the only option available. The Lifetime ISA is designed to help people aged between 18 and 40 to save towards their first home or for later life. The Government will again give a bonus worth 25% of what is paid in, up to a maximum of £4,000 per year. Savers can then receive a maximum of £1,000 per year as a government bonus. This can be used to buy a home worth up to £450,000 anywhere in the country. 

Both ISAs can be helpful when it comes to saving for a first-time property purchase, although there are some marked differences between the two. 

The Lifetime ISA rules mean that savers have to wait at least a year before they can use it to buy a home. With the Help to Buy ISA, individuals have to have saved £1,600 before they can claim the minimum government bonus of £400 but this can be done over a period of three months: £1,200 in the first month followed by two subsequent deposits of £200 in the next two months. 

It is possible to spread deposits across multiple ISAs. However, the maximum that can currently be saved in ISAs is £20,000 for the 2019-2020 tax year. 

Helping your children get their first house 

Given the struggles the younger generation face to get on the property ladder today, you may be wondering the best way to give financial support. If you’re considering giving your child enough money for a deposit, there are no immediate tax implications. You can give as much money as you like to your children tax free, but if you were to pass away within seven years of the gift, they could be faced with an inheritance tax bill if your estate was worth more than £325,000. You can gift up to £3,000 a year without paying inheritance tax.            

If your children or grandchildren are interested in taking out a Help to Buy ISA, encourage them to do so as soon as possible before time runs out. If you would like to know more about the options around gifting money to your children to help with a deposit on a house, don’t hesitate to get in touch.  

Own a second property? Look out for Capital Gains Tax changes.

Wednesday, September 25th, 2019

There have been several changes relating to Capital Gains Tax (CGT) over the past few years. The coming years are set to bring more. Here’s our summary of some of the more important changes coming that might be coming into effect from April 2020. 

If you are thinking about selling a residential property in the next year or two, you need to know about proposed changes to the capital gains tax rules for disposals from April 6th 2020. 

If you only own one property and have always lived there, you should not be affected. However, if you own more than one property or you moved out of your only property for a period of time, you might face a capital gains tax bill. 

The two main changes you should be aware of are: 

Final period exemption 

The last period of ownership counting towards private residence relief will be reduced from 18 months to just nine. Currently, the final period exemption allows individuals a period of grace to sell their home after they have moved out. However, the government feels that individuals with multiple residences have been taking advantage, hence the reduction.   

Lettings relief

Lettings relief is set to be removed, unless you live in the property with the tenant. For UK property, HMRC must be notified and tax paid 30 days after completion rather than the January following the end of the tax year in which the disposal took place. Failure to pay on time will result in HMRC imposing interest and potential penalties. 

With no transitional measures in place, this means that higher-rate taxpayers previously expecting to benefit from the maximum potential relief of £40,000 could be lumped with £11,200 extra tax overnight. 

Here’s an example of how the new taxes could influence a sale:

Steve, a higher rate taxpayer, bought a flat in April 2009 for £100,000. He lived there for 6 years until April 2015 before moving out to live with his partner. He let the flat until 2020 when he sold it for £300,000. The sale was completed on 4th June 2020. 

If the contracts were to be exchanged before the April 2020 changes, a CGT of £6,618 would be due. However, after the deadline a CGT of £21,636 would be due, payable seven months earlier – this is due to there being a lower period of private residence relief and a lack of lettings relief. 

The next steps

The two above changes are set to be enacted as part of the 2020 Finance Act and at the moment are not definite. The consultation to these steps closed on 5th September 2019. Assuming that draft provisions reach the Finance Bill 2019-20, we will have to see if any changes are made to either after it is debated in Parliament. 

Marshmallows and financial planning

Wednesday, September 11th, 2019

The Stanford marshmallow experiment is one of the most famous pieces of social science research out there. It has arguably influenced the way that many people live their lives, in addition to providing plenty of fun and interest for those with young children who are in the ‘I’ll try this at home’ camp.

So what is the marshmallow test? 

A marshmallow is placed in front of a child, they are told that they can have a second one if they can go 15 minutes without eating the first one – then they are left alone with the marshmallow.

As you can imagine, many children ate the marshmallow as soon as the door closed, others fidgeted and wiggled as they tried to restrain themselves, eventually giving in. A handful of children managed to wait the entire time. 

Following the experiment, the children were monitored as they grew up and it was found that those who waited for the second marshmallow performed better in exams, had a lower likelihood of obesity, lower levels of substance abuse and their parents reported that they had more impressive social skills. 

In other words, it could be said that the ability to delay gratification is a trait that leads to valuable rewards in the future. 

So how does this relate to financial planning?

The results from the experiment can easily be applied to the way you save and invest money. Simply put, if you save rather than spend now, you’ll gain greater rewards in the future. 

How do you delay gratification?

Cutting out frivolous and impulsive purchases are a good start. Think to yourself: ‘do I really need this?’ Do you have to buy a coffee from the coffee shop near work? Do you have to eat out twice a week? Small acts of restraint can lead to a big pay off in the future. 

When it comes to building a financial plan, it’s important to identify the levels of savings required for achieving goals in the future. Are you aiming for an early retirement or buying a holiday home? Setting out these goals early and developing a plan will help you to streamline your saving strategies so that you remain on track. Just remember, one marshmallow now or many marshmallows later.   

Whatever you want to purchase: a boat, a house or a car, delayed gratification is an extremely valuable skill to learn when it comes to achieving your financial milestones. The more you see your savings grow, the more motivated you will be to keep going. It’s good to see your hard work pay off and over the span of a few years, you could see dramatic increases in your wealth and financial security. 

September Market Commentary

Wednesday, September 4th, 2019

Introduction 

August is traditionally known as the ‘silly season’. The great and the good are on holiday. Nothing is happening: there are no world events. So the newspapers have to resort to any number of peripheral and not-at-all-serious subjects to fill their columns. 

Not this year. 

Most of the headlines in the UK concerned Brexit. This Commentary is written on 1st September with no idea what will have happened by the end of the week, never mind by 31st October when the UK is – currently – scheduled to leave the European Union. 

But the big story of the month was not Brexit, but the continuing trade war between the US and China. The President didn’t mince his words: 

“Our country has lost, stupidly [sic], trillions of dollars to China over many years. They have stolen our intellectual property […] and they want to continue. I won’t let that happen! We don’t need China and, frankly, would be far better off without them. […] Our great American companies are hereby ordered to immediately start looking for an alternative to China, including bringing your companies home and making your products in the USA.” 

China was not slow to respond as these words went hand-in-hand with another raft of tariffs. China has hit back against the Trump administration with a drastic exchange rate devaluation, almost guaranteeing a superpower showdown and a lurch towards a full trade war. The yuan blew through the symbolic line of seven to the dollar for the first time since the global financial crisis. […] The calculated action by the People’s Bank threatens to unleash a wave of deflation across the world and risks pushing East Asian countries and much of Europe into recession. It is certain to provoke a furious response from the White House. 

Capital Economics commented rather more succinctly that Beijing had taken the fateful step of ‘weaponising’ its currency. 

It is therefore hardly surprising that Reuters described the world economy as ‘probably being in recession with most business indicators flat or falling.’ And this was reflected on world stock markets, as none of the major markets we cover managed to gain ground in August. 

UK 

Boris Johnson ‘enjoyed’ his first full month as Prime Minister with Brexit dominating the agenda: as always there is a special Brexit section below, so let’s push it to one side for the moment. 

Figures released in the middle of the month showed that the UK economy had contracted for the first time since 2012, shrinking by 0.2% between April and June. However new Chancellor Sajid Javid has said that he does not expect the UK to slide into recession. 

There’s plenty of gloom on the UK’s high streets. July 2019 was the worst month on record for retail sales growth as consumer spending fell to a record low. Unsurprisingly this will result in job losses – Tesco is to cut 4,500 jobs at its Metro stores – and store closures. Shoe retailer Office is to close half its UK stores and empty shops are at their highest level for four years. 

There was one ray of sunshine – literally – as the good weather saw pubs and restaurants post modest monthly growth, although those with the beer glass half empty will point out that restaurant closures are continuing to rise. 

There was, though, plenty of news for those who prefer to see their glass as half full. 

Figures for June confirmed that wage growth had reached an 11 year high at 3.9% and that the employment rate was at its highest since 1971. The rate is estimated to be 76.1% with 32.81m people in employment – 425,000 more than a year ago. 

There was plenty more good news: Derby train maker Bombardier won a £2.34bn contract to make trains for the Cairo monorail, beating off ‘pharaoh-cious’ competition from Chinese and Malaysian firms. Overall, exports from the UK were up by 4.5% in June, the best performance since October 2016. 

There was also news of booming investment in the UK tech sector, especially from the US and Asia, as tech start-ups attracted a record $6.7bn (£5.58bn) in funding in the first seven months of this year. 

Mortgage lending also jumped to a two-year high as figures for July confirmed the approval of 67,306 mortgages, up from 66,506 in June. 

It wasn’t just the high street where there was bad news. Belfast ship maker Harland and Wolff – the firm best known for building the Titanic – called in the administrators, putting 120 jobs at risk. Optimism in the UK services sector also fell sharply and – in line with the rest of Europe – output was down in the UK car industry. 

Unsurprisingly, the FTSE 100 index of leading shares – along with the world’s other markets – had a difficult time in August, falling by 5% to 7,207. The pound was unchanged in percentage terms, ending the month at $1.2165. 

Brexit planning 

This section could be out of date within a matter of hours. 

Over the last month we have Boris Johnson in talks with Angela Merkel and Emmanuel Macron. One of his key demands has been the removal of the Irish backstop: do that, he has said, and then we can talk about the rest of the Withdrawal Agreement. 

His threat has always been that the UK would otherwise leave the European Union with ‘no deal.’ There seems to be a growing number of MPs getting ready to fight the Government and oppose a ‘no deal’ by seizing control of the House of Commons agenda – possibly aided by the Speaker – and making ‘no deal’ illegal. The Government hints that if this happens they will simply ignore the legislation. 

All this is, of course, set against the background of the Prime Minister’s decision to prorogue parliament (ending what has been a very long sitting) in readiness for a Queen’s Speech. Depending on your view, this is either a ‘coup against democracy’ or a perfectly normal decision by the Executive. 

As of early September, the country faces a possible General Election on 14th October, with the Prime Minister and Jeremy Corbyn trying to outwit each other. As we said earlier, there’s every possibility this is old news by the time you read this. 

Europe 

It was hard to find much good news in Europe. The month opened with the news that growth in the Eurozone economy had slowed as German output fell to a six-year low and the manufacturing sector continued to struggle. Germany’s overall Purchasing Managers’ Index was down to a 73-month low of 50.9 as the economy dealt with the US/China trade tensions, the overall global slowdown, weak demand from China and the uncertainty over Brexit. 

Against this, the service sector did well and wages rose, as the Eurozone reflected what is now a familiar pattern for so many developed economies. 

Figures in the middle of the month confirmed that the overall German economy had shrunk by 0.1% in the three months to June. A similar story in the three months to September would see Europe’s biggest economy officially in recession. 

August saw the return of political uncertainty in Italy – inevitably leading to a sell-off of Italian bonds and a fall in the stock market – as Matteo Salvini, leader of the right-wing League party, called for a snap election. 

By the end of the month a new government had been formed without Mr Salvini, as the anti-establishment Five Star movement formed a new coalition with the centre-left Democratic Party (PD). “We consider it worthwhile to try the experience,” said Nicola Zingaretti of the PD. We shall see…

Despite the gloom it was a relatively quiet month on Europe’s major stock markets. In keeping with the majority of world markets both Germany and France were down, but not significantly. The German DAX index dropped 2% to 11,939 while the French stock market fell just 1% to end the month at 5,480.  

US 

Given its impact on the wider world economy it seemed sensible to cover the US/China trade dispute in the Introduction, so this section deals purely with matters domestic. 

August started with a spat between the President and the Federal Reserve, as the Fed – as expected – cut US rates by 0.25% to a range of 2% to 2.25% and the President – as expected – said that it wasn’t enough. Federal Reserve Chairman Jerome Powell described the cut as a ‘mid-cycle adjustment to policy.’ His boss demanded ‘an aggressive rate-cutting cycle that will keep pace with China, the EU and other countries around the world.’ 

A few days later it was announced that the US had added 164,000 jobs in July – well down on the 224,000 jobs created in June but broadly in line with expectations. Unemployment remained flat at 3.7% and hourly earnings were 3.2% up on the same period last year. 

There was worse news later in the month as inflation rose to 1.8% (from a previous 1.6%) thanks to rises in gasoline and housing costs. This, of course, means that the Federal Reserve are likely to be more cautious about future rate cuts, which will presumably not do much for the President’s temper. 

In company news, Uber’s shares dropped 13% as it unveiled what were coyly termed ‘disappointing profit figures’ but which were really a thumping record loss of over $5bn (more than £4bn) for the three months to June 2019. Meanwhile co-working space provider WeWork unveiled a loss of $900m (£750m) in the first six months of the year and announced that it would seek a stock market listing. Whatever happened to that quaint notion of companies making a profit and paying a dividend to shareholders? 

By the end of the month the President was back on the attack, confirming that he was planning a new, temporary cut in payroll tax in a bid to further boost the US economy. “A lot of people would like to see it,” said the President. 

Wall Street generally likes to see news of tax cuts, but in August there were just too many worries about the trade war with China for the Dow Jones index to make any headway. It was down 2% in the month, closing at 26,403. 

Far East 

All roads in the Far East led to Hong Kong in August as the pro-democracy protests continued and the authorities became more and more determined to quash them. The month ended with tear gas, water cannons and threats of five-year jail sentences for anyone taking part in the protests. 

Throw in the continuing trade war between the US and China and August was inevitably a difficult month for the region’s stock markets, as we will see below. 

The month had also started with another trade row, albeit on a much smaller scale. Japan has removed South Korea from its list of ‘trusted trading partners,’ citing security concerns and poor export controls. Unsurprisingly, Japanese car sales in South Korea duly slumped. 

There are now growing fears that the US/China trade war and general worries about the global economy will push some of the smaller, ‘innocent bystanders’ in the Far East – such as Hong Kong and Singapore – into recession. 

In the region’s company news Samsung launched a range of new phones – but Samsung heir Lee Jae-yong, along with disgraced former President Park Geun-hye, now faces a retrial on bribery charges. Meanwhile China’s leading specialist facial recognition company Megvii decided to seek a stock market listing. 

Inevitably the pro-democracy problems and general unrest in Hong Kong had to impact economic growth at some point. Figures for the second quarter of the year showed that the economy had grown at just 0.5% year-on-year, which was below expectations. So it was no surprise to see the Hong Kong stock market down by 7% in the month, as it closed August at 25,725. 

China’s Shanghai Composite index was down 2% at 2,886 and the South Korean market fell 3% to 1,968. Japan completed a miserable month for the region’s stock markets as it dropped 4% to close August at 20,704. 

Emerging Markets 

It is easy to think that the big story in Emerging Markets was the fires in the Amazon rainforest. The G7 offered Brazil money to combat the fires – which President Jair Bolsonaro immediately rejected as he traded insults with French President Emmanuel Macron. 

Of greater long term significance to the financial markets – and the wider economy of South America – might well be the political and economic developments in Argentina. Both the peso and the Argentinian stock market plunged after a shock defeat for President Mauricio Macri in mid-month primary elections. The peso fell 15% against the dollar, while some of Argentina’s leading stocks lost 50% of their value. 

In early September, the Argentine Central Bank imposed currency controls as the crisis deepens, with the country also looking to suspend debt repayments to the International Monetary Fund. 

Fortunately, it was a much more sober month for the three major emerging stock markets we cover. The Russian market barely moved at all, rising just one point in the month to 2,740. The Indian market was also unchanged in percentage terms, closing August at 37,333 and, despite all the controversy and criticism of the government’s response to the fires, the Brazilian stock market was down just 1% in the month at 101,135. 

And finally…

All too often, the news was depressing. That is especially true if you are one of the directors of that well-known financial institution the Bank of Mum and Dad, now one of the biggest mortgage lenders in the UK. 

According to recent figures from L&G the Bank of Mum and Dad lent (or gave) a total of £6.3bn last year to help its children get on the housing ladder. The UK’s 10th biggest mortgage lender, the Clydesdale Bank, lent just £5bn. 

The average amount lent by the Bank of Mum and Dad is £24,100 – up by £6,000 on the previous year. But not content with running a bank, it appears that Mum and Dad have decided to diversify – and the Hotel of Mum and Dad is doing record business. 

According to the Office for National Statistics a quarter of the young adults in the UK – those aged 20 to 34 – live at home, with the number growing steadily over the past 15 years. According to a survey by MoneySuperMarket of 500 adults living at home and 500 parents who had adult children living with them, the ‘kidults’ were at home for an average 9.7 months and cost Mum and Dad £895 as they emptied the fridge, had their washing done for them and demanded that the old people open a Netflix account. 

This year the stay has extended to more than 10 months and the cost has escalated to more than £1,600 as water, heating and electricity costs have risen at the hotel. 

Apparently many of the guests are also demanding a steady stream of takeaways. A welcome distraction, perhaps, from reading the latest Brexit updates.

The generational gap in savings

Wednesday, August 21st, 2019

A new report by Scottish Widows (SW) has found that savings habits among younger people are rather lacking when compared with older generations. 

14% of people aged 20-29 are not saving any money, whereas 20% are saving between 0-6% of their wages and 26% are saving between 6-12%. That leaves only 40% of people between the ages of 20 and 29 making what SW deems to be ‘adequate’ savings (12% and upwards). 

The figures differ for those over 30 where 59% of savers are saving adequately. 

Scottish Widows outlines that the central problem with savings in the UK is that people simply aren’t saving enough. This could be attributed to the decline in defined benefit pension schemes and wider economic challenges. Though progress has been made, with record highs in the adequate savings category, according to SW, this is still not enough. 

The lower level of savings among younger people is likely to be a reflection of differences in priorities. SW’s study found that 45% of younger savers (under 30s), the highest of any age group, are saving towards medium-term goals such as buying a house. 27% were found to be saving for the long term and 28% were saving for rainy days. 

SW notes that the savings gap for young people “is perhaps unsurprising but nonetheless worrying.” Those under 30 are at a time where long-term saving can be hardest, yet investment growth can be advantageous. SW outlines how younger people are missing out on “the power of compound growth.“ 

They later go on to present four interlocking issues that have led to this general lack of savings made by younger generations:

  • Most people remain disengaged with long-term savings – 38% of people are not aware how much they are saving 
  • Financial pressures – 28% of individuals earning between £10,000 – £20,000 say they’re not saving at all
  • Self-employed individuals are being left behind – 41% of the self-employed aren’t saving at all
  • Home ownership is a struggle for young people – 56% of 20-29 year olds say they have not saved for a deposit

Scottish Widows then set out a number of reforms that would benefit savers: 

  1. Raise pension contribution rates – a new level of 15% to give people a chance to maintain their quality of life during retirement
  2. More flexibility between pensions and property – including the ability to use some retirement savings to help with the purchase of their first property
  3. Create better education and guidance – which includes information on the role of property and pensions in retirement
  4. Provide a hardship facility – allowing some savings to be used to avoid problem debt
  5. Ensure the self-employed have access to similar benefits as those in employment

Though there are marked improvements from last year’s report, it seems there is still a long way to go in terms of saving habits in younger individuals. As suggested above, there may even be a requirement for governmental reform in order to achieve the goals that Scottish Widows have set out.

For advice on how to develop savings plans to stand the test of time, don’t hesitate to get in touch.  

Find the right investment for you

Wednesday, August 21st, 2019

In the wake of the Woodford debacle, there’s a lot of buzz around investments and the rationale for choosing them. So we thought it would be useful to outline what you should be thinking about when it comes to choosing an investment to enable you to get the best outcomes for your money. 

Review your goals

It sounds obvious, but taking the time to think about what you want from your investments is key to selecting the correct fund for you. Writing down your needs, your goals and how much risk you may be prepared to take is a good starting point. 

Consider your investment’s lifespan

How soon will you need your money back? Timeframes will vary between goals and will affect the level of risk you are prepared to take. For example:

  • If you’re saving for a pension to be accessed in 30 years’ time, you can ignore short-term falls in the value of your investments and focus on the long term. Over longer periods, investments other than cash savings accounts tend to deliver a better chance of beating inflation.
  • If your goals are shorter term, i.e saving for a big trip in a couple of years, investments such as shares and funds might not be suitable as their value can fluctuate, so it may be best to stick to cash savings accounts. 

Make a plan

Once you’ve identified your needs, goals and risk levels, developing an investment plan can help you to find the sort of product that’s best for you. Low risk investments such as Cash ISAs are a good place to start. After that, it’s worth adding some medium-risk investments such as unit trusts if you’re comfortable with higher volatility. 

Adding higher risk investments is something you’ll only really want to approach once you’ve built up a few low to medium-risk products. However you should only do so if you’re willing to accept the risk of losing some or all of the money you put into them. 

Diversify, diversify, diversify

You’ve probably heard it before, but diversifying is a key part of investment planning. It’s a basic rule that to improve your chances of better returns, you have to accept more risk.  Diversification is an excellent method that improves the balance between risk and return by spreading your money across different investment types and sectors. 

Avoid high risks 

As mentioned above, it’s best to avoid high-risk investments unless you’re willing to accept the chance that you might not see any returns or even lose your investment. Adverts that proclaim to offer high levels of return will rarely come without risk and we’d urge caution before investing in anything that you’re not 100% certain about. If you do decide to pursue a high-risk product, it’s vital to make sure you fully understand the specific risks involved. 

With all investments comes a degree of risk, and returns can never be wholly guaranteed. Of course, we would always advise talking to an independent financial adviser. For more information, feel free to get in touch.

August Market Commentary

Wednesday, August 7th, 2019

Gold hit a six-year high as nervous investors looked for alternatives to stock markets. The IMF cut global growth forecasts amid continuing trade tensions.

In any normal month these would have been perfectly normal introduction, but July was not a normal month. With Boris Johnson becoming UK Prime Minister and sweeping into 10 Downing Street on a wave of promises to deliver Brexit ‘do or die’ by 31st October – only a handful of months away. 

How you feel about that commitment will almost certainly depend on how you voted in the 2016 Referendum. If you voted Leave then Boris is showing real leadership, we finally have a Prime Minister who is negotiating from a position of strength and he has achieved more in a week than Theresa May achieved in three years.

If you voted Remain then Johnson is threatening the union of the UK, driving the pound to dangerously low levels and risking – if not actively seeking – a catastrophic ‘no deal’ exit on 31st October. 

The one thing we think you can now say is that the UK will leave the European Union on 31st October. The public commitments to that date have been so clear that any backtracking is unthinkable. But there remain any number of imponderables, as we discuss in the Brexit section below. 

And so to the other world news that made the headlines in July. And yes, gold did hit a six year high of $1,450 (£1,190) an ounce as jittery investors looked for a safe haven. Gold is up by 6% over the last month and 12% in the last year as the US/China trade dispute, lower growth prospects for world trade and worries about inflation if the US Federal Reserve cut interest rates all added to investors’ uncertainties. 

Meanwhile, the International Monetary Fund (IMF) has trimmed its growth forecasts for the global economy for both this year and next year. Growth for this year is now forecast to be 3.2% – down from the 3.3% forecast in April – with growth for 2020 forecast to be 3.5%. Growth “remains subdued” said the IMF, with an “urgent need” to reduce trade and technology tensions. However, the IMF did raise its forecast for UK growth, from 1.2% to 1.3%. 

July was a generally uninspiring month for world stock markets. Of the major markets we cover in this Commentary only four made gains, and none of those gains were significant. Let’s look at what happened in more detail.

UK 

June was a wet month and UK high street retailers duly reported a ‘wash out.’ Total sales decreased by 1.3% in the month, taking the yearly average down to a 20-year low according to research from the British Retail Consortium. 

Bookmaker William Hill added to the gloom with plans to close 700 shops – putting 4,500 jobs at risk – and there are suggestions that up to 3,000 betting shops could close up and down the UK as gamblers increasingly move online and the reduction in stakes on fixed odds betting terminals starts to bite. 

And it is not just betting shops. A report from Retail Economics predicted that internet shopping will overtake physical stores by 2028 as deliveries become faster, cheaper and more convenient. The trend will be driven by millennials and Generation Z, who will form 50% of the adult population in the next decade. Ten years from now our high streets will be very different places – if they exist at all. 

Away from the high street there was good news in July though, as Amazon (who else?) announced plans to create up to 2,000 new jobs, taking its UK workforce up to nearly 30,000. 

Japanese telecoms company NTT announced that it would be opening a global HQ in London for one of its subsidiaries and at the end of the month Hitachi Rail announced a £400m investment at its plant in Newton Aycliffe, County Durham.

Jaguar Land Rover also unveiled an investment of ‘hundreds of millions’ to build a range of electric vehicles as its Castle Bromwich plant, which will secure the jobs of 2,700 workers at the plant. But – as there was across Europe – there was also bad news for the UK car industry, with Nissan threatening to cut 10,000 jobs worldwide and the Society of Motor Manufacturers and Traders saying that overall investment in the industry has ‘plummeted.’

From the roads to the rail. Boris Johnson has long been sceptical of HS2 and the chairman of the project has now written to the Department of Transport saying that it ‘cannot be delivered within its £56bn budget and the cost could rise by £30bn. There is bound to be a review of the project but meanwhile the Prime Minister used a speech in Manchester to commit to a faster trans-Pennine rail link – something the North of England has long needed. 

Let’s end the new Prime Minister’s first UK section with some more good news. ‘Fintech’ (financial technology) investment is booming in the UK and 2019 is set to be a record year, as funding reached £2.3bn in the first six months of the year. And household finances are looking up – June saw consumers saying they were optimistic about their personal finances for the first time this year. 

Also looking up was the FTSE 100 index of leading shares, which closed July up 2% at 7,587. But if the stock market was going up, the pound was definitely going in the other direction with the financial markets anticipating a ‘no deal’ Brexit. The pound closed the month down 4% against the dollar at $1.2218. 

Brexit 

To no-one’s surprise, it was Boris. The result was, perhaps, closer than many had predicted but Boris Johnson comfortably beat Jeremy Hunt in the vote by Conservative members, kissed the Queen’s hand and took over from Theresa May as Prime Minister. He duly appointed Sajid Javid as Chancellor, and we can expect a radical Budget when the new man in 11 Downing Street presents it. Whether that will be before or after 31st October remains to be seen, but one suspects that the speech – and the measures proposed – will be in stark contrast to anything Philip Hammond might have had in mind. 

Boris Johnson has had meetings in Northern Ireland, having already visited Scotland and Wales. He has demanded that the Irish backstop – the most contentious part of Theresa May’s Withdrawal Agreement – be scrapped and he’s been met with the predictable response from Europe. 

Are we now headed for a ‘no deal’ Brexit? Boris Johnson says he doesn’t want that, but has ramped up preparations just in case, with Sajid Javid committing an extra £2.1bn and meetings of the relevant Cabinet committee taking place every day. 

There remains, however, a significant number of MPs vehemently opposed to ‘no deal’ and the Government’s majority is wafer-thin. It’s unlikely, but you cannot rule out a General Election before 31st October and there will certainly be further attempts in parliament to thwart a ‘no deal’ Brexit. Meanwhile the Brexit Party and the hard-line Eurosceptics will be holding the Prime Minister’s feet to the fire.

‘May you live in interesting times’ is supposedly a Chinese curse. If nothing else the next 90 days in UK politics will certainly be interesting.

Europe 

There was plenty of economic news in Europe in July, but we should perhaps start in the corridors of power where, after much talking, negotiating and deal-making, German Defence Minister Ursula von der Leyen emerged as the only name on the ballot paper to replace Jean-Claude Juncker as European Commission chief. 

Von der Leyen makes no secret of her wish to move to closer European integration and – while the headlines were all about how her appointment will impact Brexit – she could, in the long run, be very bad news for a country like Ireland, which has benefitted from a lower corporation tax rate. 

It was all change in the top jobs as Christine Lagarde left the IMF to take over as head of the European Central Bank. 

Lower down the bankers’ food chain it was very much all change at the beleaguered Deutsche Bank as it announced plans for 18,000 job losses. There are rumours that the bank’s customers are pulling out $1bn (£800m) a day amid worries about the bank’s continuing solvency. 

There was also more gloom for the European car industry as car sales dropped by 7.9% in the European Union in June, the biggest fall since December and 130,000 registrations down on the same period last year. 

More generally the German manufacturing recession worsened as the Purchasing Managers’ Index for the sector dropped to 43.1 from 45.0, with any figure above 50 reflecting ‘optimism.’ This was the lowest level since 2012 as export orders showed their sharpest decline for a decade. 

How did all this translate onto the European stock markets? The German DAX index was down 2% in July to 12,189 while the French stock market fell just 20 points – unchanged in percentage terms – to 5,519. In Greece the market rose 4% to 900 as the centre-right under Kyriakos Mitsotakis won the snap general election. 

US

It was a good start to the month in the US, as figures for June confirmed that 224,000 jobs had been created against the expected 160,000. Normally this would have persuaded the Federal Reserve to keep interest rates on hold 

However, revised figures at the end of the month showed that the US economy had grown by less than expected in 2018, increasing by 2.5% and missing the President’s target of 3%. 

With Donald Trump continuing to describe the Fed’s decision to keep interest rates on hold as a ‘faulty thought process’ something clearly had to give and it duly gave on the last day of the month, as the Fed reduced US interest rates for the first time since 2008. The rate was cut by 0.25% to a target range of 2-2.25% but this wasn’t enough for the President. He scorned Federal Reserve chairman Jerome Powell on Twitter: ‘As usual, Powell let us down.’ 

In company news, there was the now seemingly-monthly bad news for Facebook, which faced a $5bn (£4.1bn) fine over privacy breaches, while US Treasury Secretary Steve Mnuchin criticised its plans for a crypto-currency, telling a press conference that it could be used by money launderers and terrorist financiers and was a national security issue. 

Apple posted a small rise in sales for the third quarter of its year – although iPhone sales and profits both dipped. Alphabet (Google’s parent company) and Amazon posted more impressive figures, with both firms reporting sales increases of close to 20% for the latest quarter. 

Meanwhile Elon Musk – of Tesla, SpaceX, the Boring Company and other future fame – brought us what may be his most revolutionary project yet. His company Neuralink revealed a brown and white rat with thousands of tiny electrodes implanted in its brain. It is, apparently, the first step towards linking the human brain to artificial intelligence, with the company betting that millions of people will eventually pay to become cybernetically enhanced. 

If Wall Street was cybernetically enhanced in July it wasn’t by much. The Dow Jones Index rose by just 1% in the month, closing at 26,864. 

Far East 

There was plenty of news in the Far East in July, but one story dominated all the others. The month began with Hong Kong leader Carrie Lam condemning the extreme use of violence as pro-democracy protesters stormed the parliament building. 

The protests continued throughout the month, and it seems inevitable that they will go on into August, quite possibly with ever increasing violence. Beijing – through the Hong Kong legislature – is determined to stamp down on any show of dissent and when then-Foreign Secretary Jeremy Hunt tried to intervene he was told in no uncertain terms to show some respect.

Away from the protests figures confirmed that China’s economy had grown at just 6.2% in the second quarter of the year. Obviously ‘just’ is a relative term, but this is the slowest rate of growth in China since the 1990s. 

Unsurprisingly the continuing trade tensions with the US meant that both China’s exports and imports were down when figures for June were reported, with exports down by 1.3% and imports down by 7.3% as domestic demand slowed. With China’s economy now driving so much growth around the world – not just in the Far East – it was hardly surprising that the IMF reduced its projection for global growth this year. 

In South Korea, Samsung announced that it was finally ready to sell its long-awaited folding phone after the April launch was delayed due to problems with the screen. The phone will go on sale in September in selected markets but – with the phone costing nearly $2,000 (£1,630).

A week later, Samsung faced rather bigger problems than fixing the screen on a folding phone, as the world’s biggest smartphone and memory chip manufacturer saw profits fall 56% in the three months to June. Samsung said results were in line with expectations as it blamed the continuing China/US trade war and a trade dispute between the South Korean and Japanese governments. 

It was – perhaps unsurprisingly – a disappointing month on Far Eastern stock markets as three of the four major markets fell.  China’s Shanghai Composite Index was down 2% to 2,933 while the Hong Kong market was down by 3% to 27,778. South Korea suffered a sharper fall as the market dropped by 5% to end July at 2,025. The one bright spot was Japan’s Nikkei Dow index, which was up 1% in the month to 21,522. 

Emerging Markets 

It was a relatively quiet month for our Emerging Markets section. Of the three markets we cover, Brazil was the only one to make any gains in the month with the stock market rising just 1% to 101,812. The Russian market slipped back by a similar amount, closing down 1% at 2,739. However, India suffered a sharper fall, sharing the month’s wooden spoon with South Korea as it fell 5% to end July ay 37,481. 

And finally…

News from the French Civil Service: Auditors for the Provence-Alps-Riviera region published a report in July showing 30 ‘ghost’ civil servants had been paid more than £22m to do nothing for the last three decades. Their jobs were phased out in 1989 but they continued to be paid, much to the embarrassment of the French President.

But, of course, we now know that the real way to riches is through your teenage son’s bedroom. Worried that he’s spending far too long in there playing video games? Nonsense, he’s working on his future career. July saw 16 year old US teenager Kyle Giersdorf win $3m (£2.46m) as he became world champion of the computer game Fortnite. 

With two British teenagers also picking up major prizes, it’s becoming an even bigger challenge for parents trying to convince their kids to wash the dishes. 

Ethical investments: what shade of green are you?

Wednesday, July 31st, 2019

Light green, dark green – there’s a whole range of shades when it comes to ethical investment opportunities. If you want to invest your money in line with your moral compass, then ethical investment funds or ‘green funds’ are suited to you. There are a few types to choose from; let’s check them out… 

Dark green

Dark green funds refer to funds that hold international ethical values at the heart of their investment strategy. Funds such as Kames Ethical Equity excludes certain areas completely. Tobacco and alcohol, oil & gas, munitions manufacturers and companies that utilise animal testing will not be found in such a portfolio. Another fund by Kames is their Ethical Cautious Managed fund which excludes energy stocks, tobacco and banks with investment banking operations. It also excludes government gilts on the bond side. 

Focused green

This is how we refer to ethical funds that only focus on a couple of particular areas for investment. Investing Ethically’s WHEB Sustainability fund has three focuses: health and population, climate change and resource efficiency. Legal & General’s Gender in Leadership fund is about investing purposefully without compromising returns – they believe that responsibly run, diverse companies will benefit both society and the investor. 

Light green

Funds within the lighter shade of green have ethical focus; they may invest in companies that are responsible in their practices, but might still be part of an industry deemed to be less than ethical. Such a fund would invest in an oil company aiming to move over to greener sources of energy. One such fund is Vanguard’s SRI Global Stock Fund which only invests in companies that meet the UN’s Global Compact Standards on environmental protection, labour standards, human rights and controversial weapons (it also excludes tobacco companies). 

Ethical investing offers the possibility of growing your wealth whilst benefiting society and is becoming more popular with investors of all ages. The ethical value of a particular fund, however, lies solely with the individual’s own personal values, as what is seen as ethical to one person may be deemed not so by another. That’s why it’s best to make sure each fund’s investment portfolio is consistent with your personal views before you invest. 

With all investment opportunities, there can be no guarantee of returns regardless of the fund’s ethical objectives. There will always be a degree of risk involved. It’s clear that investing ethically is becoming an increasingly important consideration for investors. Reflecting this, the sector has developed to offer a much wider range of funds and opportunities to meet a broad range of investor needs. The growth of the sector can only be seen as a positive step for investors and the broader society. 

If you’re interested in finding out more about investing ethically, do drop us a line.

July Market Commentary

Thursday, July 4th, 2019

Introduction

Many of you will know the old stock market adage: ‘Sell in May and go away, and come on back on St. Leger’s Day.’ 

The theory was that with everyone out of London for the summer season there was little business to be done and the stock market drifted lower. These days, of course, we live in a very different, very connected world where the London stock market is affected far more by relations between the US and China than it is by deals done at Royal Ascot and Henley. And if you had ‘sold in May and gone away’ then you’d have missed out on an excellent month: with just one exception, all the world’s leading stock markets rose in June, some of them by significant amounts. 

This was despite June being another month where the US/China trade tensions continued to simmer, where Chinese industrial output fell to a 17-year low and where India also faced tariffs from the US President – and inevitably responded in kind. Although there was a glimmer of light at the G20 summit at the end of the month, as the US and China agreed to a pause in hostilities, with talks on solving the trade dispute set to resume.

Stock markets also overcame gloomy news from the World Bank, which had opened the month by suggesting that the global economy was weakening. It was now predicting global growth of just 2.6% in 2019, and a very slight increase to 2.7% in 2020. Inevitably ‘international trade tensions’ were to blame. 

There was also a bleak long term forecast on jobs. Oxford Economics forecast that up to 20m manufacturing jobs around the world could be lost to robots and automation by 2030, with the people replaced by the robots finding that comparable roles in the service sector had also been squeezed by AI. 

One job up for grabs is, of course, that of the UK Prime Minister. The battle to succeed Theresa May has been fought down to two – Boris Johnson and Jeremy Hunt. We will have a decision by the end of July: whether the winner will be able to command a working majority in Parliament will be a different matter.

UK

For a change, the UK section of these notes is not awash with ‘retail gloom.’ No doubt that will return, for now let’s start with the good news…

Despite all the uncertainty, UK consumer confidence hit an eight month high in May, with unemployment continuing at a record low level and wages growing faster than expected in the three months from February to April. 

Wage growth for the period was 3.4% with official figures confirming wage growth of 1.4% after inflation had been taken into account. Despite this, though, many people continue to need more than one job to make ends meet, with estimates from the TUC released at the end of the month suggesting 1-in-3 people are now working in the ‘gig economy.’ 

…And if you like your glass half-empty, the rest of the month’s news would have been just what you were looking for. 

UK house prices slipped in May in a subdued market and – not helped by car plant shutdowns – figures showed that the UK economy had contracted by 0.4% in April. Car manufacturing fell by 24% in that month, with the Society of Motor Manufacturers and Traders saying that production is now 45% down on a year ago. 

With the continued uncertainty over Brexit and the ongoing global trade tensions, audit firm KPMG forecast that UK GDP growth will be 1.4% in 2019, falling to 1.3% in 2020, with both figures 0.2% down on the firm’s forecasts in March. 

Hand in hand with the race to succeed Theresa May – covered below – went the ongoing debate on the future of HS2. Boris Johnson has admitted to ‘serious doubts’ but leading business groups (including the CBI and the IoD) have urged the Government to commit to the project, arguing it is vital for the UK’s infrastructure. 

By the end of the month the gloom-mongers had won the battle, with the consumer confidence that had been so high in May turning a complete 180 degrees. By the end of June consumers were feeling negative about both their personal finances and the general outlook for the UK. 

Fortunately this view was not shared by the FTSE 100 index of leading shares, which rose 4% in the month to close June at 7,426. The pound survived the buffeting of bad news to end the month unchanged in percentage terms, trading at $1.2696. 

Brexit 

As we mentioned in the introduction, the race to succeed Theresa May is now down to two – former Foreign Secretary and ex-Mayor of London, Boris Johnson, and the current Foreign Secretary, Jeremy Hunt. The final decision will be taken by Conservative Party members, with the result announced on Tuesday 23rd July. 

All the indications at the moment are that Boris Johnson will win – he is an overwhelming favourite with the bookmakers – so what does he have to say about Brexit?  

Part of the reason he is such a firm favourite is that he has given a commitment that the UK will – deal or no deal – leave the EU on 31st. With so many top positions in the EU currently changing, and with many heads of government – Ireland’s Leo Varadkar is the latest – resolutely trumpeting the ‘no re-negotiation’ line, leaving without a deal is becoming a real possibility. Whether you see this as ‘crashing out’ or very sensibly moving to World Trade Organisation terms probably depends on whether you voted Remain or Leave. 

What a Johnson victory may well mean is an early Budget. At the moment the Budget is scheduled for November. However, Boris Johnson is reported to want to give the economy a real shot in the arm before the UK leaves the EU, so there could well be a tax cutting Budget in September, with cuts to both higher rate tax and stamp duty. 

Europe 

Among a media storm questioning her health after being seen shaking, German Chancellor Angela Merkel vowed that her coalition government will continue. This despite the surprise resignation of Andrea Nahles, leader of the coalition’s junior partner, the Social Democratic Party. 

If the political clouds are gathering over Mrs Merkel, the economic ones may be gathering over Germany as a whole following the release of more gloomy financial news. 

Industrial production in April was down by 1.9% compared to the previous month, with exports 0.5% lower than the same period in 2018. The Bundesbank – Germany’s central bank – is now predicting growth of just 0.6% this year, compared to a forecast of 1.6% growth it made in December. 

Clearly this is bad news not just for Germany but for the whole of Europe, as the slowdown in China and the US/China trade dispute continue to impact the German economy. 

There was more bad news in the car industry as Volkswagen announced plans to cut ‘thousands’ of jobs as part of a modernisation drive. Meanwhile BMW joined forces with Jaguar Land Rover to co-operate on electric cars as the traditional car makers continued to battle against new entrants to the market. 

There was more bad news on jobs as Deutsche Bank revealed plans to cut 15-20,000 jobs – although those would be worldwide cuts, not just in Germany. Meanwhile in the wider European economy the ECB said that it would keep interest rates on hold at the current record low levels until at least the middle of 2020, as it continues to try and spark some life into the Eurozone economy. 

And, as they say, all good things come to those who wait. After 20 years of negotiation it was finally announced that the EU had agreed a trade deal with Mercosur – the South American trade bloc which includes Brazil, Argentina, Uruguay and Paraguay. Brazil’s President Jair Bolsonaro called it “one of the most important trade deals of all time.” Whether Irish beef farmers, suddenly facing competition from South American imports, will agree is another matter…

There was plenty of ‘beef’ in European stock markets in June, as both the German and French indices rose by 6% in the month, to close at 12,399 and 5,539 respectively. 

US 

The month did not get off to a good start in the US, as figures showed that the economy had only added 75,000 jobs in May, far fewer than the 180,000 analysts had been predicting. It is possible that another month of poor figures could see a cut in interest rates from the Federal Reserve – something the President has long called for. 

The figures showed that wage growth was also sluggish, although US unemployment remains at a 50 year low of 3.6%. 

Something that wasn’t sluggish – and hasn’t been sluggish through much of 2019 – was the performance of the virtual currency Bitcoin, which has risen from £3,133 at the end of March to £9,335 by the end of June. Bitcoin is, of course, a virtual (or crypto) currency and in June, Facebook announced that it would be launching a virtual currency of its own – the Libra – in 2020. 

This virtual currency already has the apparent backing of Uber, Spotify and Visa and with bank JP Morgan also creating its own currency – the JPM Coin – June 2019 may turn out to be the month when virtual currencies took a major step forward. 

Staying in cyberspace there was bad news for two US cities as Lake City in Florida followed Riviera Beach in paying a ransom (in Bitcoin, inevitably) to hackers after their computers had been offline for two weeks. According to reports, workers in Lake City disconnected computers within minutes of the attack but it was too late: they were locked out of email accounts and residents were unable to make payments and access online services. The ransom was reported as $500,000 (£394,000) and it is surely only a matter of time before the same thing happens to a local council in the UK. 

Fortunately Wall Street was not held to ransom and, in line with virtually every other major world stock market, the Dow Jones index enjoyed a good month, rising by 7% to close June at 26,600. 

Far East 

We have covered the US/China trade row above – at least the month ended with a commitment to restart the talks aimed at ending the dispute. But in June it was the China/Hong Kong row that really made the headlines, as the Hong Kong legislature sought to allow extraditions to mainland China, arguing that it “would keep Hong Kong a safe city for residents and business.” 

This sparked huge protests and some of the worst violence seen in decades, with protesters worried ‘keeping the city safe’ will inevitably come to mean ‘not criticising the Chinese government.’ 

There are also worries that the proposed legislation might damage Hong Kong’s status as a global financial centre. “The proposed legislation would undermine Hong Kong as a hub for multinational firms [and] as a global financial centre,” said a Washington-based think tank. Despite the protests, the legislation is likely to go ahead at some point. 

Another long term worry for China is the spread of its deserts, apparently caused by global warming, deforestation and overgrazing. At least in June it took comfort in the arms of Japan as Shinzo Abe and Xi Jinping had what appeared to be a friendly meeting ahead of the G20 summit, with the US/China trade wars and tensions about North Korea seemingly bringing the two countries closer together. 

All the leading Far Eastern stock markets were up in the month. Despite the protests Hong Kong led the way, rising 6% to 28,543. The South Korean market was up by 4% to 2,131 while China’s Shanghai Composite Index and Japan’s Nikkei Dow were both up by 3%, to end the month at 2,979 and 21,276 respectively. 

Emerging Markets 

If the US economy got off to a bad start with the jobs figures, the Indian economy got off to an even worse start in June as it lost the ‘fastest growing economy’ title to China. 

Figures for the first quarter showed the economy growing at 5.8% – mightily impressive compared to economies in Western Europe, but below the 6.6% recorded in the previous quarter and below the 6.4% posted by China. 

Worse was to follow a few days later as the US imposed a 10% tariff on a series of Indian imports including imitation jewellery, building materials, solar cells and processed food. Inevitably this led to fears of job losses and – equally inevitably – India was quick to retaliate as it imposed tariffs on 28 US products, some as high as 70%. 

Will this mean a US/India trade dispute to mirror the US/China dispute? While it looks unlikely, India was the only one to fall in June, dropping 1% to end the month at 39,395. 

Meanwhile the markets in both Russia and Brazil moved up in the month: both markets were up by 4% in June, with the Russian market closing at 2,766 and the Brazilian market going through the 100,000 barrier to reach 100,967. 

There was clearly good news for the South American economy with the trade deal agreed with the EU which we have mentioned above. There was less good news for Argentina and Uruguay in the middle of the month. A massive power outage left both countries completely in the dark, wiping out power to tens of millions of people. Argentine President Mauricio Marci has promised a “full investigation.” As soon as he can find the light switch…

And finally…

We have mentioned cyber-attacks above and one company particularly badly hit was Norwegian aluminium producer Norsk Hydro, who saw 22,000 computers go offline in 170 locations around the world. The company refused to pay the ransom demanded and instead fought back against the hackers using the latest cutting edge technology: the pencil and paper. 

…And June really was nostalgia month as 1990s toys are apparently making a comeback on a wave of millennial nostalgia. If you were in a school playground in the 1990s – or your children were – you may remember Tamagotchi (digital pets) and they’re being re-joined on shelves by Teenage Mutant Ninja Turtles, Power Rangers and Polly Pocket. There is also, according to analysts, an increasing market for the films of the same era as grown-up millennials feel nostalgic for their childhood.

If you haven’t made your fortune from your own version of Cash in the Attic, perhaps the answer is to get serious about Crazy Golf. You may have thought Crazy Golf was just a game to play at the seaside, but now the ‘sport’ is dreaming of Olympic recognition and hosting a series of championships up and down the UK. 

While Tiger Woods was pocketing $2m (£1.6m) for winning the US Masters, near-namesake Mark Wood, a local council finance manager, won £50 as he was crowned UK Crazy Gold champion. The secret? According to the sport’s insiders, it is to keep your ball safely tucked inside a sock. That way, it keeps an even temperature and rolls consistently. 

Get out there! With that vital piece of inside information there’s nothing to stop you…

Neil Woodford and the lessons it tells us

Wednesday, June 12th, 2019

If you read the financial press, this is big news. ‘Star fund manager’, Neil Woodford, stopped investors withdrawing money out of his Woodford Equity Income Fund on 4th June, after the sum total of investment withdrawn from the fund reached a staggering £560m in less than four weeks. Kent County Council wanted to withdraw a further £263m, but was unable to do so before trading halted.

Investment analysts have attributed this action to the significant poor performance of the fund over recent months. Neil Woodford was once the darling fund manager who could do no wrong. A few years ago he was riding high when he left his employer, Invesco Perpetual, to set up his own company, Woodford Funds. With a reputation for having the midas touch, he’d built a large following amongst both retail and institutional investors, many of whom followed him to his new venture.

Once the blue-eyed boy, his public apology probably hasn’t gone far enough in the minds of some investors who are unable to withdraw their funds and are now nursing significant losses.

There are a number of issues at play here which, as advisers, we seek to address when managing client portfolios.  

Don’t put all your eggs in one basket

Investing is about managing risk and diversification is a key part of this. Committing all your money to one investment manager is never a great idea. By selecting a range of funds, we spread the risk within portfolios.

Good governance is essential

A robust governance process is important when managing client portfolios. When selecting funds as part of a portfolio, our established investment governance process ensures that these are regularly reviewed and action is taken where and when appropriate. This framework ensures that we act early on managing any potential risks that may impact portfolio performance.

Asset allocation is a key driver to performance

It is not just about selecting the right funds. When constructing client portfolios, we take into account the importance of asset allocation. This is the split between different types of investments such as UK and overseas equities, fixed interest and cash.  Asset allocation is as important as fund selection.

Follow the fund, not the manager

Fund managers are human, they don’t get it right all the time. The most sensible approach is to consider the fundamentals governing the fund itself, not the individual investment manager. We want to understand the answers to questions such as what process and approach does the fund take to manage risk and the stock selection process? What governance process and framework is in place to ensure a fund delivers against its stated objectives. Fund managers can be flavour of the month, it’s the fundamentals of the fund itself that provide better insight.

If you have any queries regarding your portfolio or would just like to find out more about our investment approach, do not hesitate to get in touch.