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4 January: Forbes Advisor Analysis Reveals Preferred Fund Choices
Investors went far and wide in their quest to make money in 2022, according to the most-bought funds data from three leading investment platforms, writes Jo Groves.
Topping the buy lists were global funds, funds of funds and precious metal funds. Cautious funds were also a popular option as investors sought a safe harbour from falling stock markets.
We’ve compiled a list of the top 10 funds bought in 2022 by customers of investment platforms AJ Bell, Bestinvest and Hargreaves Lansdown below:
|AJ Bell||Bestinvest||Hargreaves Lansdown|
|Scottish Mortgage Investment Trust||Fundsmith Equity||Artemis Global Income|
|VT AJ Bell Adventurous*||Evelyn Growth Portfolio*||BlackRock Consensus 85|
|VT AJ Bell Global Growth*||Evelyn Adventurous Portfolio*||Fidelity Index World|
|VT AJ Bell Mod Adventurous*||Scottish Mortgage Investment Trust||Legal & General Future World ESG Developed Index|
|Fundsmith Equity||IFSL Marlborough US Multi-Cap Income||Legal & General International Index Trust|
|VT AJ Bell Balanced*||SVS Sanlam Global Gold & Resources||Legal & General US Index|
|iShares Core FTSE 100 ETF||Evelyn Maximum Growth Portfolio*||Troy Trojan|
|Vanguard LifeStrategy (100% Equity)||HSBC American Index Fund||UBS S&P 500 Index|
|VT AJ Bell Responsible Growth*||Jupiter Gold & Silver Fund||Vanguard FTSE Global All Cap Index|
|Vanguard S&P 500 ETF||Charteris Gold & Precious Metals||Vanguard LifeStrategy 100% Equity|
What were the investing themes of 2022?
So where are investors putting their money amid economic uncertainty and stock market volatility? Let’s look at some of the key investing themes from 2022.
First up are funds of funds which offer ready-made portfolios for investors wanting a more hands-off approach. These funds are split by risk (from cautious to adventurous) and are typically invested in a mix of funds across different asset classes such as equities, bonds and commodities.
After delivering some impressive gains over the previous three years, the global fund sector hit the buffers last year, falling by 11% (according to Trustnet). As a result, investors were able to buy global funds at depressed prices in 2022, hoping for longer-term upside when stock markets recover.
Precious metal funds were also a popular option. Gold, in particular, is seen as a hedge against high inflation and a potential sanctuary in a stock market downturn. Gold investors have enjoyed a 15% increase in its price over the last year, while the price of silver is up by 17%.
The battle between active and passive funds also looks set to continue. Investors are backing US stock markets to recover, with S&P 500 tracker funds a popular choice. But there’s also a number of actively-managed funds in the top 10, which may offer the potential to limit losses in falling markets, which tracker funds are not set up to do.
Most popular funds of 2022
Finally, which funds were the most-bought across the platforms?
Top of the list was Scottish Mortgage Investment Trust, which made the top four on two of the investing platforms. Managed by Baillie Gifford, it focuses on entrepreneurial growth companies and over 50% of the fund is invested in the US.
The fund is likely to appeal to investors willing to tolerate volatility in pursuit of higher returns.
The fund had a stellar 2020, achieving a 110% return, before losing over 45% of its value in 2022.
Fundsmith Equity, managed by veteran manager Terry Smith, was also popular with investors. It invests in a fairly concentrated portfolio of global equities, with a bias towards the US and the consumer, healthcare and technology sectors.
However, its performance has also been a mixed bag, delivering a top-quartile return of 62% over five years, but a third-quartile loss of 14% in 2022, according to Trustnet.
3 January: Home REIT Misses Regulatory Deadline
Home REIT, the £1.2 billion real estate investment trust, has been forced to suspend its shares temporarily having missed a deadline to publish its annual report in accordance with UK financial rules, Andrew Michael writes.
The investment trust, which funds the acquisition and creation of properties aimed at providing accommodation to homeless people, has been in dispute for the past two months with short seller Viceroy Research, which published a report last November that included a number of claims against the company.
These included allegations, which Home REIT denies, of inflated property values and conflicts of interest with developers. But the report prompted a share price slide – from over 80 pence in November 2022 to approaching 37 pence now – that has seen the trust drop out of the FTSE 250 index.
In addition, the claims have led to BDO, Home REIT’s auditor, redoing its work on the company’s accounts and subsequently delaying the publication of its annual report.
This put the investment trust in breach of the Financial Conduct Authority’s disclosure and transparency rules, requiring trading in its shares to be suspended.
The rules say that a company has to publish its annual report within four months from the end of its financial year. Home REIT’s financial year ended on 31 August, giving it a deadline of new year’s eve to complete the task, or fall foul of the regulations.
In a statement to the London Stock Exchange, Home REIT said: “The company intends to request a restoration of the listing of its ordinary shares upon publication of the 2022 results, which the company expects to be published by as soon as is practicable.
“While the company awaits the completion of BDO’s enhanced audit procedures, the company will continue with the previously announced steps to maintain and enhance shareholder confidence, while maintaining its ordinary course operations to provide high-quality housing for some of the most vulnerable people in society.”
Oli Creasey, equity research analyst at Quilter Cheviot, said: “In principle, this is a technical breach of rules, and one that should be able to be remedied fairly quickly. We would expect that the results will be published in January 2023, and trading in the shares to resume promptly after that.
“The reaction to the full year results, when it comes, is going to be highly dependent on the auditor’s statement, as well as the REIT management’s response to the allegations. For once, analysts will not be focusing on the financial data. Home REIT has already offered a rebuttal to the report but will likely need to provide investors with further detail to shore up confidence in the company.”
19 December: Move Would Free Up Owner’s Time For Tesla, SpaceX
Twitter users have decreed that Elon Musk, the company’s chief executive, should step down from his role after he held a vote to decide his corporate fate at the social microblogging platform, writes Andrew Michael.
The billionaire entrepreneur, who also heads up the electric car maker, Tesla, and space transportation and aerospace manufacturer, SpaceX, bought Twitter for £36 billion ($44 billion) in October, taking the company private.
Yesterday (Sunday), shortly after attending the World Cup final in Qatar, Mr Musk set up a ‘yes’ or ‘no’ Twitter poll asking his 122 million followers whether he should step down as head of the company.
“I will abide by the results of the poll,” he tweeted.
Out of the 17.5 Twitter million accounts that cast votes, over half (57.5%) called for Mr Musk to step down, while the balance (42.5%) said he should remain.
It remains unclear whether Mr Musk will honour his decision. An hour after the result of the poll appeared on Twitter, he tweeted: “As the saying goes, be careful what you wish for”.
Either way, he would remain as the company’s owner.
Responding to the poll, Changpeng Zhao, boss of cryptocurrency platform Binance (who has eight million Twitter followers), tweeted Mr Musk not to step down, urging him to “stay the course”.
Last month, Mr Musk told a Delaware judge that he planned to reduce his time at Twitter and, over time, find somebody else to run the business.
There has been a string of controversial decisions since Mr Musk took over the company in October. About half the company’s staff have been fired, while an attempted roll-out of Twitter’s paid-for verification feature was paused before being kickstarted again last week.
Mr Musk has also come under fire for his business’s approach to content moderation and has been condemned by both the United Nations and the European Union over suspensions that the company has imposed on journalists about the way they cover the company.
Tesla’s share price has fallen sharply in value over the course of 2022 – down 60% year-to-date to trade at just over $148 currently – with critics of Mr Musk saying his pre-occupation with Twitter is damaging the electric car maker’s brand.
Russ Mould, investment director at AJ Bell, said: “Given how much of a distraction Mr Musk’s tenure at Twitter has become, shareholders in the electric vehicle manufacturer will be breathing a big sigh of relief if he steps back from Twitter and gets back to the day job at Tesla.
“For someone who sets so much store by work ethic, Mr Musk sure seems to spend a lot of time on social media. With Tesla shares having more than halved year-to-date, he needs to roll up his sleeves and get his main business back on the road.”
8 December: Energy, IT And Healthcare Tipped As Sectors To Watch In 2023
Private investors believe that the threat of recession both at home and overseas will be the most significant threat to stock markets in 2023, according to the investment trading platform interactive investor (ii), Andrew Michael writes.
The view is shared by professional investment company managers, many of whom believe both a slowing down of corporate earnings and recessionary threats are greater concerns than inflation over the coming year.
The past 12 months have been turbulent for stocks and shares investors, with markets stuttering against a backdrop of stiff economic headwinds compounded by soaring inflation, rising interest rates and gathering recessionary clouds.
Stock market performance has also been affected by global supply chain bottlenecks and Russia’s invasion of Ukraine.
The majority of private investors (54%) told ii that uncertainty over the economic outlook meant they would stay on the investing sidelines in the coming months, either because they were unsure how best to re-jig their portfolios, or because they weren’t planning on making any changes.
Investors also said they were torn between the need to achieve investment growth or focusing on strategies that preserved existing capital over the coming year.
One-in-10 investors said they were pre-occupied with the issue of investing tax-efficiently. A likely factor for this were the decisions, revealed in last month’s Autumn Statement, to slash capital gains tax and dividend allowances from the new tax year in April.
According to ii, of those investors who are currently taking the plunge, half (50%) are choosing to invest in the UK followed by the US (20%). The company says domestic stocks are typically favoured by investors thanks to a concept known as ‘home bias’ which makes companies closer to home easier to research and understand.
From a professional investing perspective, a poll carried out by the Association of Investment Companies (AIC) found that over half (61%) of its member investment company managers thought that inflation has already peaked. A quarter (25%) told the AIC they believed there was still scope for prices to rise further.
Managers told the AIC that their greatest fears going forward involve a slowdown in corporate earnings and the prospect of recession.
Over a quarter (28%) of managers tipped energy to be the top-performing sector in 2023, followed by IT (21%) and healthcare (11%).
Lee Wild, head of equity strategy at ii, said: “While we don’t know exactly what will happen next year, we do know that the UK economy will likely spend at least some of it in recession. And that’s by far the biggest worry.
“A fifth of investors are investing more money in the US where exposure is primarily to growth stocks like the technology sector. Tech has had a torrid time in 2022 but has reacted positively to any hint that the US rate hike cycle is slowing. If rates peak soon or even begin to ease later in the year, growth stocks are back in play.”
Evy Hambro, co-manager of BlackRock World Mining Trust, said: “This year, we have seen a growing acceptance that the low carbon transition simply can’t happen without mining companies supplying the materials required for technologies such as wind turbines, solar panels and electric vehicles.
“The need to build out these technologies has only increased over the past 12 months, with governments, particularly in Europe, committed to reducing their dependence on energy imports from Russia.”
7 December: Investors Should Seek Managers With Proven Track Records – AJ Bell
Fund managers that actively invest in UK equities have had “a real stinker of a year” in 2022, according to research from AJ Bell, writes Andrew Michael.
The investing platform’s Manager versus Machine report calls this year an “annus horribilis” for so-called ‘actively-managed’ funds – those made up of shares that are chosen by investment managers according to region, asset class or sector, with the aim of outperforming a specific benchmark such as a stock market index.
In contrast to active funds, so-called ‘passive’ investments such as index tracker or exchange-traded funds – are only designed to copy the performance of stock market indices and other benchmarks, not outperform them.
AJ Bell said that only a quarter (27%) of active funds were able to beat a passive alternative this year. Almost a third of active funds achieved the feat in 2021.
The company added that active fund performance improved over the longer term, with well over a third of portfolios (39%) outperforming passives over a 10-year period, although it said: “That’s still considerably less than half and this figure will be flattered by ‘survivorship bias’, as underperforming funds tend to be closed down or merged into others over time.”
The report looked at active funds in seven equity sectors and compared their performance to the average passive fund in the same sector. The company said this approach provided a “real world comparison, reflecting the choice that retail investors face between active and passive funds”.
The proportion of active funds outperforming the average passive fund was as follows:
|Sector||Year-to-date 2022/%||5 years/%||10 years/%||2021/%|
|Asia Pacific Ex-Japan||12||19||47||26|
|Global Emerging Markets||21||36||44||50|
|UK All Companies||13||27||60||41|
Laith Khalaf, AJ Bell’s head of investment analysis, said: “2022 has been a terrible year for active equity funds, especially those plying their trade in UK shares.
“In a year when stock markets have faltered, active managers might have expected to nudge ahead of the tracker funds that simply passively follow the index. But our latest report shows any such hopes have been dashed.
“Where they do select active managers, investors need to tilt the performance odds in their favour, by conducting research to pick out managers with a proven track record of outperformance. That’s no guarantee going forward, but if an individual active manager has delivered outperformance over a long period, that suggests they are skilful and not just lucky.”
6 December: Tech Firms Figure Highly On Investing Map Of UK
From London to Aberdeen and Cardiff to Manchester, the electric car maker Tesla has topped the table of most popular share purchases among UK’s retail investors, according to the latest figures from Freetrade, Jo Groves writes.
The trading platform’s Retail Investing Map of Britain crunched over six million ‘buy’ orders worth nearly £2 billion to see which shares its investors were buying.
Top 10 lists of share purchases from traders based in 10 UK cities showed that the electric car giant, whose boss Elon Musk recently paid $44 billion for the social media network Twitter, was the most popular trade in eight locations and second in the other pair.
Freetrade’s analysis showed that Londoners, Mancunians, Liverpudlians and Glaswegians were the most avid investors in technology companies, with Alphabet, Apple, Amazon and Meta accounting for half of their share purchases.
Elsewhere, the results showed that inhabitants of Cardiff, Brighton, and Northern Ireland were keen to add AMC and Gamestop to their buy-lists.
AMC and Gamestop made the news in 2021 when, as part of the so-called ‘meme stock’ revolution, private investors on social trading platforms coordinated their buying activity to push up the share price of companies heavily-shorted by institutional investors.
Other findings included:
- Investors in Bath showing their support for fast-food delivery services, with Just Eat taking number two spot in the city’s top 10
- Brightonians revealing their hip and healthy side by piling into Swedish oat-milk producer Oatly
- Aberdonians confirming their city’s heritage for natural resources by buying into oil and gas producer BP, and metals miners Ferrexpo and Lithium Americas.
Despite their nationwide affection for Tesla, investors tended to be more regional in their biases towards other companies.
Dan Lane, senior analyst at Freetrade, said: “Greggs cracked the top 50 in Newcastle, but didn’t even make the top 300 in London.
“Dispelling the popular footballing myth that there are more Manchester United fans in London than in Manchester, shares in the club were four times as popular in Manchester than they were in the capital. The company also accounted for a whopping 1% of all cash invested in shares by Mancunians in 2022.”
30 November: FCA Wants To Open Investment Doors To Heavy Cash Savers
Major reforms aimed at reducing the cost of financial advice for millions of people with “straightforward needs” have been proposed by the UK regulator.
The Financial Conduct Authority (FCA) says its proposals would create a separate, simplified advice regime, making it easier and cheaper for firms to advise consumers about investments within stocks and shares individual savings accounts (ISAs).
According to FCA research, 4.2 million people in the UK have over £10,000 in cash and say they are open to investing some of their savings.
Analysis by Paragon Bank shows that deposits in savings accounts hit £1 trillion for the first time in September, up £25 billion compared with the same month in 2021.
Paragon said that more than £428 billion is held in ‘easy access’ savings accounts paying less than 0.5% interest, with £142 billion held in accounts paying 0.25% or less.
The FCA says: “While keeping a cash buffer is a sensible way of dealing with unexpected expenses, consumers who hold significant amounts of excess cash may be damaging their financial position, as inflation reduces the value of their savings.
“Altering the current framework could help the advice market support mass-market customers with simpler needs”.
The FCA wants to prevent in-person financial advice from being too costly for potential investors “as this can stop them from investing when it may be in their interest to do so”.
Its plans include reducing the level of qualifications required for firms to advise on products such as stocks and shares ISAs. It also wants fees to be payable in instalments so that customers do not face large upfront bills.
Chris Hill, head of investing platform Hargreaves Lansdown, said: “We support the FCA’s move to make investing simpler and it’s great that the FCA recognises that today’s all-or-nothing approach to advice doesn’t suit everyone, especially those with sufficient savings who are started out on their investment journey. The proposal should help narrow down options for those who want to invest but aren’t sure where to start.”
Richard Wilson at interactive investor said: “This is a watershed moment in the UK. It will determine whether we can begin to change the narrative around long-term financial wellbeing.”
22 November: Twice As Many Men Hold Stocks & Shares ISAs As Women
Men are far likelier than women to invest in stocks and shares but are more prone to bailing out earlier from their investments when market turbulence strikes, according to Alliance Trust, writes Andrew Michael.
Research carried out for the investment company showed that nearly one-in-three UK men (30%) have a stocks and shares individual savings account (ISA) compared with one-in-six women (16%).
The trend continues into other investment products, with one-in-six men (17%) saying they have a general investment account compared with one-in-10 (10%) women.
A stocks and shares ISA is a tax-efficient savings plan that allows the holder to invest up to £20,000 in shares each tax year, while shielding them from income tax, capital gains tax (CGT) and dividend tax.
A general investment account is a product that allows the holder to make investments outside of tax wrappers such as ISAs.
According to the research, women are far more likely than men to hold their nerve amid market volatility.
Alliance Trust found that nearly half of male investors (48%) said they had sold investments when they went down in value in a bid to avoid losing more money. This compared with just over a third of women (38%) who were less likely to have ‘crystallised’ a loss during a market dip.
Mark Atkinson, head of marketing at Alliance Trust, said: “Despite being less likely to invest, women are proving to be better investors. Their behaviour implies a steady long-term investment strategy, without knee-jerk reactions or impatient decisions. This is likely to result in much better financial performance.
“The last few weeks have seen even more chaos in the markets, and dramatic headlines may well prompt a crisis of confidence for investors. Holding your nerve is key. The best investment is one which is left alone for as long as possible. Patience will pay-off.”
21 November: Regulator Issues Trading App Warning
The Financial Conduct Authority (FCA) is warning providers of share trading apps to review “game-like” elements within their offerings because of fears they might mislead investors or encourage them to take risks and lose money, Andrew Michael writes.
Such apps – available via both smartphone and tablet – have become increasingly popular, especially among those aged under 40.
In the first four months of 2021, the FCA said 1.15 million accounts were opened with four trading apps, around double the number opened with all other retail investment services combined.
The regulator says the ‘gamification’ of trading apps – such as peppering users with frequent notifications and sending celebratory messages on the completion of a trade – can lead to poor consumer outcomes.
It said that “consumers using apps with these kinds of features were more likely to invest in products beyond their risk appetite”.
The FCA has produced research raising concerns that customers using trading apps are exposed to high-risk investments, with some demonstrating behaviour more commonly found with problem gamblers.
To ensure customers are being treated fairly, the regulator says all firms should be reviewing their products to ensure they are fit for purpose.
Next year will see the introduction by the FCA of the Consumer Duty, which tells firms to design services enabling consumers to make “effective, timely and properly informed decisions about financial products and services”.
Sarah Pritchard, the FCA’s executive director of markets, said: “Some product design features could be contributing to problematic, even gambling-like, investor behaviour. We expect all firms that offer stock trading to consumers to review and, where appropriate, make improvements to their products.
“They should also ensure they are providing support to their customers, particularly those in vulnerable circumstances or those showing signs of problem gambling behaviour.”
17 November: Chancellor Unveils Hefty Cuts To Allowances
Jeremy Hunt, Chancellor of the Exchequer, has announced significant changes to both capital gains tax (CGT) and dividend tax as part of today’s Autumn Statement, writes Andrew Michael.
The move is likely to increase interest in individual savings accounts, which can be used to shelter savings and investments from tax.
CGT is applied on the sale of shares, second homes and other assets. For basic rate taxpayers, the CGT rate is determined by the size of the gain, taxable income levels and whether the gain is from residential property or other assets.
Higher and additional rate income tax payers are charged CGT at a rate of 28% on gains made from the disposal of a residential property and 20% on gains made from other chargeable assets.
Mr Hunt said that the current CGT annual tax-free allowance of £12,300 will be cut to £6,000 from the start of the new tax year in April 2023. The amount will be halved again, to £3,000, in April 2024.
The majority of CGT that is paid to the government comes from a small number of tax payers who make large gains.
However, Chris Springett, tax partner at Evelyn Partners, said: “The halving of the allowance increases the burden on investors and property owners at the other end of the CGT spectrum – those who have made relatively modest gains but are nevertheless drawn across a much-reduced threshold.
“These taxpayers may need to file tax returns for the first time to report capital gains, causing a new admin headache.”
Today’s announcement by Mr Hunt strengthens the case for holding investments in wrappers such as individual savings accounts (ISAs) that are exempt from CGT.
Mr Springett said it was also a reminder to use allowances as effectively as possible: “In terms of reducing CGT exposure, married couples and those in civil partnerships can transfer assets to each other – known as an interspousal transfer – to make use of both sets of allowances, as well as shift a potential gain to whichever partner might be exposed to a lower tax band.”
Dividend tax is a tax paid by shareholders on dividends they receive from companies. Dividends are payments made by companies, usually yearly or half-yearly, that come from profits they have generated.
The current annual dividend tax allowance, the amount a recipient can receive from dividends each year before paying tax, is £2,000. Mr Hunt said he would be halving this amount to £1,000 from the new tax year next April and then halving the allowance again, to £500, from April 2024.
The amount a shareholder pays in dividend tax depends on his or her income tax band. Basic rate tax payers are charged at a rate of 8.75%. The figure jumps to 33.75% for higher rate taxpayers and 39.35% for additional rate tax payers.
Evelyn Partners’ Chris Springett said: “The annual tax-free dividend allowance was slashed from £5,000 in 2017/18 to just £2,000 currently – and will from April be reduced to a quite limited £1,000, and then to a very restrictive £500 in 2023/24. Together with the 1.25% increase in dividend tax rates, which was introduced in April 2022, this constitutes a real crackdown on dividends.
“This is a blow to investors who hold assets outside of ISAs and to retirees who rely on dividend income to supplement their pensions. It’s yet another reminder to make use of ISAs allowances as a tax-free umbrella for owning investments.
“Business owners, many of whom pay themselves partially or primarily through dividends rather than salaries, will also be hit.”
15 November: Retail Investors Gain Voting Rights
Share trading platform eToro has struck a deal allowing millions of retail investors to have their say on how the companies they invest in are run, Andrew Michael writes.
The self-styled “social investing network” has partnered with Broadridge Financial Solutions to bring proxy voting to its 30 million customers worldwide. In the UK, eToro has more than three million registered users.
Proxy voting allows shareholders to have their say at a company’s annual general meeting (AGM) on key aspects of a business’s strategy or how an organisation is run.
eToro says that its customers will be able to participate in AGMs by casting proxy votes for free that are administered and supported by Broadridge, a specialist provider of services in this sphere.
eToro adds that the option will extend to its investors who hold fractions of shares, enabling all its customers to vote “on issues such as mergers, executive pay and environmental, social and governance [ESG] proposals”.
Rival sharedealing platforms, including Hargreaves Lansdown, AJ Bell and interactive investor, already offer similar voting services for their users.
Once dismissed as a virtuous concept that potentially compromised portfolio returns, ESG investing has moved centre-stage within the global investing arena in recent years.
For younger investors in particular investing with a conscience has become an important consideration, often driven by major issues of the day – from climate change to general corporate behaviour.
eToro says that votes submitted by its investors will be aggregated and shared with the company concerned.
A global survey of 10,000 retail investors carried out by the platform found that nearly three-quarters (73%) wanted to vote in AGMs. According to the research, younger investors were the keenest to have their say with 80% of 18-34-year-olds saying they would vote in AGMs given the chance compared with 65% of over-55s.
When asked about the corporate issues they would most like to vote on, dividends – the annual distributions made by some companies to shareholders out of their profits – came out on top, followed by executive pay then climate strategy.
Proxy voting for stocks listed on US exchanges will go live on the eToro platform later this month, followed by voting for shares on other global exchanges.
Yoni Assia, ceo and co-founder of eToro, said: “Retail investors have not always been given the platform, the voice and the support that they deserve but this is rapidly changing. Retail investor access to proxy voting is a crucial step in this journey.
“There is clearly a huge appetite among retail investors to participate in AGMs and we look forward to seeing how clients engage with this new feature.”
8 November: Ethical Investing Receives Thumbs Up Despite Doubts Over Performance And Risk
The vast majority of financial professionals are unwilling to back completely the sustainability claims made by investment funds, according to research from the Association of Investment Companies (AIC), writes Andrew Michael.
Sustainable investing, also known as socially responsible investing, is a process that incorporates environmental, social and governance (ESG) factors into investment decisions.
Once dismissed as a virtuous concept that potentially compromised portfolio returns, ESG investing has moved centre-stage within the global investment arena in recent years. As a theme, it is especially popular among younger investors.
In theory, companies that actively support positive change via various ESG measures – such as how they run their business or treat their workers – will find themselves nearer to the top of a fund manager’s ‘buy’ list than their rivals.
The AIC asked wealth management firms and financial advisor businesses to rank, on a scale of 1 to 5, how much they trusted the sustainability of ESG claims made by various investment funds.
From a universe of 91 wealth managers and 109 financial advisors, just 1% responded by scoring a ‘5’ indicating they had complete trust in providers’ claims. The majority (56%) rated claims with a ‘3’ suggesting they had “limited trust” in the promises being made.
The findings coincide with the news that the UK’s financial watchdog, the Financial Conduct Authority, is proposing a new set of rules to prevent consumers from being misled by exaggerated claims from supposedly environmentally friendly investments (see story from 25 October below).
In a bid to clamp down on greenwashing – where unsubstantiated claims are made to trick consumers into thinking a company’s products are more environmentally sound than they really are – the FCA recently proposed a package of measures and restrictions.
These include investment product-sustainability labels and restrictions on how terms such as ‘ESG’, ‘sustainable’ and ‘green’ are used.
Despite scepticism around ESG claims, financial professionals told the AIC that they remain supportive of ESG investing in general. More than three-quarters of the businesses polled (79%) acknowledged that “investments should make a positive difference as well as financial return”.
Nick Britton, head of intermediary communications at the AIC, said: “Advisers and wealth managers are overwhelmingly on board with ESG and sustainable investing, but they’re also keenly aware of the risks of greenwashing with only 1 in 100 completely trusting ESG claims from funds.”
“ESG investing has faced a perfect storm this year and this has clearly affected expectations about performance and risk. Market falls, higher inflation and the war in Ukraine have made many advisers and wealth managers more wary of investing in sustainable funds in the short term, though they still expect demand for ESG investing in general to increase over the next 12 months.”
28 October: Completes Twitter Takeover, Begins Platform Overhaul
The months-long and acrimonious takeover of Twitter by Elon Musk is now complete, with the Tesla chief paying just over £38 billion ($44 billion) to acquire the micro-blogging social media site, writes Kevin Pratt.
Mr Musk posted a tweet simply saying “the bird is freed”, indicating that he now owns the platform.
Reports indicate that he has dismissed a number of senior executives, including Parag Agrawal, CEO. He is also expected to dismiss a significant proportion of Twitter’s 9,000 staff.
Mr Musk is also expected to change the way Twitter functions in his pursuit of what he has termed “absolute free speech”. This may include updating the site’s algorithm, reducing moderation activity, allowing users to edit their tweets, and lifting bans on controversial figures such as former US president, Donald Trump, who was banned from the site last year.
Further developments could see Twitter’s scope expanded so that the app could become a multi-purpose life management tool, enabling a range of administrative functions.
In a message to Twitter advertisers yesterday, Mr Musk said his pursuit of free speech would not mean the site became a “free-for-all hellscape where anything can be said with no consequences.”
Analysts believe Mr Musk will need ongoing support from advertisers because the price he paid for Twitter represents a significant premium over its true market value.
At the close of trading on Thursday, Twitter shares were priced at just over £46 ($53). The New York Stock Exchange, where the shares are listed, has issued a notice saying the suspension of trading in the shares is “Pending before the Open” of the market later today at 9.30am in the US (2.30pm in the UK).
What does this mean for Twitter shareholders?
According to financial commentators, it’s likely to be many days – and possibly weeks – before investors are credited once Mr Musk’s acquisition of Twitter has officially gone through.
What we do know is that shareholders will receive £46.70 ($54.20) for each share they held up to the time of acquisition.
Hargreaves Lansdown’s Susannah Streeter said: “For UK investors, the cash proceeds will be converted from US dollars into sterling, subject to the prevailing exchange rate at the time and any standard currency conversion fees. We have not yet heard from Twitter indicating the takeover has gone through, so we don’t yet know what the prevailing exchange rate will be.”
The decision by Mr Musk to take Twitter private, means that the company will now de-list from the stock market leaving a gap for a new company to fill its place.
“The insurer, Arch Capital Group Ltd, is set to replace Twitter Inc. in the S&P 500 effective prior to the opening of trading on Tuesday, November 1,” says Ms Streeter.
The news means that index funds that formerly held Twitter stock will also need to adjust their portfolios to take account of the move. Index, or tracker funds, are computer-driven investments that hold baskets of shares aiming to copy the performance of a particular stock index.
27 October: ‘Chief Twit’ Ready To Bring Takeover Saga To Close
Billionaire business magnate Elon Musk appears to have finalised his deal to buy social media giant Twitter, changing his profile on the platform to read ‘Chief Twit’, ahead of tomorrow’s (Friday 28 October) buyout deadline, writes Mark Hooson.
Negotiations between Mr Musk and Twitter over the £38 billion purchase have been drawn out since April, mired in litigation over the number of fake and spam user profiles Twitter might have had.
The Tesla chief threatened to pull out of the £46.72-a-share deal in July and was sued by Twitter. The two parties were due to face off in court this month, with Musk potentially on the hook for an £860 million break clause for pulling out.
Earlier this month, however, the new ‘Chief Twit’ agreed to proceed with the deal. He is widely believed to want to prioritise eradicating spam and promoting free speech on the platform.
Posting on Twitter yesterday, Mr Musk shared a video of himself visiting Twitter headquarters carrying a kitchen sink. The post caption read: “Entering Twitter HQ – let that sink in!”
He has also talked in general terms about transforming Twitter into an ‘everything app’ in the mould of China’s WeChat – an application for completing a wide range of tasks including booking taxis and medical appointments.
It is expected Mr Musk will reinstate former US President Donald Trump on the platform. Mr Trump was ‘permanently’ banned by Twitter over the ‘risk of further incitement of violence’ in January 2021, following a riot at the Capitol building in Washington DC involving his supporters.
Analysts say Twitter’s new owner is likely to cut jobs at the firm. Mr Musk is expected to address workers at Twitter tomorrow, Friday 28 October.
26 October: Shareholders In UK Companies Stand To Benefit From Sterling’s Slide
Investors could receive an extra £5.7 billion in dividend payments from UK companies this year because of the pound’s fall against the value of the US dollar, writes Andrew Michael.
The boost is a reminder of how sterling weakness benefits many British companies because they earn a large share of their income in US dollars and gain from the exchange rate when repatriating their profits.
The findings were part of the latest Dividend Monitor from Link Group.
Dividends are payouts made by companies to shareholders from annual profits and are regarded by some investors, especially pension funds, as a vital source of income, especially for those approaching or in retirement.
According to Link, dividends dropped by 8.4% year-on-year to £31.4 billion for the third quarter of 2022.
The company said the figure was “impacted heavily” by the de-listing of mining company BHP from the London Stock Exchange.
Over the past year, mining and energy companies have rewarded their investors with bumper payouts following the end of the pandemic which had forced businesses to hold on to their cash in the face of unprecedented economic conditions.
Excluding BHP’s departure, dividends were 1% higher over the third quarter compared with a year earlier.
Link said: “Sharply lower special dividends and falling mining payouts, even after adjusting for BHP, were offset by strength among banks and other financials as well as oil companies.”
The company added that “the exceptional weakness of the pound also enormously flattered quarter three figures to the tune of £1.9 billion as many dividends are declared in dollars”.
Without this boost caused by fluctuations in the exchange-rate, Link said that payouts were slightly weaker than anticipated.
For the full year, Link forecasted that the “extraordinary surge in the US dollar will add a record £5.7 billion to UK dividends and is the driver of an upgrade to our expectations for the fourth quarter of 2022”.
Headline dividends are expected to reach £97.4 billion for the whole of 2022, up 5.5% year-on-year. But Link said it expected reductions to both mining dividends as well as one-off payments.
Link Group managing director, Ian Stokes, said: “For 2023, we expect a further reduction in mining dividends and likely lower one-off special dividends, but outside the mining sector there is still room for payouts to rise, even with a weakening economy.”
“Our provisional 2023 forecast suggests a slight drop in headline dividends to £96 billion. This implies no change in our expectation that UK pay outs will only regain their pre-pandemic highs some time in 2025.”
25 October: Ethical Investments Urged To Drop ‘Lazy Labels’
The Financial Conduct Authority (FCA), the UK’s financial regulator, has proposed rules to prevent consumers from being misled by exaggerated claims from supposedly environmentally friendly investments, writes Andrew Michael.
Environmental, or ethical, investing covers a range of issues, from concerns about corporate behaviour to anxiety about climate change.
Within this sphere, the growth enjoyed in recent years by environmental, social and governance (ESG) investing means it has become a mainstay of the global financial landscape, with hundreds of billions of pounds invested worldwide in funds that purport to do good.
But according to the FCA, “exaggerated, misleading or unsubstantiated claims about ESG credentials damage confidence in these products.”
In a bid to clamp down on greenwashing – where unsubstantiated claims are made to trick consumers into thinking a company’s products are more environmentally sound than they really are – the FCA is proposing a package of measures and restrictions.
These include investment product-sustainability labels and restrictions on how terms like ‘ESG’, ‘green’ or ‘sustainable’ are used.
Sacha Sadan, FCA ESG director, said: “Consumers must be confident when products claim to be more sustainable than they actually are. Our proposed rules will help consumers and firms build trust in this sector.”
Beth Lloyd, head of responsible wealth management strategy at Quilter, said: “This is an important step forward to helping provide consumers with the necessary protections and boundaries when it comes to responsible investment. The lazy labelling of investment products as ‘ESG’ has not been helpful of late and has caused increasing confusion both to consumers and across the industry.
“Having clear definitions to adhere to and refer back to will not only help facilitate better understanding, but also result in better outcomes as expectations and reality are more likely to be aligned.”
Interactive Investor’s Becky O’Connor said: “Investors who want to make their money make a difference need to be able to trust that the investment they are buying actually does what it says on the tin.
“With so many different and often conflicting rating systems and definitions currently floating around, it can be hard to know what investments are truly helping the planet and easy to lose faith in the whole idea of sustainable investment.”
18 October: Watchdog Blocks One-In-Five Investment Firms From Market
The Financial Conduct Authority (FCA) curbed the activities of twice as many investment firms in the past year compared with the previous 12 months as part of a crackdown on poor financial advice and scams, Andrew Michael writes.
The FCA said that the overall number of restrictions it had placed on firms rose from 31 in the financial year 2020/21 to 61 in 2021/22.
The regulator added it had prevented firms from promoting and selling specific services such as advice on final salary (defined benefit) company pension schemes.
Ill-informed or ill-advised decisions can prove financially costly to members of such schemes if they are taken close to, or at, retirement.
In addition, the regulator said it had stopped 17 firms and seven individuals from trying to obtain FCA authorisation in the investment market in the past year where ‘phoenixing’ or ‘lifeboating’ were suspected.
These terms apply where firms or individuals try to avoid the consequences of having provided unsuitable advice by moving to, or setting up, a new firm.
The FCA said it had also stopped the UK operations of 16 Contracts for Difference (CFD) providers, that had entered the UK’s temporary permissions regime in 2021, where suspected scam activity had been detected, or where consumers were encouraged to trade excessively to generate revenue.
CFDs are a financial product used to speculate on the direction of a market’s price. The FCA’s temporary permissions regime is aimed at firms that are looking to operate in the UK long-term and are readying themselves for full UK authorisation.
In recent years, the FCA has come under fire for its handling of several high-profile scandals. These include the collapse of the former star fund manager Neil Woodford’s eponymous investment firm and the London Capital & Finance mini-bond saga that cost 12,500 investors £236 million.
The latter has been described as “one of the largest conduct regulatory failures in decades”.
Sarah Pritchard, FCA executive director of markets, said: “We want to see a consumer investment market where consumers can invest with confidence, understanding the level of risk they are taking, and where assertive action is taken when harm is identified.
“In the last year we have maintained our focus on acting assertively and innovatively to tackle harm. We prevented 1 in 5 firms from entering the consumer investments market and we have taken action against unauthorised firms, with a 40% increase in the number of consumer alerts issued.”
Tom Selby, head of retirement policy at AJ Bell, said: “Recent events have exposed some pretty fundamental and dangerous misunderstandings about the risks associated with different kinds of pensions. Problems with a specific type of investment held in defined benefit pensions have sparked fear and panic about entirely unrelated financial issues.
“Savers and investors are clearly crying out for help but, at the moment, lack of clarity over the advice/guidance boundary is holding firms back when communicating with customers.”
12 October: ‘Patience Pays’ For Long-Term Investors
Stocks and shares investors who cash in investments during a market downturn can end up paying a high price for their decisions over the long term, according to Alliance Trust, Andrew Michael writes.
The investment company carried out research and data modelling which showed an ‘impatience tax’ would have cost UK investors £1.3 billion over the past year.
Alliance Trust defines an ‘impatient investor’ as someone who sells a losing share – thereby fixing in or ‘crystalising’ a loss – when the market dips, only to buy back the investment at a higher rate when the market recovers.
According to the company, almost half (45%) of UK investors admitted to crystalising a loss in the past. More than one in 10 (12%) said they had done so in the past year.
Of those who have ever crystalised an investment loss, only two in five investors (41%) did so because they were confident it was the right decision.
Just under a quarter (23%) admitted that they had panicked and cut their losses. One in six investors (16%) said they fell foul to peer pressure when they saw other people selling up.
Alliance Trust also found that the majority of investors who ditched a stock that had fallen in price (52%) regretted doing so.
‘Buying the dip’ provides investors with the opportunity to gain exposure to an asset they perhaps already like, only at a cheaper price.
To back up its findings, the company used the example of two hypothetical market investors who both invested £10,000 in 1992 and also made monthly contributions equal to 10% of the national average salary for the next 30 years.
The patient investor was assumed to hold his/her nerve through any market dips, while the impatient investor sold a quarter of his/her shares if the market dipped by 5% or more in a single day. When the market recovered by 10% in a single day, the impatient investor was assumed to buy back in.
According to Alliance Trust, by 2022 the impatient investor would have accumulated £217,884, while the patient investor would have performed considerably better accruing £410,757. Neither calculation took into account capital gains or income tax, nor the fees associated with offloading investments.
Mark Atkinson, head of investor relations at Alliance Trust, said: “Investing is rarely turbulence free. As the cost-of-living crisis spirals, it is understandable that people want to avoid taking risks with their money.
“But for those in the market, selling at a loss to move into cash is not risk-free. With inflation nearing double digits, the real value of cash savings is falling by 7 or 8%. Even despite market dips, long-term investment in equities is proven to outperform cash over any 20-year period.”
12 October: UK Shareholder Payouts On Surest Footing In 14 Years
Dividends – payments made by companies out of their profits to shareholders – will reach a record £1.25 trillion worldwide this year, according to Henderson International Income Trust (HIIT), Andrew Michael writes.
The investment trust found that dividends from UK businesses will be on their most robust footing since 2008 after rising oil prices boosted revenues among certain FTSE 100 companies.
Dividends are a key component of the investing landscape, especially for investors looking to obtain a steady and reliable income stream, such as those in retirement.
HIIT said UK dividend cover – the ratio of a company’s income to its dividend payment and a key indicator of the sustainability of its dividend – will improve “markedly” this year, thanks mainly to profits generated by oil sector businesses.
Companies with a strong track record of paying dividends tend to be found in specific stock market sectors such as energy and commodities, where businesses have benefited from soaring oil and gas prices.
Unlike several of its rival stock market indices worldwide, the UK FTSE 100 is replete with so-called ‘old economy’ shares, including several energy and commodities companies.
HIIT said UK companies made significant cuts to their dividends during the pandemic, dragging down their average dividend cover figure to just 1.0 for the period between 2015 and 2020, less than half the global average.
However, UK dividend cover rebounded to 2.0 in 2021. This was still below the rest of the world but HIIT forecasts that the figure is on course to exceed the global average this year thanks to the rise in oil profits.
Ben Lofthouse, portfolio manager of HIIT, said: “During inflationary periods it is important to find companies with good dividend cover, pricing power, cash flow, and modest borrowing.
“If inflation and recession come at the same time, profits may fall, but history shows that dividend income is much less volatile than profits over time as companies flex the proportion of their profits they pay to shareholders. With dividend cover so high at this point in the cycle, we can have some significant confidence for 2023 that overall dividend payouts will prove resilient.”
10 October: Concerns Raised About Delay To Twitter Deal
In another twist to Elon Musk’s long-running saga over his deal for Twitter, court proceedings between the Tesla chief and the social media giant have been suspended until 28 October to allow Mr Musk time to complete the deal, Jo Groves writes.
However, Twitter has voiced its opposition to this delay, with continued concerns over Mr Musk’s ability to raise the debt financing given the deterioration in the value of technology stocks and wider economic conditions since the deal was announced in April.
While the Twitter share price rose from $43 to $52 on Mr Musk’s announcement last week, it has subsequently fallen back to around $49 per share, indicating the level of uncertainty around the deal finally managing to get over the finish line.
5 October: Funds Suffer Worst Month For Cash Outflow
Worldwide market turbulence was responsible for a record-breaking outflow of cash from funds that invest in stocks and shares last month, according to Calastone, Andrew Michael writes.
The global funds network said equity funds leaked £2.4 billion in September, the 16th consecutive month investment portfolios experienced net outflows of money. The latest figure beat the previous record, set a month earlier, by more than a fifth.
Calastone’s Fund Flow Index showed that a net figure of just over £6.6 billion has been removed from equity funds since the beginning of 2022. The amount of money that exited the sector in the third quarter of this year, £4.7 billion, was greater than the whole of 2016, previously the worst year for outflows in Calastone’s eight-year reporting history.
It said: “Investors continued to pummel funds focused on UK equities”.
Portfolios investing in UK equities were hit the hardest, but every other geography saw significant outflows.
According to the index, US equity funds shed a net £497 million in capital during September. During the same month, Calastone blamed the strength of the US dollar and the economic slowdown in China for record net outflows experienced by emerging market and Asia-Pacific funds, at £116 million and £223 million respectively.
The company also reported a “sharp reversal in appetite” for so-called environmental, social and governance (ESG) funds, which shed £126 million during September. This was the first net outflow from this sector in nearly four years.
Edward Glyn, head of global markets at Calastone said: “The surge in global bond yields is driving a dramatic repricing of assets of all kinds. UK investors are voting with their feet and heading for the exits. The sensitivity to market interest rates of the big growth stocks that characterise the US market explains the record outflows there.
“For emerging markets, the support provided earlier in the year by high metals prices has been kicked away by the prospect of a global recession. The negative effects of the strong dollar for many emerging market economies are coming to the fore in its place.”
5 October: Elon Musk Reinstates Bid To Buy Twitter
After months of legal battles, Elon Musk has agreed to reinstate his original offer of $44 billion for social media giant Twitter, Jo Groves writes.
Yesterday’s filing with the Securities and Exchange Commission (SEC) revealed that Mr Musk sent a letter to Twitter on Monday night offering to go ahead with the original deal, pending receipt of funds from the debt financing package.
However, Mr Musk’s offer was on the condition that there was an immediate stay of action and closure of the current legal proceedings in the Delaware Chancery Court.
The two parties were due in court later this month, with Twitter attempting to hold Mr Musk to his original offer to buy the company. The agreed $1 billion ‘break fee’ was also likely to have been a contentious issue had Mr Musk walked away from the deal.
Mr Musk offered $54.20 per share to buy Twitter in April, however, the deal foundered when he raised concerns over the number of fake and spam accounts. He claimed that Twitter had failed to provide sufficient information to prove that these accounts represented less than 5% of users.
The proposal may put an end to months of uncertainty about the deal, with Twitter shares rising from $42 to $52 on the news.
However, there could yet be one more twist in the long-running corporate saga. A handful of Wall Street banks had signed up to provide $12.5 billion of financing for the transaction, with the intention of selling the debt to institutional investors.
The rise in interest rates and fears of a recession may make this a more challenging prospect, with the yields on corporate debt having soared in the last few months.
In a tweet, Twitter confirmed: “We received the letter from the Musk parties which they have filed with the SEC. The intention of the Company is to close the transaction at $54.20 per share.”
Here’s more information on how to buy Twitter shares.
27 September: ‘Guidance’ Option Could Help Reduce Fees
Market regulator, the Financial Conduct Authority (FCA), is to review the regulations around the provision of advice to investment clients.
In a speech today at the Future of UK Financial Services Regulation Summit in London, Sarah Pritchard, FCA executive director, said: “Because of the costs involved, only the relatively well-off can access advice on what to invest in. Mass market consumers are often left to navigate a bewilderingly large choice with little support.
“As part of the FCA’s Consumer Investments Strategy, we have said that we want to establish a simplified advice regime for mainstream stocks and shares ISAs where the risks to consumers are relatively low.”
The distinction between advice and guidance was made as part of the introduction of the Markets in Financial Instruments Directive (MiFID) in 2007. It requires firms to make a full suitability assessment of a customer’s personal financial situation before offering advice.
The FCA is seeking to reduce this regulatory burden with the aim of reducing the fees firms need to charge and making advice on mainstream investments more accessible. It will carry out a review of the regulatory boundary between advice and guidance, while continuing to provide protection for consumers.
Tom Selby, head of retirement policy at investment provider AJ Bell, comments: “A culture of fear has built around providing guidance that risks going anywhere near the blurred advice/guidance boundary, with firms and employers keeping a safe distance from the boundary and ordinary people receiving less help making decisions as a result.
“Those who do not take advice need better, more personal guidance so they can make financial decisions which are more likely to lead to ‘good outcomes’, in line with the FCA’s Consumer Duty.”
The timing of the review is not yet decided but Ms Pritchard said: “Once the FCA has greater rule-making powers under the future regulatory framework legislation next year, we will be able to do more.”
8 September: Payouts Forecast To Slow As UK Economy Moves Into Reverse
The UK’s smaller publicly listed companies paid dividends to investors worth £574 million in the first half of 2022, according to fund administration service Link Group, Andrew Michael writes.
Dividends are distributions to shareholders usually paid out in cash that are taken from a company’s annual profits.
Link Group said that the amount paid in dividends by companies listed on the Alternative Investment Market (AIM) section of the London Stock Exchange was a 7.4% increase compared with the same period last year.
The company’s annual AIM Dividend Monitor showed that the largest contribution to growth came from the building materials sector, one that has benefited from a revitalisation in construction activity in the wake of the Covid-19 pandemic.
An example of this is Breedon, the cement, aggregates and asphalt producer, which paid its first-ever dividend in the third quarter of last year. This was followed by a large final payment in May 2022. Link Group said that the food, drink and tobacco sectors each delivered strong growth as well.
AIM companies are generally less likely to pay dividends than larger, more mature companies that trade on the main London market.
Link Group said that, before the pandemic, a third of AIM-listed companies paid cash to shareholders compared with about three-quarters of companies traded on the main London market.
In 2020, the number of AIM companies paying dividends plunged to 22%. Link Group estimated that the figure would rise back up to around 29% this year. But it also warned of a slowdown in the pace of recovery in AIM dividends for the second part of 2022.
Ian Stokes, Link Group’s managing director for corporate markets UK and Europe, said: “AIM companies have really impressed with their ability to bounce back from the pandemic. This is reflected in the strength of the recovery in their dividend payments, which was better than we expected. The easy work is done, meaning that growth will now slow.
“As we move into 2023, we expect growth to slow further. Corporate margins are currently under pressure and a potential recession is on the cards, which will affect both the ability and willingness of AIM companies to return cash to shareholders.”
7 September 2022: Fraudsters Target Investors In Increasing Numbers As Cost-Of-Living Crisis Bites
An increasing number of investors have become victims of investment fraud, according to the latest figures from the UK’s financial services complaints service, Bethany Garner writes.
The Financial Ombudsman Service (FOS) said there had been a rise in the number of investment scams reported by consumers.
Between April and June 2022, the FOS received 570 complaints about “authorised” investment scams, in which someone is tricked into sending money to a fraudster posing as a legitimate person or business.
Investment fraud accounted for 30% of all “authorised” scam complaints logged during this period, and represents a 14% increase compared with the same period in 2021.
Around a fifth of investment fraud complaints related to cryptocurrencies. These schemes usually involve scammers posing as legitimate intermediaries, and persuading consumers to transfer money to purchase cryptocurrencies.
Nausicaa Delfas, interim chief executive at the FOS, said: “Complaints about investment scams are currently the fastest growing type of fraud complaint that the FOS receives.”
As scammers take advantage of people’s increased financial vulnerability amid the cost-of-living crisis, Ms Delfas warned consumers to be on their guard.
She said: “We are concerned that, in current economic circumstances, people could be tempted to invest in fake investments. Our advice to consumers is to be wary, conduct their own research, check the Financial Conduct Authority register and contact the firm directly on the number listed.”
Despite the uptick in investment fraud, the FOS added that the overall number of complaints about “authorised” scams has decreased since last year.
But the service said it had also received nearly 200 new complaints about unregulated collective investment schemes (UCIS) between April and June 2022.
UCIS are high-risk, collective investments aimed at high-net-worth, experienced investors.
Of the consumers who complained about a UCIS, 45% said they were given inappropriate advice about using their pension to invest in the scheme.
6 September: Portfolios Suffer August Backlash Despite Market Rally
UK investors withdrew £1.9 billion from equity funds last month, a record amount, according to the latest figures from Calastone, Andrew Michael writes.
The global funds network said that the August outflow of funds easily beat the previous outflow records of June and July 2016, when investors removed £1.54bn and £1.56bn of cash respectively in the wake of the Brexit vote.
Calastone said August’s net outflow was driven by a “significant increase in selling activity, rather than a drop-off in buy orders, indicating a decisive choice [by investors] to exit holdings”.
Global stock prices rose sharply in July, rallying in reaction to a fall earlier in the summer. But Calastone said that, rather than leaving investors buoyed, an upwards move on the markets had left customers exposed to UK funds unconvinced.
It said: “Investors sold their equity fund holdings (going) into the rally, withdrawing a modest £251m in the second half of July, ramping up to £2.08bn between 1 and 17 August.”
According to the data, UK funds were worst hit by the outflows last month, with investors pulling out £759 million from the sector. This marked the 15th month in a row that portfolios with a domestic tilt had suffered a net exit of money.
Investors also dumped North American and Asia-Pacific equities funds to the tune of £426 million and £234 million respectively.
Since the beginning of this year, equity funds have shed £4.3bn overall. Calastone, which reports fund data going back eight years, said only March to October 2016 witnessed larger outflows (£5.2bn).
Calastone said that the only portfolios experiencing minor inflows during August were those linked to specialist investment sectors, such as infrastructure, renewable energy and environmental, social and governance (ESG) investing.
Edward Glyn, head of global markets at Calastone, said: “Markets are absorbing the likelihood that inflation will be extremely pernicious and persistent meaning that interest rates will stay higher for longer than initially expected.
“The combination of a weaker economy and higher rates is very negative for share prices, especially of growth stocks.”
5 September: Latest Reshuffle Sees F&C Investment Trust Promoted
Asset management group abrdn has dropped out of the UK’s stock market index of leading blue chip companies after its share price fell by more than 40% this year, Andrew Michael writes.
With a market capitalisation of less than £3.2 billion, the company has been relegated from the FTSE 100 in a well-signalled move. The business, which rebranded from Standard Life Aberdeen in 2021, was formed when the two fund management firms merged in 2017.
One of the companies moving in the opposite direction is the £4.5 billion F&C investment trust.
The re-shuffle, announced by index compiler FTSE Russell, will come into force when the stock market closes on Friday 16 September. From that point, so-called passive investment funds that are designed to track the performance of the ‘Footsie’ will withdraw their positions in the company’s stock.
Two other businesses facing demotion from the benchmark stock index are kitchen maker Howden Joinery Group and the drug firm Hikma Pharmaceuticals.
F&C, run by fund management firm Columbia Threadneedle, is the UK’s oldest investment trust. It will be the fourth investment trust to take its place in the index, joining Scottish Mortgage, Pershing Square Holdings and 3i, the private equity investment vehicle.
Susannah Streeter at Hargreaves Lansdown, said: “Huge geopolitical uncertainty, sky-high inflation and worries about economic growth have been challenging for the asset management sector.
“abrdn’s operating profits came in lower than expected as fund flows reduced further. But this isn’t just a recent problem, assets have been walking out the door for years. Its environmental, social and governance options currently lag peers, and demand for ESG investments is on the rise, which puts it in a tricky position.”
31 August: St James’s Place Shakes Up Digital Offering For Clients
Wealth manager St James’s Place (SJP) is to launch a mobile investment app for its clients, writes Andrew Michael.
The company has around 4,600 advisers and 900,000 clients in the UK and Asia. It says the app will enable clients to manage and keep track of their investment performance and financial position.
Several wealth managers have created a client app. Brewin Dolphin launched one in 2019, while Evelyn Partners is thought to be planning one later this year.
SJP described the move as part of a wider ‘Next Generation Client Experience’ vision that will “use digital technology to make it easier for our clients and their advisers to collaborate, administer and manage their financial futures in more convenient ways”.
The company says that, once the app has been downloaded and registered, clients will be able to use biometric and FaceID to log-in securely in less than a second.
Clients will be able to check the value and performance of SJP products including pensions, investments, individual savings accounts, trusts and bonds along with any protection and mortgage products they hold with the company.
Interactive graphs will show investment performance over different time periods and clients will also be able to see how much money they have paid in, withdrawn and taken as income.
Ian Mackenzie, chief operations & technology officer at SJP, said: “The intention is to ease the burden of paperwork, documentation, storage, reporting and planning, freeing up our advisers’ time so they can better focus on making a difference to our clients’ future, and designed using leading identity and security technology to keep client details safe and secure.”
25 August: Advisers ‘Ignoring Investor Views On Ethical Issues’
UK retail investors are being let down by wealth managers who fail to discuss clients’ views on responsible investing, according to research from Oxford Risk, Andrew Michael writes.
The behavioural finance company found that nearly half (46%) of adults with investment portfolios run by wealth managers have never been contacted by them about their attitude to environmental, social and governance (ESG) issues or the broader issue of responsible investing.
Just over a third of clients (37%) said portfolios reflected their views on sustainable investing, suggesting the majority of retail investors were not having their opinions catered for in this sphere.
Oxford Risk says this scenario comes at a cost to both clients and wealth advisers alike. It found that nearly one-in-three investors (31%) say they would invest more if their portfolio better reflected their views on ESG and responsible investing.
The company said this particularly applied to younger investors, where over half of under-35s (59%) say they would invest more if their money was tilted to responsible investing.
Around one-in-three of all clients said their adviser did not address their ESG investing aspirations.
Greg Davies, head of behavioural finance at Oxford Risk, said: “Accounting for investors’ sustainability preferences needs a deeper understanding both of financial personality, and that suitability – matching investors to the right investments for them – is at the heart of helping people use their wealth for good.
“It is surprising that nearly half of investors claim they have never been contacted by their advisers about their attitude to responsible investing and ESG, and fewer than two out of five say their investment portfolio doesn’t represent their views on responsible investing.”
Oxford Risk produces a suitability framework for wealth managers enabling them to work out an investor’s ESG preference to determine how much money should be weighted towards the ‘E’, ‘S’ and ‘G’ part of a portfolio.
24 August: Re-Shuffle Looms At UK’s Leading Stock Market Index
Abrdn, the asset management group, faces demotion from the UK’s stock market index of blue chip companies after its share price plummeted by almost 40% this year, Andrew Michael writes.
The firm’s market capitalisation – the sum of all its issued shares multiplied by the share price – has fallen to below £3.3 billion, leaving it perilously close to the bottom of the FT-SE 100 (see below), the UK’s blue riband stock market index.
The asset manager has experienced a tough year, with its recent interim results reporting an outflow of funds worth £36 billion during a six-month period.
Global index provider FTSE Russell will announce the latest reshuffle of both the 100 large-cap and 250 mid-cap indices at the end of this month.
Along with abdrn, other potential casualties from the quarterly re-rating of the main index include generic drug maker Hikma Pharmaceuticals and kitchen maker Howden Joinery Group.
Ben Laidler, global markets strategist at eToro, the social investment network, said: “Those tapped for an upgrade from the FT-SE 250 into the FTSE-100 include (medical technology firm) ConvaTec Group, whose share price has surged 20% this year, and the F&C Investment Trust that focuses on global equities. Both stocks have market caps well in excess of £5 billion.”
Changes to major stock indices, such as the FT-SE 100 in London and the S&P 500 in the US, have become more important as the money tracking them in index tracking and exchange-traded funds (ETFs) has surged in recent years.
Mr Laidlaw said: “The amount invested in ETFs has almost doubled to a dramatic £7.7 trillion since 2018.”
22 August: Equities And Gold Replace Crypto And Alternative Assets As Investors Adjust Portfolios
The majority of the UK’s retail investors are bracing themselves for recession before the end of this year, irrespective of the outcome of the Conservative Party leadership contest, according to research from online foreign exchange provider HYCM, writes Andrew Michael.
The result of the contest, to be announced on Monday 5 September, will decide whether Foreign Secretary Liz Truss or former Chancellor of the Exchequer, Rishi Sunak, becomes the UK’s next Prime Minister.
HYCM surveyed nearly a thousand retail investors each with at least £10,000 under management excluding both the value of their home and workplace pension. Nearly two-thirds (62%) of the investors said they believed the UK would be plunged into recession by the end of 2022.
Half of the respondents (50%) also said they were concerned that the current interest rate hiking cycle undertaken by the Bank of England (BoE) would not be enough to stamp out soaring inflation in the coming months. Investors said the impact of inflation, which currently stands at 10.1%, posed the biggest single threat to the performance of their financial portfolios.
The Bank of England recently warned that UK inflation could reach 13% before the end of 2022 with levels remaining elevated for the whole of next year.
More than half the investors said they regarded themselves as “risk averse” in the current high inflation, low growth economic climate. Just over a third (38%) said that ‘safe haven’ assets were their prime focus given the current investment landscape.
When asked about their investment strategy for the rest of 2022, a third (33%) of investors said they planned to reduce their holdings in cryptocurrencies, while just over a quarter (27%) told HYCM they were likely to increase their exposure.
Investors also indicated that they would be reducing their holdings in so-called alternative investments, including classic cars and private equity, while upping their exposure to stocks and shares, social investments and gold.
Giles Coghlan, chief currency analyst at HYCM, said: “With the Conservative leadership contest gaining momentum, all eyes are falling firmly on economic policy in the bid for the prime minister role. As Rishi Sunak warns that the lights are flashing red on the economy and urgent action must be taken to tame spiralling inflation, Liz Truss and her backers are casting doubt on current thinking from the BoE. Whatever course is taken, our research shows that investors clearly view a recession as inevitable.
“As the cost-of-living crisis continues to bite, it is therefore unsurprising to see many investors reducing their holdings in some riskier and more speculative assets in favour of those that characteristically provide a safe haven in times of uncertainty.”
16 August: Profits At BHP Jump On Soaring Coal Prices
Mining company BHP said it would return a record amount of cash to shareholders after reporting record profits for the first half of 2022 on the back of soaring commodity prices earlier this year.
Reporting its results for the year ended June 2022, the Australian-based miner revealed a total final dividend of £7.4 billion ($8.9 billion), increasing payments for the year to £13.7 billion ($16.5 billion), the highest distribution in the company’s near 140-year history.
Dividends are payouts to shareholders made by companies out of their profits. They provide an important source of income for investors, especially as part of a retirement planning strategy.
Link, the fund administration group, recently reported that dividends from mining companies accounted for nearly a quarter of all payments made to shareholders during the second quarter of 2022, the largest proportion from any industrial sector.
BHP’s annual profit rose by 26% to £17.7 billion ($21.3 billion), its highest figure in 11 years. The company says it is continuing to look for acquisitions, having offered to buy OZ Minerals earlier this month. In morning trading today in London, the company’s share price rose 4% to £2,337 on the back of the results.
Mike Henry, BHP chief executive, said: “These strong results were due to safe and reliable operations, project delivery and capital discipline, which allowed us to capture the value of strong commodity prices.”
Against a looming recessionary economic backdrop caused by faltering growth worldwide plus the prospect of rising interest rates, Henry said that the company was well prepared to manage an uncertain near-term environment, adding an optimistic note: “We expect China to emerge as a source of stability for commodity demand in the year ahead.”
Victoria Scholar, head of investment at investing platform interactive investor, said the price of coal hit record highs following Russia’s invasion of Ukraine at the end of February.
She added: “BHP has been a key beneficiary of the surge in commodity prices this year. Looking ahead, the environment looks increasingly challenging with copper prices down 25% since the March high and with concerns about rising global interest rates, labour constraints and an economic slowdown.”
8 August: Bestinvest Spotlights ‘Dog’ Investment Funds
Investment funds worth nearly £11 billion are named as consistently underperforming ‘dogs’ in research from online investing service Bestinvest, writes Andrew Michael.
The company identifies 31 underperforming funds, worth a combined £10.7 billion, highlighting the poor showing of three in particular: Halifax UK Growth; Halifax UK Equity Income; and Scottish Widows UK Growth, together valued at £6.7 billion.
Bestinvest describes the underperformance of this trio, each widely held by UK retail investors, as “entrenched”, to the extent that “questions must be asked over their [investment] approach”.
Both of the Halifax funds are from a stable of investments offered by Halifax Bank of Scotland (HBOS). HBOS’s parent, Lloyds Bank, is ultimately responsible for the Scottish Widows portfolio as well. Fund manager Schroders acts as sub-adviser to all three funds.
Bestinvest’s latest Spot the Dog analysis defines a ‘dog’ fund as one that fails to beat its investment benchmark over three consecutive 12-month periods, and which also underperforms its benchmark by 5% or more over a three-year period.
A benchmark is a standard measure, usually a particular stock market index, against which the performance of an investment fund is compared.
Bestinvest said that, despite their underperformance, the 31 funds it had identified will generate management fees of around £115 million this year, based on their size and costs.
The company’s previous Spot the Dog, published earlier this year, highlighted 86 dog funds worth £45 billion.
Bestinvest said: “Although there are unfortunately plenty of funds that have undershot the markets they invest in over the last three years, a change in fortune for funds investing in undervalued companies and dividend-paying shares means many of the funds that dominated the list in recent editions have escaped this time due to a much stronger relative performance in the last several months.”
Jason Hollands, Bestinvest’s managing director, said the report demonstrated a big disparity between the best and worst-performing funds that can’t be explained by cost differences alone: “The exceptional 12-year period of strong equity market performance that came to something of a halt at the end of last year meant that, until recently, most funds investing in equities generated gains irrespective of the skill of their managers.
“This has helped to disguise poor relative performance and bad value for money.
“In a bull market, when most funds rise in value with the upward tide, investing can seem all too easy, but tougher times are a period to reflect on your approach. If you want to be a successful DIY investor, then periodically reviewing and monitoring your investments is absolutely vital and you need to be super-selective in the funds or trusts you choose.”
4 August: Equity Portfolios Suffer As Investors Pull Near-Record Sums
UK investors pulled out £4.5 billion from investment funds in June this year, the largest monthly withdrawal of 2022 and the second highest figure on record, according to the latest figures from industry body the Investment Association (IA), writes Andrew Michael.
The IA said investors were responding to intensifying economic uncertainty following a challenging first half of the year for market performance.
Last month, the US market officially moved into bear market territory when the influential S&P 500, recorded a 20% drop in value since the beginning of 2022.
The IA said that equity funds experienced outflows worth £2.3 billion in June. Within this cohort, the largest sector casualty was globally diversified portfolios, with investors pulling out money to the tune of £1.3 billion.
In contrast, so-called volatility managed funds, which aim to deliver positive returns to investors by investing in a blend of assets including equities, bonds and cash, were the IA’s best-selling sector in June, with net retail inflows worth £248 million.
Chris Cummings, IA chief executive, said: “Savers are pre-empting slowing economic growth and preparing for further interest rate rises as we enter new territory for markets. Higher rates mean a weaker performance outlook for the high-growth companies that helped to fuel the bull market of the last decade.”
“This month’s equity fund outflows indicate that investors are looking at ways to better balance their savings,” Cummings added.
[ ] Assets under management in the European fund industry fell by £1.7 trillion (€2 trillion) from £12.8 trillion (€15.3 trillion) to £11.1 trillion (€13.3 trillion) over the first half of 2022, according to the latest figures from data provider Refinitiv Lipper.
Detlef Glow, head of EMEA research at Refinitiv Lipper, said: “It was no surprise that the European fund industry faced declining assets under management over the course of the year 2022 so far, as the geo-political situation in Europe, the still ongoing COVID-19 pandemic, disrupted delivery chains, increasing inflation, and interest rate hikes put some pressure on the securities markets.”
3 August: Less Than 1% Of Funds Delivered Top Performance Over 3 Years – Columbia Threadneedle
Just four investment portfolios, a record low, delivered top quartile performance over a rolling three-year period to the end of June this year, according to the latest figures from fund manager Columbia Threadneedle, writes Andrew Michael.
A top quartile fund is one that ranks in the top 25% of its peer group based on investment performance.
Columbia Threadneedle’s quarterly Multi-Manager Fund Watch survey reviewed 1,153 portfolios across 12 major fund sectors – as defined by the Investment Association (IA) universe – assessing performance in each of three 12-month periods up to June this year.
The Multi-Manager Consistency Ratio, the toughest test within the research, looked for funds that were top quartile for each of these periods. Columbia Threadneedle found that, up to the end of the second quarter of 2022, just 0.35% of funds, four in total, proved up to the mark.
The funds in question were: Quilter Investors Sterling Diversified Bond; Matthews Asia Small Companies; Luxembourg Selection Active Solar; and Fidelity Japan.
Each fund is located in a different IA sector, making it difficult to determine why these portfolios produced the requisite investment returns, while so many of their rivals languished over the same period.
Columbia Threadneedle said that the funds industry was experiencing a “challenging period”, with macro factors and geo-politics currently creating an “interesting environment for investment”.
Factors included the ongoing implications of the war in Ukraine, rising inflation, plus the impact of central banks’ decisions worldwide to hike interest rates in the face of stiff economic headwinds.
Kelly Prior, investment manager at Columbia Threadneedle said: “This quarter’s findings are unprecedented, demonstrating the extreme rotations that markets have been through in the last couple of years and how different flavours of investment have led markets at different times.”
She added: “While the data points make for hard reading, we believe the data does indicate that fund managers are holding their nerve and not trying to chase these very unusual markets.”
1 August: Mining, Banking And Oil Sectors Lead The Dividends Charge – For Now
Total dividends from UK-listed companies hit £37 billion in the second quarter of this year, an increase of more than a third compared with the same period in 2021, according to the latest figures from Link, the fund administration group, writes Andrew Michael.
Dividends are payouts to shareholders made by companies out of their profits. They provide an important source of income for investors, especially as part of a retirement planning strategy.
Link’s latest UK Dividend Monitor reported that the headline total for dividends rose year-on-year by 38.6% in the second quarter of this year.
The figure, driven by one-off special payments, was the second-largest quarterly total on record, eclipsed only by the amount companies paid out to shareholders between the months of April to June in 2019.
Link said that dividends from mining companies accounted for nearly a quarter of all payments made to shareholders during the second quarter of this year, the largest proportion from any industrial sector. In addition to mining, banks and oil companies make up the UK’s three largest dividend-paying sectors.
Link added that sectors including housebuilders, industrial goods, media, travel and general financials each also had a strong second quarter, thanks to strong profit growth offering a boost to dividend payouts in the wake of the pandemic.
In light of this, the company said it was upgrading its UK plc dividend forecast for the full year with headline payouts expected to rise by 2.4% to £96.3 billion.
Link warned, however, that next year could prove more of a challenge to companies looking to further increase their dividend payments as economic conditions increasingly take a turn for the worse and the conflict in Ukraine continues unabated.
Ian Stokes, managing director, corporate markets UK and Europe at Link, said: “Mining payouts are closely linked to the cyclical fluctuations in mining profits, and tend to rise and fall much more over that cycle than dividends from other industries.”
He added: “As we move into 2023, headwinds will strengthen. The easy post-pandemic catch-up effects are soon to wash entirely out of the figures, and an economic recession will crimp the ability and willingness of many companies to grow dividends.”
20 July: Perceived Risk Of Lower ESG Returns Proves A Turn-Off For Investors
The majority of investors are unaware of environmental, social and corporate governance (ESG) investing, despite the shift to sustainability and increased concern about the impact investments are having on the planet, writes Andrew Michael.
According to research from financial advisers Foster Denovo, six in 10 investors (60%) said they were unfamiliar with the availability of specialist investment portfolios such as ESG funds.
However, Foster Denovo’s report, Investing with the Dynamic Portfolios: The latest research surrounding investors opinions on ESG investing, reveals signs of a growth in investor perception about the environment along with the impact made by their investments.
Once dismissed as a virtuous concept that potentially compromised portfolio returns, ESG investing has moved centre-stage within the global investment arena in recent years.
According to Global Sustainability Investment Alliance, approximately £30 trillion in assets was being managed globally in accordance with ESG principles.
Foster Denovo said just over half (51%) of respondents either felt strongly or very strongly about the impact that climate change could have on their savings and investments.
In addition, nine in 10 (89%) said they were concerned about the impact that corporate practices and some large businesses were having on the environment.
A quarter (25%) of respondents told Foster Denovo that they had invested with ESG factors in mind. But the majority said they weren’t interested in ESG investments because of perceived lower returns from the sector compared with more traditional investment channels.
Foster Denovo described this response as “at odds with the majority of recent investment research which found that three-quarters of ESG-screened indices outperformed their broad market equivalents”.
Declan McAndrew, Foster Denovo’s head of investment research, said: “It’s clear that many people, including those not currently investing sustainably, are interested in and willing to learn more about ESG and want to put their money towards positively benefiting the planet as well as making returns.
“However, a lack of awareness about the availability of such products, what ESG means and a persistent misconception about lower returns are clearly having an impact.”
13 July: Gloves Off As Twitter Sues Musk For Ditching Takeover Bid
Twitter has carried through its threat to sue Elon Musk after the Tesla boss announced last week (see story below) that he is walking away from his £36.5 billion bid to buy the social media platform, writes Kevin Pratt.
In what looks set to be a lengthy and acrimonious legal battle – Twitter’s complaint filed with the Delaware Court of Chancery calls Mr Musk’s behaviour “a model of hypocrisy” – the main issues are the number of fake accounts on the platform, and the $1 billion break clause in the original contract.
Mr Musk is refusing to pay the sum, arguing that Twitter has not provided him with the information he needs to verify the number of genuine accounts.
The original offer for Twitter was at $54.20 per share but the stock is now trading below $35. Recent falls are attributed to Mr Musk’s announcement, but the price was already around the $40 per share mark before last weekend.
Twitter’s legal filing reads: “In April 2022, Elon Musk entered into a binding merger agreement with Twitter, promising to use his best efforts to get the deal done. Now, less than three months later, Musk refuses to honor his obligations to Twitter and its stockholders because the deal he signed no longer serves his personal interests.
“Having mounted a public spectacle to put Twitter in play, and having proposed and then signed a seller-friendly merger agreement, Musk apparently believes that he – unlike every other party subject to Delaware contract law – is free to change his mind, trash the company, disrupt its operations, destroy stockholder value, and walk away.
“This repudiation follows a long list of material contractual breaches by Musk that have cast a pall over Twitter and its business. Twitter brings this action to enjoin Musk from further breaches, to compel Musk to fulfill his legal obligations, and to compel consummation of the merger upon satisfaction of the few outstanding conditions.”
In a tweet last night, Bret Taylor, Twitter chairman said: “Twitter has filed a lawsuit in the Delaware Court of Chancery to hold Elon Musk accountable to his contractual obligations.”
Mr Musk responded with a tweet of his own: “Oh the irony lol (laugh out loud)”.
Twitter’s filing to the Delaware court accuses Mr Musk of wanting to back out of the deal because of the drop in the stock market generally and the firm’s share price in particular: “After the merger agreement was signed, the market fell. As the Wall Street Journal reported recently, the value of Musk’s stake in Tesla, the anchor of his personal wealth, has declined by more than $100 billion from its November 2021 peak.
“So Musk wants out. Rather than bear the cost of the market downturn, as the merger agreement requires, Musk wants to shift it to Twitter’s stockholders. This is in keeping with the tactics Musk has deployed against Twitter and its stockholders since earlier this year, when he started amassing an undisclosed stake in the company and continued to grow his position without required notification.
“It tracks the disdain he has shown for the company that one would have expected Musk, as its would-be steward, to protect. Since signing the merger agreement, Musk has repeatedly disparaged Twitter and the deal, creating business risk for Twitter and downward pressure on its share price.”
The market awaits a fuller response from the Musk legal team in the coming days.
9 July: Two Sides At Loggerheads Over £36.5 Billion Takeover Contract
Elon Musk has told Twitter he is pulling out of the previously agreed £36.5 billion deal to buy the social media micro-blogging platform. Twitter says it is determined to complete the transaction on the original terms, writes Kevin Pratt.
A letter to Twitter, filed with the US Securities and Exchange Commission, says Mr Musk “is terminating the Merger Agreement because Twitter is in material breach of multiple provisions of that Agreement, appears to have made false and misleading representations upon which Mr. Musk relied when entering into the Merger Agreement, and is likely to suffer a Company Material Adverse Effect.”
Mr Musk effectively put the deal on ice in May while his team determined the number of ‘spam’ accounts on Twitter, arguing that he needed accurate information on the number of genuine users to determine the true value of the company.
The latest letter states: “For nearly two months, Mr. Musk has sought the data and information necessary to ‘make an independent assessment of the prevalence of fake or spam accounts on Twitter’s platform’.
“This information is fundamental to Twitter’s business and financial performance and is necessary to consummate the transactions contemplated by the Merger Agreement because it is needed to ensure Twitter’s satisfaction of the conditions to closing, to facilitate Mr. Musk’s financing and financial planning for the transaction, and to engage in transition planning for the business.
“Twitter has failed or refused to provide this information. Sometimes Twitter has ignored Mr. Musk’s requests, sometimes it has rejected them for reasons that appear to be unjustified, and sometimes it has claimed to comply while giving Mr. Musk incomplete or unusable information.”
Bret Taylor, Twitter’s chairman, said in a tweet that he is determined to complete the takeover on the original terms: “The Twitter Board is committed to closing the transaction on the price and terms agreed upon with Mr. Musk and plans to pursue legal action to enforce the merger agreement. We are confident we will prevail in the Delaware Court of Chancery.”
The dispute between the two camps is likely to be drawn out and acrimonious, not least because the contract includes a £1billion break clause, payable by either party if they withdraw without good reason.
Mr Musk will therefore try to show that the contract is no longer valid because of Twitter’s actions or lack of action, while the company will insist it has acted within the terms of the arrangement. As stated in Mr Taylor’s tweet, it will sue Mr Musk to enforce the deal.
Twitter shares fell by 5% when the news broke that the takeover is in jeopardy. In after-hours trading in New York, they stood at around $35 (£29). Mr Musk’s original offer was for $54.20 (£45) a share.
7 July: Investment Association Says Digital Ledgers Would Benefit Consumers
The UK’s asset management industry is calling on the government to create a new class of fund that incorporates blockchain technology, the digital process that underpins much of the cryptocurrency industry.
The Investment Association (IA), the trade body representing the UK’s investment management firms running nearly £10 trillion worldwide, has urged the government and the City regulator, the Financial Conduct Authority (FCA), to work together “at pace” to approve blockchain-traded funds that would issue digital tokens to investors in place of traditional shares or fund units.
The IA says that the increasing adoption of so-called ‘tokenisation’ would ultimately reduce costs for consumers and improve efficiency in the delivery of funds, through quicker settlement and improved transparency of transactions.
It added that tokenisation may also broaden the assets held within a fund by increasing access to private markets and illiquid assets such as property, that cannot quickly or easily be converted into cash.
According to the IA, the landscape it envisages for funds of the future would offer consumers “more engagement and customisation, while maintaining important consumer protections”.
It added that this could include the provision of a greater variety of portfolios tailored to the specific needs of individual investors and a wider range of financial advice services to address the UK’s current advice gap.
Earlier this year, the Treasury, headed by Rishi Sunak MP, former Chancellor of the Exchequer, announced a series of measures designed to elevate the UK into a global hub for cryptoasset technology and investment.
The FCA issues regular warnings to consumers about the crypto industry, reminding them that cryptoassets are unregulated and high-risk.
The regulator’s current stance on crypto as an investment is that investors “are very unlikely to have any protection if things go wrong, so people should be prepared to lose all their money if they choose to invest in them”.
Chris Cummings, IA chief executive, said: “With the ever-quickening pace of technological change, the investment management industry, regulator and policymakers must work together to drive forward innovation without delay.
“Greater innovation will not only boost the overall competitiveness of the UK funds industry, but will improve the cost, efficiency and quality of the investment experience.”
5 July: Watchdog Unveils Recruits To Oversee Investment And Crypto Sectors
The UK’s financial watchdog has poached a director with specialist knowledge of economic crime and illicit finance from the National Crime Agency (NCA) for a new role overseeing the crypto-asset, e-money and payment markets.
The appointment is one of six new directorships revealed by the Financial Conduct Authority (FCA), as the regulator looks to beef up its top personnel covering traditional areas of investment, while burnishing its credentials amid calls for tougher oversight of the crypto sector.
Matthew Long will join the Financial Conduct Authority in October as director of payments and digital assets. Long is currently director of the National Economic Crime Command, part of the NCA.
He also led the UK Financial Intelligence Unit, which has national responsibility for receiving, analysing and disseminating financial intelligence through the Suspicious Activity Reports (SAR) regime.
SARs are pieces of information that alert law enforcers that client or customer activity is suspicious and might indicate money laundering or terrorist financing.
Joining Long in October will be Camille Blackburn in the new role of director of wholesale buy-side.
Ms Blackburn will be responsible for policy development and supervision across asset management, alternative investments, custody banks and investment research.
She is currently global chief compliance officer at Legal & General Investment Management. Prior to that she was chief compliance officer at Aviva Investors and was also chair of the Investment Association’s Brexit committee.
Four other new directors have also been appointed in the FCA’s latest hiring round, including former City of London economic crime co-ordinator, Karen Baxter, who joins as director of strategy, policy, international and intelligence.
Three internal promotions – Roma Pearson, director of consumer finance; Anthony Monaghan, director of retail and regulatory investigations; and Simon Walls, director of wholesale, sell-side – complete the appointments.
29 June: Investment Trust Dividends Soar To £5.5 billion
Dividends paid out by investment trusts hit a record high of £5.5 billion in the year to March 2022, propelled by payouts from privately-owned companies not listed on stock markets.
An investment trust is a public limited company, traded on the stock market, whose aim is to make money by investing in other companies. The investment trust sector has become increasingly popular with retail investors in recent years.
According to fund administration group Link, two-thirds of investment trust dividends paid over the 12 months to March focused on so-called ‘alternatives’. These include investments in venture capital, renewable energy infrastructure and property.
Link says the figures equate to an overall increase in dividends of 15% compared with the previous year.
It adds, however, that shareholder payments from investment trusts investing in company stocks flatlined over the period, accounting for £1.85 billion of the total payout. These equity investment trusts traditionally play a key role in the London-listed investment trust sector.
While dividends from alternative trusts have increased nine-fold over the past decade, Link forecasts that shareholder payments from equity trusts will grow more slowly than the market average over the coming year.
Ian Stokes, Link’s managing director, corporate markets UK and Europe, said: “Ten years ago, alternatives were a much smaller segment of the investment trust market, but they have rapidly expanded as new investment opportunities have opened up in response to investor demand.”
Richard Stone, chief executive of the Association of Investment Companies, the trade body representing investment trusts, said: “This report demonstrates that investment companies offer an abundance of benefits to income investors and have continued to do so through challenging market conditions.”
28 June: Platforms Sweeten Deal With Interest Payments
Competition has intensified among online trading platforms as they battle to retain client funds now that the boom in ‘armchair’ share trading during the pandemic has tailed off.
The rise in the popularity of commission-free trading platforms had already put pressure on the larger platforms to review their fee structures, with AJ Bell reducing their platform and foreign exchange fees from July.
Now interactive investor (ii) has announced that it will start paying interest on British pound and US dollar cash balances held in its Individual Savings Accounts (ISAs) and Self Invested Personal Pensions (SIPPs) accounts from 1 July.
Historically, platforms have not paid interest on these balances, and investors may even have been charged for the privilege of holding cash in the past.
However, the stock market downturn has encouraged some investors to leave their ISA contributions uninvested as cash in their account. Others have sold their equity investments to hold the proceeds as cash in their ISAs and SIPPs, enabling them to keep the money within its tax-free wrapper.
The move by ii will see interest of 0.25% paid on the value of any balances over £10,000, with each account (eg ISA and SIPP) treated separately, rather than combined for the purpose of the interest calculation.
Richard Wilson, CEO at ii, commented: “Interest rates are still low, but following recent increases, ii will begin paying interest on accounts from 1 July.”
Mr Wilson also pointed to the benefit for regular traders of overseas shares, who will now earn interest on US dollar balances held on their account.
This announcement brings ii in line with other major trading platforms as follows:
- Hargreaves Lansdown pays interest of between 0.05% to 0.25% on cash held in ISAs, 0.05% to 0.20% on Fund and Share Accounts and 0.05% to 0.45% held in SIPPs.
- AJ Bell offers a lower interest rate of 0.0% to 0.15% for ISAs and Dealing Accounts and 0.0% to 0.25% for SIPPs.
Hargreaves Lansdown (HL) also announced the introduction of a ‘pay by bank’ service today, allowing clients to transfer funds directly from their bank accounts to their HL accounts, without the use of cards.
George Rodgers, senior product manager at Hargreaves Lansdown, commented: “Our clients can expect a simpler payment journey as well as instant settlement for deposits and withdrawals compared to days under the current system. Our adoption of Open Banking is a key milestone in our digital transformation strategy.”
28 June: Investment Scammers Add To Ombudsman’s Burden
Fresh data from the Financial Ombudsman Service shows that so-called ‘authorised’ scams – where consumers are tricked into transferring money into accounts they believe to be legitimate – increased by over 20% to 9,370 in in 2021/22.
The Ombudsman says fraudsters are increasingly using social media to lure their victims, with many of the total 17,500 fraud and scam cases recorded for the year relating to fake investments.
The Ombudsman says it upheld 75% of scam complaints in the consumer’s favour last year.
As far as insurance is concerned, the Ombudsman recorded 38,496 complaints (including Payment Protection Insurance) in the last financial year, compared to 44,487 the year before.
The number of travel insurance complaints decreased by 75% from 8,175 in the financial year 2020/21 to 2,116 in the financial year 2021/22.
The fall coincides with an increase in the number of insurers who have added cover for Covid-related issues to their policies.
The Financial Ombudsman Service faced a backlog of complaints throughout the pandemic. Last month, it announced that the number of outstanding complaints had decreased to 34,000 from 90,000 in April last year.
It says it resolved over 58,000 insurance complaints (including PPI) in total in the last financial year. However, it upheld less than 30% (28%) of cases in the complainant’s favour.
Nausicaa Delfas, interim head of the Financial Ombudsman Service, said: “Over the past year, the Service continued to help over 200,000 customers who had problems with financial businesses on issues across banking, lending, insurance and investments.
“In this period of economic uncertainty it is more important than ever that where problems do arise, they are addressed quickly. We are here to help to resolve financial disputes fairly and impartially.”
The Financial Ombudsman Service always advises consumers to complain to their product or service provider first. If they are unhappy with how their provider has dealt with their case, they should then take their complaint to the Financial Ombudsman Service.
24 June: Interactive Investor Responds To Woes In ‘Sustainable’ Sector
One of the UK’s largest online investment platforms, interactive investor (ii), has ditched two funds from its buy list of ethical portfolios.
It has also revealed that only two of the 40 funds in its ACE 40 list of environmental, social and governance (ESG) investments – VT Gravis Clean Energy Income Fund and iShares Global Clean Energy ETF USD Dist GBP INRG – delivered positive returns since the start of 2022 until the end of May.
Funds in the sustainable space have become popular among investors, with strong performance underpinned by their bias to so-called growth-oriented sectors (growth investing focuses on companies with better-than-average gains in earnings and which are expected to maintain high levels of profit).
However, since the start of 2022, growth stocks have faltered in the face of strong inflationary headwinds and rising interest rates, as evidenced by the performance of the ACE 40 list overall.
In contrast, value investing – focusing on companies perceived to be underappreciated and undervalued – has gained increased backing from investors this year.
On the advice of Morningstar, which advises on the composition of the ACE 40, ii announced the removal of two funds: abrdn Europe ex UK Ethical Equity, and Syncona Investment Trust. In their place, the company will add M&G’s European Sustain Paris Aligned fund.
Dzmitry Lipski, head of funds research at ii, said: “We continuously review the list to ensure it meets customer needs and, in this instance, given the significant shift in the market environment this year we agreed with Morningstar to make these changes.”
In connection with the removal of Syncona, Morningstar said: “We feel that the level of risk the trust displays is elevated relative to the benefits.”.
Regarding the abrdn fund, it said: “Compared to peers, the team’s fund management experience remains limited. Overall, we believe there are stronger fund options available in this sector and have therefore recommended the removal of this fund from the ACE 40 list.”
14 June: Analysts Warn S&P 500 Could Fall Even Further From January High
US stocks closed in bear market territory yesterday (13 June) after the S&P 500 fell 3.9%, hauling down the stock index’s overall performance by 21.8% since its record high achieved on 3 January this year.
Stock market professionals generally define a bear market as one that has fallen least 20% from its peak.
The sell-off in equities was prompted by nervous investors taking fright at a higher-than-expected May inflation figure of 8.6% as reported last Friday (10 June) by the US Bureau of Labor Statistics.
The announcement stoked expectations that the US Federal Reserve could implement an interest rate rise of 0.75 percentage points at its next monetary policy meeting, which concludes tomorrow (Wednesday).
A rate hike of this magnitude would signal a more aggressive stance from the Fed towards its strategy of tackling soaring consumer prices.
Later this week, the Bank of England’s Monetary Policy Committee is expected to announce a 0.25% hike in the Bank Rate in its own bid to stave off steepling inflationary pressures in the UK.
Stock market analysts warned that the sell-off in US equities potentially has further to go.
Ben Laidler, global markets strategist at social investing network eToro, said: “The S&P 500 closed in bear market territory yesterday, over 20% down for the year, and history tells us there is still a way to go yet. Recession risks are rising and could see this market fall another 20%.”
Laidler added that while S&P 500 bear markets were a relatively infrequent event, when they did happen, they tended on average to last around 19 months and result in a 38% drop in prices: “This one has only lasted five months and is down 21%.”
Russ Mould, investment director at online broker AJ Bell, said: “There is a lot riding on the Federal Reserve’s policy update tomorrow. Investors look as if they increasingly fear the central bank will become more aggressive with the pace of interest rates to try and curb inflation, given May’s cost of living figures were higher than expected.
“The Fed is focused on inflation and the economy, not the markets, yet its actions have significant influence on the direction of stocks and bonds. A decision to raise rates by more than half a percentage point could cause chaos on the markets and put a bigger dent into investors’ portfolios than they’ve already seen this year.”
7 June: Investors Hold Back Despite Prospect Of Better Returns
Nearly two-thirds of UK adults have money to invest but say they are prevented from doing so because they don’t know where to start, according to the investing app Dodl.
Research carried out by Dodl found that 65% of people do not have an investment account such as a stocks and shares individual savings account (ISA). But the company said the majority of the people in this group (95%) were not put off simply because they didn’t have sufficient disposable cash.
Instead, Dodl said they blame a range of issues such as not knowing where to start, the investment process being too complicated and not knowing what to invest in.
When asked how much money they potentially had set aside for investing, the average amount among respondents was £3,016.
Dodl said that leaving a sum this size in a top easy-access savings account paying 1.5% for 20 years would produce a return of £4,062. The company estimated that, if the same amount were invested over 20 years producing a 5% annual return, the total would be £8,002 after taking charges into account.
The company added that respondents were split when questioned about what would encourage them to begin investing. Just under half (48%) said they would prefer a narrow list of investments to choose from, while just over a third called for a wide range of investing options.
Dodl said nearly half of the responses (40%) were in favour of single funds that invested in mainstream themes such as technology and healthcare.
Dodl’s Emma Keywood said: “With living costs on the rise it is surprising that so many people say they have money saved in cash that they feel they could invest. The problem is they don’t know where to start or find it too complicated.
“However, once people do a bit of research and dip their toe in the water, they often find that investing isn’t as scary as they’d thought.”
6 June: ISAs Provide Timely Boost To Funds Industry
UK investors returned to the stock market in April after multi-billion pound withdrawals in the first quarter of 2022.
Figures from the Investment Association (IA) trade body showed that investors put £553 million into funds in April. Over £7 billion was pulled from the funds market between January and March this year.
In April, the overall amount in funds under management stood at £1.5 trillion.
The IA said this year’s Individual Savings Account (ISA) season fuelled the turnaround. ISAs are annual plans that allow UK investors to shelter up to £20,000 a year from income tax, tax on share dividends, and capital gains tax.
The plans run in line with the tax year, so there is traditionally a surge in interest in the weeks leading up to the tax-year end on 5 April.
The IA said Global Equity Income was, for the first time, its best-selling investment sector in April. With weaker prospects share price growth – thanks to factors including the war in Ukraine, high global inflation and rising interest rates – company dividends have become increasingly important to the overall returns investors can make from stock and shares.
Also popular were the Volatility Managed, Specialist Bond and North American sectors. The worst-selling sector was UK All Companies.
In April, UK investing platforms were responsible for half of all gross retail fund sales, while UK intermediaries, including independent financial advisers, accounted for just over a quarter (28%). Discretionary fund managers (20%) and direct sales from investment provider to consumer (3%) made up the balance.
Miranda Seath, IA’s head of market insight, said: “Although inflows to ISA wrappers were half those of 2021, they were still the third strongest in the last five years. This is significant as April’s positive sales come after one of the most challenging quarters for retail fund flows on record.”
1 June: Hedgie Investment Strategies Split Along Gender Lines
Hedge funds led by women perform slightly better than those headed up by men over the longer term, according to research from broker IG Prime.
Hedge funds are pooled investment vehicles aimed at high-net worth individuals and other major investors.
In their quest for outsize returns, the investment strategies associated with hedge funds are often more eclectic and involve greater risk-taking than those found in most run-of-the-mill retail funds.
IG Prime’s research focused on the UK, Australia, Singapore, Switzerland and the United Arab Emirates. It considered the extent to which a higher proportion of women in hedge fund leadership roles correlated with improved fund performance.
The company said looking at all investing periods, from one month to five years, the findings suggested there was no consistent correlation between female leadership and either positive, or negative, fund performance.
But IG Prime added that over five-year periods in both the UK and Australia, it found that hedge funds with female management at the helm marginally outperformed investment portfolios run by men.
According to the company, the decision to appoint women as hedge fund leaders may prove “somewhat beneficial… from a financial perspective”.
In spite of this, the research also found that women accounted for just 15% of the leadership roles across international hedge funds compared with men.
IG Prime also found that female and male hedge fund traders adopted differing investment strategies. Nearly two-thirds (60%) of women said they relied on equity-led approaches to investing, compared with just over a quarter (26%) of men.
In contrast, nearly twice as many men (33%) said they focused on macro-investing strategies compared with women (18%). A macro strategy bases its approach on the overall economic and political views of various countries, or their macroeconomic principles.
When it came to cryptocurrencies, about a third (31%) of male traders said they were likely to incorporate crypto assets within their portfolios, compared with 20% of female traders.
IG Prime said: “When making investments in funds, the focus should be on people’s past performance and intended strategy for the funds. Due to the unique nature of funds, it remains a wise decision to tailor each investment decision to each fund.”
26 May: Investors Identify Retirement As Main Savings Goal
The majority of non-professional investors believe investing with a life goal in mind leads to more successful outcomes compared with trying to make money in the abstract, according to research from Bestinvest.
The investment service’s Life Goals Study found that 80% of investors with a financial target on the horizon believed that this would help them secure a more satisfactory result.
Bestinvest also said that nearly nine in ten investors (89%) had a set goal in mind that they are trying to achieve by making their money work harder for them via an investment strategy.
Three-quarters (77%) of investors referred to a retirement-related investment incentive, either one that helped them to give up work sooner, or to help fund a comfortable income stream alongside their state pension.
Other major goals driving investment strategies included building up a pot of wealth to provide financial security, boosting lifestyles in the run-up to retirement, paying for future family costs such as weddings or tuition fees and building up wealth to hand on to future generations.
Despite both men and women sharing the belief that having an investment goal would lead to better results, Bestinvest said women “were noticeably less likely to check whether they are on course to achieve their goals than men”.
Bestinvest’s Alice Haine said: “It’s concerning that female investors are choosing to pay less attention to their investments. Women are often more vulnerable to pension poverty as they have less money squirrelled away than men, either because of the gender pay gap, or because they have taken time out of their careers to care for children or loved ones.”
- The average age of women when they start investing is 32, compared with men who typically start at the age of 35, according to research from Janus Henderson.
The fund manager also found that, on average, UK investors allocate around 16% of their money to investing. The majority of investors cited a lack of spare cash as the reason why they hadn’t started investing earlier.
26 May: Age Split On Prospects For Economy And Personal Wealth
Well-heeled older investors say inflation is their number one worry when it comes to the state of the UK economy and the prospects for their own finances, according to research from a wealth manager.
The Saltus Wealth Index also found that older high net worth individuals (HNWIs) – those with investable assets of more than £250,000 – have a far gloomier outlook about their finances compared with the affluent young.
According to the findings, the majority of younger HNWIs said they felt confident over the next six months about both the future of the UK economy as well as their own finances.
But when posed with the same questions, older HNWIs expressed significant concerns. According to Saltus, a third (34%) of HNWIs in the age-range 55 to 64 said they were confident about future prospects. The proportion fell further, to 23%, among HNWIs aged 65 or over.
When asked what they saw as the biggest threat to their finances, older HNWIs pointed to inflation (33%), Covid-19 (30%), exchange rates (25%), cyber security (25%) and geo-political risk (22%).
Saltus said this marked a shift from 2021, when Covid-19 was the top threat, followed by inflation, return on investments, Brexit and climate change.
UK inflation rocketed to 9% in April 2022, its highest level in 40 years, as prices felt the effect of soaring energy costs and the impact of the ongoing conflict in Ukraine.
The rise has exacerbated a cost-of-living crisis that was already playing havoc with the finances of millions of UK households.
Michael Stimpson, a partner at Saltus, said: “There are a number of factors causing feelings of unease, with the impact of rising inflation the key concern, especially among older people whose fears about how it will affect their retirement plans highlights more than ever the importance of having a robust financial plan in place.”
- The UK’s millionaires are prioritising recycling as part of their efforts to be environmentally friendly, instead of changing their investments, which could have a bigger impact.
According to Coutts, the private bank, wealthy individuals remain focused on sorting out plastic from paper. But the majority – 85% – have not made changes to their investment portfolio, despite evidence that this is the best way to enjoy a more eco-friendly lifestyle.
25 May: UK Dividend Payments Totalled £11.2 billion In First Quarter
Payouts to shareholders made by companies out of their profits jumped 11% to a record £242 billion ($302.5 billion) worldwide in the first quarter of 2022, according to the latest dividends data from Janus Henderson.
Dividends provide a source of income for investors, especially as part of a retirement planning strategy.
The investment manager’s Global Dividend Index said the growth in dividends could be a result of the “ongoing normalisation” of payouts following the disruption caused by the Covid-19 pandemic.
During 2020, companies worldwide cut back sharply on dividend payments to shareholders, opting instead to retain cash as a defence against the worst effects of the pandemic.
Janus Henderson reported that every region experienced double-digit growth in dividend payouts in the first quarter of this year, thanks to a stronger economic backdrop and the ongoing catch-up in payments following cuts during 2020 and early 2021.
However, it warned that the global economy faces challenges during the remainder of 2022 and predicted that the resulting downward pressure on economic growth would affect company profits in a number of sectors.
In the UK, oil companies in particular helped boost payouts to shareholders by 14.2% in the first quarter of 2022 to £11.2 billion ($14.7 billion).
Distributions in the healthcare sector also rose, after pharmaceutical giant AstraZeneca hiked its dividend for the first time in nearly 10 years. Janus Henderson said telecom operator BT also made a significant contribution to growth.
The US, Canada and Denmark each set all-time quarterly records paying out £114 billion ($142 billion), £10.7 billion ($13.4 billion) and £7.8 billion ($9.8billion), respectively.
Janus Henderson’s Jane Shoemake said: “Global dividends had a good start in 2022, helped by particular strength from the oil and mining sectors.
“The world’s economy nevertheless faces a number of challenges – the war in Ukraine, rising geopolitical tensions, high energy and commodity prices, rapid inflation and a rising interest rate environment. The resultant downward pressure on economic growth will impact company profits in a number of sectors.”
19 May: FundCalibre Ranks ESG Portfolios Using ‘Simple’ Definitions
FundCalibre, the online fund research centre, has launched what it says is a “simple” set of definitions it will use to scrutinise investment portfolios structured along environmental, social and (corporate) governance (ESG) lines.
ESG investing is as concerned with its impact on people and the environment as it is with potential financial concerns.
The concept has moved centre-stage within the investment arena to the point where trillions of pounds in assets are managed globally along ESG principles.
FundCalibre says it now includes an ESG assessment on the notes of each of the 228 ‘Elite Rated’ and ‘Radar’ funds that appear on its website. The assessments are each broken down into one of three categories: explicit, integrated, and limited.
‘Explicit’ funds are those that have an ESG or sustainable approach at the heart of their investment philosophy. Funds placed in this category are likely to have an independent panel or rely on a consumer survey to determine their ESG criteria.
‘Integrated’ funds are those that embed ESG analysis within the investment process as a complementary input to decision making.
‘Limited’ funds contain an element of ESG in their process, but the portfolio is not influenced overall by the ideal of ethical investing.
Each assessment is publicly available and free to view.
Professional fund managers typically put together investment portfolios according to various ESG criteria and themes. But because ESG is a wide-reaching concept, there is no absolute set of principles to which funds must adhere.
Ryan Lightfoot-Aminoff, senior research analyst at FundCalibre, said: “With each fund manager doing something different, it has become very difficult for investors to know exactly how responsible a fund really is. What’s more, a lack of trust in asset managers’ ESG claims remains a barrier to investment.
“We launched a responsible investing sector in 2015 highlighting the funds in this category that our research team believe to be among the very best. We have now gone one step further and have included an ESG assessment.”
17 May: Investors Bemoan ‘Time-Consuming’ And ‘Complicated’ Process
Nearly half the UK’s young investors make investment choices while engaged in another activity, according to the City regulator and the nation’s official financial lifeboat.
In a survey exploring attitudes towards investing, 42% of respondents aged between 18 and 24 said they made their latest investment while sitting in bed, watching TV or returning home from the pub or a night out.
The research, carried out for the Financial Conduct Authority (FCA) and the Financial Services Compensation Scheme (FSCS), also found around half of investors (44%) did not research their investments because they found the process “time-consuming” and “too complicated”.
The FSCS warned that, if consumers do not understand where they are investing their money, it increases the potential for them to fall foul of investment scams.
Earlier this year, a group of MPs warned of an alarming rise in financial frauds being perpetrated in the UK. The Treasury Select Committee suggested social media giants should pay compensation to people duped by criminals who use their websites.
According to the FSCS/FCA survey, around a quarter of investors (27%) said they were more likely to invest in an investment opportunity with a “limited timeframe” – such as one that was only available for the next 24 hours.
The FCA says time pressure is a common tactic used by scammers. It advises consumers to check its Warning List to see if an investment firm is operating without authorisation.
About one-in-five survey respondents said they hadn’t checked, or didn’t know, if their investment is FSCS-protected. The FCA says this puts consumers at risk of choosing investments with no possibility of compensation if their provider goes out of business.
FSCS protection means consumers can claim compensation up to £85,000 against an FCA-authorised business that has failed.
Consumers can check if their investment is financially ring-fenced by the FSCS via its Investment Protection Checker.
Mark Steward, enforcement director at the FCA, said: “Fraudsters will always find new ways to target consumers, so make sure you do your homework and spend some time doing research. Just a few minutes can make a big difference.”
16 May: Older Investors ‘Less Likely To Embrace ESG Values’
Feelings among investors are sharply divided by age in relation to environmental, social and governmental (ESG) issues, according to research carried out on behalf of wealth managers and financial advisers.
ESG, one of several approaches within the wider concept of ‘ethical’ investing, is as concerned with its impact on people and the environment as it is with potential financial returns.
A study carried out by the Personal Investment Management & Financial Advice Association (PIMFA) – an industry body representing investment firms and advisers – reveals a “significant generational divide” in attitudes to ESG investing.
PIMFA found that a large majority (81%) of people across all generations rate ESG factors as either ‘very important’ or ‘important’ drivers of their investment decisions.
But while nearly three-quarters (72%) of investors aged between 18 and 25 believe some, if not all, of their investments should aim for the greater good, less than a third (29%) aged between 56 and 75 feel the same. Among investors aged 75 or over, the proportion drops further to one-in-five (21%).
PIMFA also found that ESG investment issues were more important to women than men, with 86% of women across all generations saying it is a factor in their investment strategy.
However, while female investors are keener than men for their money to contribute to the greater good, a larger proportion of women (37%) say they lack confidence and ESG investment knowledge compared with men (26%).
Liz Field, PIMFA chief executive, said: “One of the more pronounced effects of the Covid-19 pandemic was the marked increase in interest in all things ESG. Of particular interest is how the five basic generational groups differ in their responses to ESG.
“The wealth management industry has a big opportunity to harness ESG investing as a catalyst to encourage more women to invest and secondly, to use ESG as both an educational and a practical tool to stimulate a much broader culture of savings and investment in the wider market.”
13 May: First Quarter Performance Figures Show That Value Managers Trump Growth Rivals
Investment performance at the UK’s largest wealth managers has experienced a dramatic U-turn this year, according to a leading investment consultancy.
Asset Risk Consultants’ (ARC) analysis of 300,000 portfolios, managed by more than 100 wealth management firms, found that growth-orientated strategies have struggled given the prevailing economic conditions of 2022, while value-biased portfolios have enjoyed a revival in fortune.
Growth-based strategies represent the process of investing in companies and sectors that are growing and are expected to continue their expansion over a period of time.
Value investing concerns itself with buying companies that are under-appreciated both by investors and the market at large.
ARC says the scenario is a complete reversal from the end of last year. Many portfolios that were riding high at the end of 2021 are now languishing in the bottom quartile for performance, having been replaced with former laggards from the same period.
Bottom quartile represents the worst-performing 25% of portfolios.
ARC says its findings show that the changing economic landscape has had a significant impact on managers whose investment strategies were previously based on a low inflation, low interest rate environment.
The company says that strategies favouring growth stocks, smaller companies and long-dated bonds had suffered the most. At the same time, around a third (30%) of managers with a value bias jumped from the fourth quartile at the end of 2021 to the top quartile in the first quarter of this year.
Graham Harrison, managing director of ARC, said: “The cause is the invasion of Ukraine by Russia, which has wide-reaching and long-term geo-political implications.”
Harrison pointed to other contributory factors including “a populist trend toward more protectionism, supply chain shortages caused by Covid-19 and a decade-long lack of real wage growth.”
He added: “The easy money has been made. We are at an inflection point for financial markets and investment strategies. The next decade will be significantly different for investors than it has been during the past three.”
6 May: Fund Outflows Mount As Uncertainty Rises
UK retail investors withdrew more than £7 billion from funds in the early months of the year, with March 2022 alone responsible for nearly half of that figure, according to the latest figures from the Investment Association (IA).
The IA reports that outflows spiked up from £2.5 billion in February this year to £3.4 billion in March. Investors also withdrew funds amounting to £1.2 billion in January 2022.
The pace of withdrawal by investors accelerated sharply over the first quarter of the 2022 exacerbated by tightening monetary policy in major markets and compounded by Russia’s invasion of Ukraine.
Surging inflation, rising interest rates and the Ukraine crisis have combined to trigger an investor flight from risk, particularly in relation to bond funds and, to a lesser extent, in equity-based portfolios.
Laith Khalaf, head of investment analysis at brokers AJ Bell, said: “The outflows from equities look modest compared with the withdrawals registered by bond funds. Over the course of the first quarter, investors withdrew £1.9 billion from equity funds, but £6 billon from bond funds.”
Chris Cummings, IA chief executive, said not all fund sectors witnessed outflows over the period: “March was a story in two parts, and outflows were balanced by many investors using their Individual Savings Accounts and seeking potentially safer havens in diversified funds, with multi-asset strategies benefiting in particular.
“Inflows to responsible investment funds continued to be a bright spot and demonstrate investors’ commitment to sustainable investing.”
4 May: Fund Manager Says Fewer Than 1% Of Funds Achieve Consistent Top Performance
Fewer than 1% of funds – out of a total of more than 1,000 – have managed to deliver sustained top performance over time, according to the latest research from BMO Global Asset Management.
The investment firm’s latest Multi-Manager FundWatch survey found that just five (0.45%) of the 1,115 funds it covers achieved top quartile returns over three consecutive 12-month periods running to the end of the first quarter of 2022.
It says this is the lowest number of funds it has recorded in this bracket since its survey began in 2008. It describes the figure as “well below” the historic average number of consistent, top-performing funds, which usually stands around the 3% mark.
The company points to market events that have damaged fund performance in the last three years, including Covid, inflation, climate change and related environmental, social and governance (ESG) considerations.
It also highlights the war in Ukraine and its geopolitical effect on the supply of resources for the dramatic drop in the number of consistent high-performing portfolios.
Rob Burdett, head of the multi-manager team at BMO, said: “The war in Ukraine is the latest in market shocks, with the resulting sanctions having a significant impact on commodities, inflation and interest rates, as well as the impact at a sector level, with knock-on effects for defence and energy stocks.
“These crises have caused significant gyrations in financial markets and underlying asset classes, resulting in the lowest consistency figures we have ever seen in the survey.”
3 May: Fundscape Warns Of Tough Year Ahead For Platforms
Assets held on investment platforms offering their services direct to consumers (D2C) have dipped below £300 billion in what could be a tough year for providers, according to Fundscape.
The fund research analysts says rampant inflation, fuel price increases, National Insurance hikes and the cost-of-living crisis have taken a toll both on investor sentiment and market prices in the first quarter of this year, even before factoring in the effect of the Russian invasion of Ukraine.
Fundscape says the overall result has led to a 6% reduction in the combined assets under management held on D2C platforms from approximately £315 billion to £297 billion at the end of March 2022.
D2C providers tend to earn the bulk of their revenues during the Individual Savings Account season between January and March each year, heightening the damage caused by a sluggish first quarter.
Fundscape’s Martin Barnett said: “The first quarter of the year is the bellwether of investor sentiment and sets the tone and pace of investments for the rest of the year. 2022 could be a tougher year for many D2C houses, especially the robos.”
Robos, or robo advisers, provide an automated, half-way house option for investors looking for an alternative either to do-it-yourself investing, or delegating the full-blown management of their investments to a professional adviser.
28 April: CFA Reports Leap In Trust For Financial Services
A new Chartered Financial Analyst (CFA) Institute study shows that 51% of UK retail investors now trust the financial services sector, compared with just 33% in 2020.
The CFA Institute is a global body of investment professionals, which administers CFA accreditation and publishes regular investment research, including its biennial report on investor trust.
According to the latest report, the majority of UK retail investors (59%) now believe it’s ‘very likely’ they will attain their most important financial goal. For 58%, this is saving for retirement, while a further 12% are prioritising saving for a large purchase such as a home or car.
The CFA surveyed over 3,500 retail investors across 15 global markets, and found that trust levels have risen in almost every location. On average, 60% of global retail investors say they trust their financial services sector.
The CFA study views last year’s strong market performance as a key driver for investor trust. In 2021, both the S&P 500 and NASDAQ achieved average returns of over 20%, while the FTSE 100 returned 14.3% — its best performance since 2016 (although global markets have since suffered falls in line with the general economic downturn).
Another factor is the uptake of technologies such as artificial intelligence-led investment strategies and trading apps, which can improve market accessibility and transparency. Half of retail investors say increased use of technology has instilled greater trust in their financial advisor.
The study also revealed investor desire for personalised portfolios that align with their values. Two-thirds say they want personalised products, and are willing to pay extra fees to get them.
Investment strategies that prioritise ESG (Environmental, Social, and Governance) credentials are a key target area for this personalisation, with 77% of retail investors saying they are either interested in ESG investment strategies or already use them.
Rebecca Fender, head of strategy and governance for research, advocacy, and standards at the CFA Institute says: “The highs we’re now seeing in investor trust are certainly cause for optimism, but the challenge is sustaining trust even during periods of volatility.
“Technology, the alignment of values, and personal connections are all coming through as key determinants in a resilient trust dynamic.”
20 April: AJ Bell Aims Trading App At Market-Shy Investors
Investing platform AJ Bell has launched what it claims is a “no-nonsense” mobile app aimed at investors with considerable sums to invest, but who are daunted by the prospect of stock market trading.
AJ Bell is hoping that its Dodl app will appeal to savers disappointed with low returns on their cash and who are looking for an easy way both to access the stock market and manage their investments.
City watchdog, the Financial Conduct Authority, recently identified 8.6 million adults in the UK who hold more than £10,000 of potentially investable cash.
Research by AJ Bell prior to the launch found that about a third of people who don’t currently invest (37%) are put off from doing so because of not knowing where to start. About half (48%) said being able to choose from a narrow list of investments would encourage them to start investing.
Dodl will therefore limit investors to a choice of just 80 funds and shares that can be bought and sold via their smartphone. In contrast, rival trading apps offer stock market investments running into the thousands.
The app will offer several products that people need to save tax efficiently, including an Individual Savings Account (ISA), Lifetime ISA and pension. Dodl will also feature “friendly monster” characters that aim to break down traditional stock market barriers and make it easier for customers unfamiliar with the investing process.
AJ Bell says a Dodl account can be opened via the app in “just a few minutes”. Customers are able to pay money into accounts via Apple and Google Pay, as well as by debit card and direct debit.
Dodl has a single, all-in annual charge of 0.15% of the portfolio value for each investment account that’s opened, such as ISA or pension. A £1 per month minimum charge also applies. The annual cost of holding a £20,000 ISA via Dodl would be £30.
Buying or selling investments is commission-free, and no tax wrapper charges apply. AJ Bell says customers investing in funds will also be required to pay the underlying fund’s annual charge as they would if they were investing on the company’s main platform.
Andy Bell, chief executive of AJ Bell, said: “Investing needn’t be scary. In developing Dodl, we’ve focused on removing jargon, making it quick and easy to open an account and narrowing the range of investments customers have to choose from.”
14 April: Market Turbulence Takes Toll On Wealthy Investors
Millionaire UK investors experienced greater losses compared with their less well-off counterparts since the start of 2022, with market volatility doing more damage to riskier portfolios favoured by those with greater amounts to invest.
Interactive Investor’s index of private investor performance shows that those of its customers with £1 million portfolios experienced losses of 4.2% in the first quarter of this year.
By comparison, average account holders were down 3.6% over the same timeframe, while professional fund managers had lost 3.7% of their money.
Figures stretching back over longer periods reveal an improvement in overall performance figures. Typical customers experienced losses of 1% over six months but were up by 5.4% over the past year.
Professional managers fared marginally worse, being down 1% over six months and up 5.3% over the last 12 months.
Stock markets worldwide have endured a troubled time in the first quarter of this year. According to investment house Schroders: “Russia’s invasion of Ukraine in late February caused a global shock. The grave human implications fed through into markets, with equities declining.”
Richard Wilson, head of Interactive Investor, said: “The horror unfolding in Ukraine has framed what was already a torrid time for markets. So, it’s no surprise to see the first quarter of the year chart the first negative average returns since we first started publishing this index.
“Markets don’t go up in a straight line, and this index is a sobering reminder of that. It’s also a reminder of the importance of taking a long-term view, and not putting all your eggs in any one regional basket.”
 In recent months, those with money in savings have become more wary about investing in markets.
Hargreaves Lansdown (HL), the investment platform, said that roughly one-third of investors who put money into a stocks and shares ISA this year have kept their money in cash rather than investing it.
In the previous two years, HL said that about a quarter of investors have favoured cash over markets-based investments.
31 March: Research Reveals Investor Inflation Concerns
Most investors with individual savings accounts (ISAs) are concerned about the short-term impact of inflation on their portfolios, according to research from online investing platform Freetrade.
ISAs comprise a suite of government-backed savings plans which, depending on the product chosen, allow interest or investment growth to accumulate tax-free
In a poll of 1,000 ISA holders, commissioned by the company in association with the Investing Reviews website, two-thirds (67%) said they were worried about the effect of inflation on their investment gains over the next three years.
Freetrade found the typical investor expects to make returns of 5.8% per annum over that period. But with the consumer prices measure of UK inflation recently soaring to a 30-year high of 6.2%, the majority of investors expect to find it harder to make real gains in the foreseeable future.
Despite rising interest rates and increased stock market volatility because of the conflict in Ukraine, Freetrade said a significant proportion of investors – one-in-five (19%) – still expect to make double-digit gains in the immediate years ahead.
In another finding, less than a third (31%) of investors believe that a strategy of holding single company stocks promised the best future returns. In contrast, nearly half (49%) thought low-cost funds were likely to offer the strongest performance.
The poll also revealed more optimism about the potential of UK equities, following record outflows of £5.3 billion from the sector during 2021. One-in-five investors intend to increase their exposure to domestic assets, while 4% are inclined to sell off their UK holdings.
Freetrade’s Dan Lane said: “Maybe the UK market’s relatively cheap valuation is proving too hard to resist, or maybe the allure of US tech is waning slightly. Whatever the reason, the UK seems to be back on the menu in 2022.”
* For savers and investors who haven’t already done so, time is running out to use this tax year’s ISA allowance. All UK adults have an ISA allowance each tax year worth £20,000. The 2021-22 tax year ends on 5 April and the 2022-23 equivalent begins the following day.
1 March: Global Dividends At Record High In 2021
Payouts to shareholders made by companies out of their profits surged to a record level in 2021, but global growth in dividends is forecast to slow sharply this year.
According to investment manager Janus Henderson, this trend was in evidence even before Russia’s invasion of Ukraine.
The company’s Global Dividend Index reported that companies paid out $1.47 trillion to shareholders in 2021, an increase of nearly 17% on the year before.
The figure represents a major rebound from the sharp cuts imposed on dividends by companies during 2020, when their preference was to retain cash due to the effects of the Covid-19 pandemic.
Dividends are a common source of income for investors, especially as part of a retirement planning strategy.
Janus Henderson said payouts reached new records in several countries last year including the US ($523 billion), China ($45 billion) and Australia ($63 billion).
In the UK, dividends rose to $94 billion, a 44% increase in 2021 compared with the previous year. The recovery came from a base of particularly severe cuts during 2020 that meant payouts still lagged pre-pandemic levels.
Janus Henderson said that 90% of companies globally increased or held their dividend steady during 2021. Banks and mining stocks alone were responsible for around 60% of the $212 billion increase in last year’s payouts. Last year, BHP paid the world’s largest-ever mining dividend worth $12.5 billion.
For the year ahead, before Russia’s attack on Ukraine, Janus Henderson had forecast dividend growth at a more moderate 3.1%. The figure may now need to be trimmed further.
Jane Shoemake at Janus Henderson said: “A large part of the 2021 dividend recovery came from a narrow range of companies and sectors in a few parts of the world. But beneath these big numbers, there was broad based growth both geographically and by sector.”
17 February: Crypto Take-Up Doubles Among Younger Investors
Investors aged 45 or under who own crypto assets have doubled in number in a year, according to research from Boring Money.
The consultant’s Online Investing Report 2022, based on a survey of more than 6,300 UK adults, also shows that mobile comms is becoming the dominant medium for younger investors buying funds and shares.
Boring Money said the proportion of adults aged under 45 who own crypto assets has risen from 6% in 2021 to 12% over the past 12 months. Ownership among the over 45s was significantly lower at 3% this year, compared with 2% in 2021.
The Financial Conduct Authority, the UK’s financial watchdog, warned last year about the volume of newer investors who were being attracted to high-risk investments such as cryptocurrencies, and also the risk of ‘low friction’ trading on mobile.
Low friction trading allows investors to start trading within just a few clicks of their smartphone or tablet. The FCA says that adding a small amount of ‘friction’ to an online investment process, through the use of disclosures, warnings and tick boxes, helps investors to better understand risk.
According to Boring Money, 43% of investors say they have used their mobile in the past 12 months as a means of checking the balance on an investment account. This compares with 36% of investors in 2021.
About one-in-five investors (19%) also reported that they had bought or sold through a mobile app compared with 16% last year.
Boring Money said one-in-five (19%) of the total UK retail investor population is made up of individuals with less than three years’ experience of investing, while 7% have been investing for less than a year.
Holly Mackay at Boring Money, said: “There is a ‘book-end’ effect in the DIY investment market today. At one end we have millions of people in cash, with significant balances and no investments. At the other end, we have some relatively inexperienced, mostly younger investors holding extremely volatile assets.
“There is a more natural middle ground for millions, and providers have to find some answers on how to transition more customers to that more comfortable area.”
- The organisation that makes recommendations to the G20 nations on financial rules has said that the risks posed by cryptocurrencies to global financial stability could “escalate rapidly”.
The Financial Stability Board (FSB) warned that policymakers must act quickly to come up with rules covering the digital asset market, given its increasingly overlapping links with the traditional financial system.
According to the FSB, some parts of the crypto market – worth around $2 trillion globally – are hard to assess because of “significant data gaps”.
14 February: Bestinvest Spotlights ‘Dog’ Investment Funds
Investment funds worth a combined £45 billion have been named and shamed as consistent underperformers by research from online investing service Bestinvest.
The firm’s latest Spot the Dog analysis shows that fund groups abrdn and Jupiter and wealth manager St James’s Place and were each responsible for six relatively poor-performing funds out of 86 so-called ‘dogs’ identified by the twice-yearly report.
The research defines a ‘dog’ fund as one which fails to beat its benchmark over three consecutive 12-month periods, and also underperforms its benchmark by 5% or more over a three-year period.
A benchmark is a standard measure, usually a particular stock market index, against which the performance of an investment fund is compared.
Bestinvest said the funds, despite their underperformance, will generate £463 million in management fees this year, even if stock markets remain flat.
The analysis highlighted 12 funds that were each worth over £1 billion. These included JP Morgan’s US Equity Income fund worth £3.93 billion, Halifax UK Growth (£3.79 billion) and BNY Mellon Global Income (£3.47 billion).
Also featured in the analysis were Invesco’s UK Equity Income and UK Equity High Income portfolios, described by Bestinvest as “perennially misbehaving funds”.
Bestinvest’s previous Spot the Dog report last summer identified 77 funds worth just under £30 billion. The company says the reason for an increase in the number of poor performers is because of additions from the Global and Global Equity Income investment sectors.
Jason Hollands, managing director of Bestinvest, said: “Spot the Dog has helped shine a spotlight on the problem of the consistently disappointing returns delivered by many investment funds. In doing so, not only has it encouraged hundreds of thousands of investors to keep a closer eye on their investments, but it has also pushed fund groups to address poor performance.
“Over £45 billion is a lot of savings that could be working harder for investors rather than rewarding fund companies with juicy fees. At a time when investors are already battling inflation, tax rises and jumpy stock markets it is vital to make sure you are getting the best you can out of your wealth.”
3 February: Half Of DIY Investors Unaware Of Risk Of Losing Money
Nearly half the people who make investment decisions on their own behalf are unaware that losing money is a potential risk of investing, according to new research from the UK’s financial watchdog.
Understanding self-directed investors, produced by BritainThinks for the Financial Conduct Authority (FCA), found that 45% of self-directed investors do not view “losing some money” as a potential risk of investing.
Self-directed investors are defined as those making investment decisions on their own behalf – selecting investments and making trades without the help of a financial adviser.
In recent years, do-it-yourself trading has become increasingly popular among retail investors.
According to the FCA, over one million UK adults increased their holdings in high-risk products such as cryptocurrencies or crowdfunding investments in the first seven months of the Covid-19 pandemic in 2020.
The research says “there is a concern that some investors are being tempted – often through misleading online adverts or high-pressure sales tactics – into buying complex, higher-risk products that are very unlikely to be suitable for them, do not reflect their risk tolerance or, in some cases, are fraudulent.”
It added that self-directed investors’ investment journeys are complex and highly personalised, but it was possible to categorise investors into three main types: ‘having a go’, ‘thinking it through’ and ‘the gambler’.
The FCA used behavioural science to test various methods of intervention to help investors pause and take stock of their decisions before committing in “just a few clicks”.
It found that adding small amounts of ‘friction’ to the online investment process, such as ‘frequently asked questions’ disclosures about key investment risks, warnings and tick boxes, helped investors comprehend the risks involved.
Susannah Streeter, senior investment and markets analyst at investment platform Hargreaves Lansdown, said: ‘’The boom of high-risk investing is causing huge nervousness among regulators, with the FCA increasingly concerned that vulnerable consumers are being swept up in a frenzy of speculation.
“The ‘fear of missing out’ effect which took hold during the pandemic, has been drawing more people into the murky world of crypto investments and almost half still don’t understand the risks involved.”
26 January: M&G Partners With Moneyfarm On Consumer Investment Service
M&G Wealth is teaming up with financial app Moneyfarm to provide a direct digital investment service aimed at meeting a range of customer risk appetites and profiles.
It will offer a collection of multi-asset model portfolios, backed by a range of actively managed and passive funds.
Multi-asset investing provides a greater degree of diversification compared with investing in a single asset class, such as shares or bonds. Passive funds typically track or mimic the performance of a particular stock market index, such as the UK’s FT-SE 100.
Moneyfarm will deliver the operating models, including dedicated “squads” to support the technology platform and customer relationship management, together with custody and trading services.
Direct investing in the UK has witnessed rapid growth in the past five years, with an annual average increase in assets under management of 18% to £351 billion at the end of June last year, according to researchers Boring Money.
David Montgomery, M&G Wealth’s managing director, said: “With the launch of a direct, mobile-based investment platform, our customers will be able to access the channel, advice and investment proposition that most suits their financial situation and needs.”
Moneyfarm was launched in Milan in 2012 and has 80,000 active investors and £2 billion invested via its platform.
25 January: Bestinvest Relaunches DIY Investment Platform
Bestinvest, part of Tilney Smith & Williamson (TS&W), is relaunching its online DIY investment platform with new features including free coaching, ready-made portfolios and a range of digital tools.
The company says it is revamping its existing platform into a “hybrid digital service that combines online goal-planning and analytical tools with a human touch”. Customers can ask for help from qualified professionals through free investment coaching.
If desired, clients can also choose a fixed-price advice package covering either a review of their existing investments or a portfolio recommendation. Bestinvest said one-off charges of between £295 and £495 will apply depending on the package selected.
The new site will go live to coincide with the end of the tax year on 5 April.
A range of ready-made ‘Smart’ portfolios offering a range of investment options to suit different risk profiles will accompany the launch.
The portfolios will be invested in passive investment funds, while being managed actively by TS&W’s investment team. Passive funds typically track or mimic the performance of a particular stock market index, such as the UK’s FT-SE 100. The TS&W team will adjust portfolios’ exposure to markets and different asset classes according to prevailing investment conditions.
Bestinvest said the annual investment cost will range between 0.54% and 0.57% of each portfolio’s value.
From 1 February, the company added that it is reducing its online share dealing costs to £4.95 per transaction, regardless of deal size.
Bestinvest produces a twice-yearly report on underperforming or “dog” investment funds. It said it wants to bridge the gap between existing online services for DIY investors and traditional financial advice aimed at a wealthier audience.