Traditional managers in spotlight
Saturday 18 August 2007
Choruses of "I told you so" are echoing down the halls of conventional UK investment management groups whose funds have been cast into the shadow of their more exciting hedge fund counterparts in recent years says Kate Burgess of the FT August 18 2007
"We are washing out some of the froth of the excesses, for example, the easy money from private equity deals. People are being reminded that trades aren't risk free," says Bob Yerbury, chief executive of Invesco Perpetual in the UK. "That is not a bad thing."
It's good to see the long only managers saying we told you so. So much so that some hedge fund managers were forced to say sorry to their investors for losing money. The FT says “Several hedge fund managers have been forced to say sorry this year, with strangely heartfelt investor letters invariably blaming market volatility for their troubles. On at least one investor conference call, a hedge fund manager was reduced to tears as he apologised for losing his investors' money. Others, including James Simons, one of the most celebrated hedge fund managers, have stopped short of apologising, but have admitted to bad performance.”
My point is that for most investors, even those with up to £25m, need to think carefully about hedge funds. We all may suffer sometimes at their actions, but that is acceptable. Taking too many risks and not knowing what they are doing with investors capital is unacceptable. I think there may also be more blood on the streets, to coin yet another phrase.
posted by Murray Round Wealth Management @ 16:32,
Fears of crash unfounded - for now
Yikes! Stock markets around the world have swung wildly this week; is this a financial crash? says Gillian Tett of the FT. More here
Not yet - or not if you look at technical metrics. The usual definition of a "bear" market is when shares drop 20 per cent, as they did after the dotcom boom of 2000, say. However, most major markets closed the week broadly flat yesterday, after some wild swings. And the UK stock market is still "only" about 10 per cent down from its high a couple of weeks ago.
Well what can I say. Markets up. Markets down. Doom and gloom…and then a sense of relief. There is an American colleague who I respect coins the phrase “Financial Pornography”. He may have borrowed the phrase, but it refers to the financial press emphasis on the fear and greed principle. I am not anti Financial Pornography, the press is in business to sell papers… saying nothing is hardly going to get anyone to buy. The key is by all means look, learn, but taking action based on short term fluctuations does not have good foundations in building an investment portfolio.
I think Oscar Wilde said to expect the unexpected. If we know future investment returns are unexpected, learn to expect them. In such a way the events of the last week are not a surprise.
posted by Murray Round Wealth Management @ 16:15,
FTSE slumps more than 200 points
Thursday 16 August 2007
"The FTSE 100 slumped to its lowest level of the year as stocks were hit by a fresh sell-off following heavy overnight losses on Wall Street and in Asia...says Michael Hunter of the FT. More here.
Ongoing concerns about the health of world credit markets after the US subprime lending crisis continued to cast its shadow over global equities, dragging London’s leading shares 214.1 points, or 3.3 per cent, lower to 5,895.2
This is the first time the FTSE has fallen below 6,000 since March. It also takes the index into negative territory for the year, and more than 800 points below its year-high of 6,732.4 set in June. "
Ouch…if you are an investor, these numbers do not look attractive. Is it time to sell? Is it time to buy? What happens next? Will this fear cause property prices to fall? Will homeowners find it more difficult to sell their homes? Will jobs be at risk? Before we continue, let’s stop these ‘what if’ scenarios. There is no doubt that investing into the stock market over the short term is volatile. I read today that in the US, volatility was the highest for over 4 years. But investment is about the long term. Ask yourself some questions. Are companies that you invest into at risk of failure. Probably not. They are still providing goods and services. The issue is looking at your attitude to risk and making risk work for you, not short term market volatility. These fluctuations will always catch headline news, but by staying focused, you increase the chances of a fair return on your capital over time. If you are a little concerned, go back to basics and think about risk. Do not change your portfolio simply because of these market conditions, but by all means, allow these conditions to act as a catalyst to help you get your risk right.
posted by Murray Round Wealth Management @ 16:46,
The Authors
Nicholas Round
Nic is the Managing Director of Murray Round Wealth Management Limited, who seeks to ensure the advice provided is truly independent. Based in Shropshire with clients local, national and worldwide, Nic has strived to find the best possible service for his clients needs, by researching and studying the market, trends and philosophies. Nic strongly believes Asset Class Management will bring his clients Financial Freedom, Independence and Happiness.
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