King sounds alarm on growth
Friday 16 November 2007
“Compared with the last 10 years where we have seen a remarkable degree of stability, this looks like a fairly sharp downturn.” The FT Thursday 15 November 2007 To some readers, these are very powerful words…and the fear of a slowdown says King, might prompt 2 successive falls in interest rates. These messages are always interesting and in truth, it is difficult to predict the reaction by investors and the markets. Businesses may feel that its time to batten down the hatches…Lower confidence and lack of job security might curb house price inflation. Equity investors may see valuations fall…everyone will have a view. The question, is what action you should take with this information?
Here lies a quandary. If you rely on active fund management…generally that’s most investors by default… (it is our experience that most investors do not really appreciate how fund managers actually manage their funds…click here for help)… then a flight to cash may appeal to be attractive. But what if the predictions are wrong? A switch could be a poor move. Active funds could use derivatives to limit any downside, but if the market makers feel the market is falling, the price of these options is not going to be cheap. So what action do you take?
Use this uncertainty in the markets as a catalyst to review your investment strategy if you rely on active fund management. It is not a time to make short term knee jerk reactions due to market conditions and move between actively managed funds in the hope of second guessing the market. Why? Because when this short term volatility ends, guess what, some other short term ‘unexpected’ event will hit the markets. The key is to have an investment philosophy you understand, which is geared to your long term objectives. If you do not have an investment strategy, documented by the way, with an agreed investment philosophy, you may be relying more on luck to achieve your objectives than a properly executed plan. Which would you prefer?
posted by Murray Round Wealth Management @ 14:41,
Investment funds and pensions scandal?
Saturday 3 November 2007
Our role is to find the best method for delivering investment performance over time for clients.
We deliver this goal, because at this moment in time, the use of asset class funds managed on a passive basis offer an investor the best chance of a successful investment experience. The traditional methods of active fund management have consistently failed to deliver on average and will continue to do so especially when fees and taxes are taken into consideration. So when I came across Dr Patrick Dixon, I wanted to let you hear what he had to say.
The title..Many fund managers do not recommend their own retail funds to family and would not chose to invest their own wealth in their own funds. Future scandal?
Patrick Dixon has been ranked one of the 20 most influential business thinkers alive today (Thinkers 50 2005). Videos linked to Patrick Dixon's Futurist site http://www.globalchange.com and his blog http://future-of-banking.blogspot.com/ and on You tube at http://uk.youtube.com/watch?v=MkGict_hmko
When investors really start to ask questions about how their money is managed, then the comments made by Patrick Dixon are closer to home than many would like to believe
Categories:Index funds, Active funds, Videos
posted by Murray Round Wealth Management @ 16:13,
Do you really think your fund manager is worth his salt?
Sometimes when I am reading papers I come across little snippets that are possibly more profound than the writer might have given credit. In a recent article by Pauline Skypala of the FT entitled Innovation can be rather hard to sell, it was the last paragraph that caught my eye…it pays sometimes to read all of the article than skipping…
“In an ideal world, the alpha and beta providers would be clearly separate and complementary. In the real world, it is hard to distinguish the consistent alpha producers, and even harder to put money with them. One investment banker claims in the Create/KPMG report that "2 per cent of people create 98 per cent of the value". That is perhaps not far off the truth. Why pay a high price for something that may not deliver, if you can get market returns at low cost? Tactical asset allocation may be the only skill worth paying for.” You can link to the full article here.
What is my point?
Tactical asset allocation works. Our job as fee only advisers is to apply tactical asset allocation principles with investment vehicles that deliver over time. There is ample evidence that over time, a passive approach makes sense. Yet because it is difficult to distinguish between what is alpha and beta, a chink of light opens for the active fund managers to sell their funds. They are very successful in doing so….why? Because it’s more profitable and for the fund manager, it keeps them in a job! Would you promote a system that makes you redundant…Of course, not!
Instead, if they will not make themselves redundant, you may need to sack them! Keep reading our blog and perhaps our scepticism of may fund managers is well founded and an alternative strategy is open to all.
Categories: Active funds, collectives
posted by Murray Round Wealth Management @ 15:40,
Zombie funds...but who are the zombies?
The news that Standard Life and Pearl Life are bidding for Resolution Life is unlikely to stir any emotion from most investors. All the discussion relates to the opportunity for Standard Life or Pearl...they see an opportunity to make money. But let's set aside this discussion, instead perhaps we should discuss the policyholders of Resolution.
Firstly, what are Zombie funds? The Guardian glossary describes them as follows: "With-profits funds that have closed to new business, so called because they either neither fully alive nor dead. Thousands of people find themselves trapped in 'zombie funds', unable to get out because of stiff exit penalties. If they stay put their returns are likely to be below average"
Here’s the interesting point, on the one hand, the many thousands of investors with policies in so called Zombies funds are facing poor returns, yet the shareholders of the companies than run Zombie funds are laughing all the way to the bank. The share price of Resolution price has almost tripled over the last 4 years! Have the policyholders benefited from a threefold increase...I think not.
Perhaps if Resolution had invested all their policyholders money into their own shares everyone would be happy! Alas, that was not a viable option, but policyholders do have choices. Clearly both Pearl and Standard Life see an opportunity to make profits from Zombie funds. They also know that in the world of investment management, investors are loath to change...that means they can milk profits because investors don't take action. But if policyholders elected to vote with their feet and invested their capital elsewhere, perhaps they would stand the chance of a better return on capital. The moral of this story is review your investments and if you stay invested in Zombie funds, only do so after exploring all your options..and remember, the profits for shareholders from Zombie funds must come from high charges! Advice is essential.
Resolution plc is the largest specialist manager of in-force UK life funds with an estimated 7 million customers and combined life company invested assets of over £61 billion. Some of the principal life companies owned by Resolution plc include:
Alba Life Limited
Abbey National plc
Britannic Assurance plc
Britannic Retirement Solutions Limited
Britannic Unit Linked Assurance Limited
Century Life plc
Phoenix Life & Pensions Limited
Phoenix & London Assurance Limited
Phoenix Life Limited
Phoenix Life Assurance Limited
Scottish Mutual Assurance Limited
Scottish Mutual International Limited
Scottish Provident International Life Assurance Limited
Scottish Provident Limited
Categories:
posted by Murray Round Wealth Management @ 15:30,
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.
Kirsty
Kirsty is our communication guru. Managing information requires considerable due diligence and her passion for organisation gives the clarity we all seek. From Shropshire, with a Psychology Degree and much travelling, she is now back in Shrewsbury...and London often, keeping us all at Murray Round focused.
Welcome to our Blog
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