Test your real attitude to risk
Thursday 9 July 2009
We have been featured in Investors Chronicle to discuss risk within an investment portfolio.
In the past investors were asked are they low, medium or high risk. Such a question relied on the individuals own understanding of these terms. In our view it is important to understand a clients risk or to put it another way, their propensity to accept loss.
Take a look at the article at Investors Chronicle.
posted by Murray Round Wealth Management @ 11:16,
The Happy Banker.
Evan Davis
Altruism. Does it work? Evan Davis from the BBC interviewed HSBC chairman, Stephen Green…click here for the blog and interview podcast.
The message from Stephen Green was "...bankers and others should be moral in their own self interest; that they will actually find life more satisfying if they are not narrowly selfish in their behaviour. In other words, to be happy, you need to be able to look yourself in the mirror and think - I have done something worthwhile for others as well as myself.”
I like the attitude, but Evan Davis went on to ask “Mr Green how many people in banking might fit that bill, but he couldn't give me a clear answer. Which I guess is why we need to regulate banks.”
Yet having the right man at the top with moral principles hopefully permeates down.
It may be some time before Banks do become warm and friendly institutions interested in your welfare not their own profits, so in the meantime, as consumers, it is important to ensure when you give them your money you understand that their interests are to sell products. Your interests are to make as much as you can with your money, their interest is to make as much from your money as possible…hopefully the result is fair to both parties; yet past experience shows the banks tend to want more of the cake! Thankfully their overpriced products do have alternatives. Talk to us.
Altruism. Does it work? Evan Davis from the BBC interviewed HSBC chairman, Stephen Green…click here for the blog and interview podcast.
The message from Stephen Green was "...bankers and others should be moral in their own self interest; that they will actually find life more satisfying if they are not narrowly selfish in their behaviour. In other words, to be happy, you need to be able to look yourself in the mirror and think - I have done something worthwhile for others as well as myself.”
I like the attitude, but Evan Davis went on to ask “Mr Green how many people in banking might fit that bill, but he couldn't give me a clear answer. Which I guess is why we need to regulate banks.”
Yet having the right man at the top with moral principles hopefully permeates down.
It may be some time before Banks do become warm and friendly institutions interested in your welfare not their own profits, so in the meantime, as consumers, it is important to ensure when you give them your money you understand that their interests are to sell products. Your interests are to make as much as you can with your money, their interest is to make as much from your money as possible…hopefully the result is fair to both parties; yet past experience shows the banks tend to want more of the cake! Thankfully their overpriced products do have alternatives. Talk to us.
posted by Murray Round Wealth Management @ 10:04,
Investment history in 270 seconds...
Tuesday 7 July 2009
I was interested to see a video produced in association with Lyxor ETF, showing Professor Elroy Dimson at the London Business School to learn about the key figures in investing history, and their ongoing impact.
Its not long but does give a useful summary
The debate continues between active and passive as Professor Elroy Dimson says as there is no perfect answer. In fact, the answer is to get as close to perfect as possible. Unless you are a professional investor, like Warren Buffett, close to perfect is a passive strategy for your core portfolio.
posted by Murray Round Wealth Management @ 11:04,
Fund mergers…Just say No?
Thursday 2 July 2009
I have no axe to grind over Rathbone Unit Trust Management, its just that they happen to let me know their plans last week. Similar changes are taking place throughout the industry in one form or another. If you want to read the marketing, click here, it will take you the Rathbones News and Views web site.
Essentially The Rathbone High Income Fund will merge into the Rathbone Blue Chip Income and Growth Fund and the Rathbone Special Situations Fund will merge into the Rathbone Smaller Companies Fund which in turn will revise its objective and be relaunched as the Rathbone Recovery Fund. When it comes to voting, do you answer Yes? In all likelihood the answer will be Yes as the fund managers will give all the arguments for the change. I wonder who will give the arguments for a No vote? Does it really matter anyway? Is it just a formality?
New funds are launched often and if the marketing fails to attract new funds, then the fund managers need to consider the funds long term viability. They do not want to return the money to unit holders as that is like ‘shooting themselves in the foot’, as they want to still hold onto the investors money. Hence a merger makes sense from the fund manager’s perspective. It is a logical way to keep the money under their management. I would say that’s good business practice for the fund management group. But have these institutions forgotten what they are supposed to be doing…investing your money within a chosen mandate. As the funds merge, so does the mandate. By this I mean the objectives of the fund and by definition, so have the relative risks.
So in the merger the risk of your investments may have changed. The objective of the fund has also changed. How do these changes affect you? Does the new mandate fit in with your risk? In fact, you end up being offered to buy a product that is different from the one you agreed to buy initially.
I would therefore like to be nominated for arguing the ‘No vote’. If the fund was successful, would it be merged? In simple terms, the fund failed. So why reward failure by giving the fund manager another chance to fail? OK that is unkind, as equally the change could be successful. But actually the motives are not about success, although that is what the marketing will say, it is more about holding onto the existing funds as long as possible and then hope that the new fund performs better.
The fund merger process also has other objectives for the fund managers. It is a useful way to get rid of poorly performing or unsuccessful funds in their stables. This makes the whole stable of funds under management look better, when actually there have been failures.
In essence, think about saying NO and voting with your feet. Look at your risk profile and assess your alternative options. There is no need to accept what is offered by a fund merger.
By the way, fund mergers are successful for fund managers as they know most investors suffer from inertia. It’s easier for an investor to continue with a fund rather than change, yet over time this may not be in your best interests.
Vote NO and review your portfolio.
posted by Murray Round Wealth Management @ 15:44,
How fund managers are surviving when their fee income falls
Wednesday 1 July 2009
I'm not picking on Lion Trust fund managers in particular but simply as an example that maybe happening elsewhere with those fund managers who are looking after your investments.
Citywire, state that “Liontrust continues to reel from the shock departures Jeremy Lang and William Pattisson with assets under management at the boutique sliding £2.8 billion over the year….The fall in assets has continued into the new financial year with assets under management standing at £1.2 billion on 9 June.”
But here’s the sting in the tail “On a brighter note performance fees increased by 10% to £16.2 million and the group remains in a strong financial position….The group will be more dependent on performance fees and sales for revenue increases than has historically been the case.”
So what does this mean to investors?
If their funds under management have fallen, so too has been their annual management fees. To make up these falls, they intend to generate more revenue through performance fees. That means the investors on average must pay more. It's simple mathematics.
The fund managers may say, that’s OK to pay more because “we are performing better”. This is where I have serious issues over fund manager stories. If they can perform better for their investors, why did they not do so to-date? What are they actually doing now to capture these excess returns so they can be paid on their performance? How can you trust what they say?
The empirical evidence is a little damning. Very few fund managers beat the market average over time. So whilst in the odd year they, along with other fund management groups, might beat the market, the problem for investors is that they do not know which fund manager or which fund or which year these fund managers will do so in advance. Telling investors they had a good year last year is nonsense.
So what’s my point for investors?
These are trying times for fund managers. Like any business that has falling revenues, they will look for different opportunities to make up revenue. That means the investors can end up paying more on average. Every investor therefore should be looking very carefully at the report and accounts of their fund managers to help them decide what plans the fund managers have for the future. For example, does your fund manager want to introduce performance fees?
If you do not want to find out yourself or you are not too sure what questions to ask, let us do it for you. When the goal posts have changed, perhaps it's time to understand more about what is happening to your investments.
posted by Murray Round Wealth Management @ 13:11,
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.
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