Well, the years rush past… August marked the Firm’s 39th anniversary. From a lowly beginning to becoming one of the largest independent financial advisory and wealth management firms in the area and now discretionarily managing over £1/4billion, we trust with a reputation to reflect that success for itself, its staff and most importantly for all of its loyal clients.
Thank you to all our Team for your input into that achievement and the journey over the years. We’ll have to see what we can do to celebrate our Ruby Anniversary next year…
So the Great British ISA is no more – a shame really as the principle is sound. There is nothing awry about tax incentives to support things which reward the Country specifically. Indeed, it follows the age-old tradition with certain taxation and allowances – carrots and sticks, encouragement to do some things and discouragement of others.
On better news, Baroness Bowles’ Private Members Bill on Investment Trust charging disclosure is in play. Let us trust it is successful, for investors’ sakes but also the fund management industry and those needing to raise capital, especially for alternative energy, venture capital and infrastructure, as key examples. The positive is that our clients should benefit disproportionately as more demand would be inevitable for the existing funds and thus discounts would narrow. The negative is that the countless special opportunities we have been exploiting over the years will begin to disappear so new investors won’t be able to enjoy that special benefit in the same way.
Well the volatility continues – comfort one moment, then wobbles – a portent for a rebasing of the overblown US market perhaps? Oil price declines, great for attacking inflation but are now being read as a portent of declining economic activity. There are disconcerting undercurrents in the US. Nvidia denies being served with an antitrust challenge though federal agencies are investigating. In 2024, this stock has seen:-
* The biggest one day gain in capital value of any company ever
* The biggest one day loss in capital value
* Became the biggest ever public company
* Lost $1trillion in market value in one month
* Created 25,000 millionaire employees
* Gave CEO Huang the largest single daily loss in net worth – $10billion
Here at home, despite Labour pledging not to go ahead with it, the Winter Fuel Allowance is being withdrawn for millions of pensioners. The reason, the ‘cost’, is likely to be ‘lost’ in translation as more pensioners will sign-up for Pension Credit instead (an average currently of £3,900pa) to keep the payment. So it will be good if more people who should have had that benefit qualify but that wasn’t the motive. However, it is a patronising Benefit and requires regular review based on the claimant’s circumstances.
Generally, the more I read the more I fear that the Budget will be swingeing and very nasty and there will be many who will regret voting (or not voting) as they did at the last Election. Initially, I believed that the hand on the tiller would be stable but am losing confidence. Whilst it remains early days, the economic growth we had enjoyed has come to a juddering halt – yes, people, business, international investors, etc do reflect on how it sees the future and that’s happening already. Those with investment capital, pension funds and estates above a relatively low sum are likely to be penalised quite savagely and also businesses, entrepreneurs and risk takers who invest in the UK. I’d love to be proven wrong.
Platforms
A large but secondary platform we use has barred purchases of a particular fund of which we hold a goodly amount already. This is because the fund is winding-down. That fact is a ‘good’ thing. We have already had a useful cash sum at the net asset value but the remaining shares on the market are still at a sizeable discount to the net asset value. So, all things being equal, if we can buy more today at say 75p and then wait a while to receive £1 and interest meantime, it is very attractive and low risk.
However, the administrators of the ‘platform’ have decreed that no one can buy any more of the asset, not that it is their portfolio management judgment – they are simply exercising their own liability-driven judgment as the ‘host’ – that is what is ridiculous with the present conditions out there! Fortunately our main investment platform has no such silly constraints. Such things will mean the shares will be cheaper than they should be – an even better opportunity as we can buy whereas others can’t…
Good news/bad news
RM Infrastructure announces a £20million tender offer at the net asset value and we are compelled to accept for our stock. The shares rise 6% to 77p. The last nav was 88p so still a premium of 14% from the present share price. Remember, these special bonuses are only available to closed-ended funds, not open-ended vehicles as most advisory firms and investment houses promote and use.
Balanced Commercial Property Trust has enjoyed a bid and the shares rose 10% on the agreed cash terms. Starwood buys the Company at a 9% discount to the latest asset value, cleaner and swifter than a managed wind-down. It’s sad but we can’t complain – this is nigh 60% above last October’s price and we have had juicy dividends in between too. It’s now our 7th largest holding and distributed well across client portfolios so well done for your patience! We’ll be selling-down and recycling in other such opportunities!
Remember, these events have nothing to do with the underlying markets – simply technical valuation adjustments which we are enjoying from the closed-ended fund space (Investment Trusts). This one movement is worth 0.2% to overall client funds, an extra bonus and for the cost conscious it helps to pay fees. However, certainly these outcomes generate returns above what simple open-ended funds can generate. The same day, Segro announces the agreed takeover of TritaxEuro Box but for all shares. Regardless, I wish we had held this one too! However, we have plenty of others just waiting…
Then on the same day, JARA (JP Morgan Global Core Real Assets Trust) announces it has failed the continuation vote and so will be winding-up. Again, this is sad as the Trust had a place but we felt closure was inevitable. We had only started buying relatively recently in view of the discount to the asset value and had leapt from JPM’s Multi-asset Trust from which we also enjoyed the winding-up bonus. If the Trust realises the assets at the latest values, then the shares will have risen by 25% from the pre-announcement levels, so another great bonus for our clients and unrelated to the underlying markets. Meantime we have had a very good income to boot.
JP Morgan European Discovery’s tender has completed too and we secured cash at 98% of the nav – a 10% increase on the share price presently and another bonus for nothing. We benefited handsomely from that; many shareholders did not engage so we were able to see over a quarter of our shares tendered! We benefited handsomely from that; many shareholders did not engage so we were able to see over 35% of our shares tendered against the average of just over 20%! We can now start buying the same shares back on the market at an 11% discount…
Good news on one of our direct stocks – Funding Circle reports superior results and the shares rise 30% to become our largest direct holding and up fivefold from March. It all helps. We are running with an overweight position presently.
On the bad news’ front, Diversified Energy, one of the most shorted stocks on the market, has seen selling with the reduced energy prices, where oil and gas have fallen sharply these last few months and despite global machinations. These falls aren’t reflected in reduced energy prices for UK consumers and businesses, funnily enough. The shares are down a third from the peak last month but now give c15% income to compensate. The stock is partly a hedge against energy price rises of course. And finally, Centamin Gold rises a quarter on the Board’s agreement to Anglo Gold Ashanti’s bid – not fully valued but at least Anglo’s shares are included and we shouldn’t complain as we own Centamin.
Bad news, in that Digital9 Infrastructure’s new board has decided to down-value its assets so the shares fall around 15%. They are now trading at a massive discount even to the reduced valuation. The cynic says the new board has purposefully cut the carrying values to reflect better upon them through the other side and to cover any other possible liabilities which can’t then be blamed on them. Remember that happy investors bought stock at the launch at £1 and now the shares are 18p. No, we didn’t support the launch but underneath, the Fund otherwise has done and continues to do exactly what it said on the tin. We shall increase our exposure but clearly watching proportionate diversity at all times.
Income in retirement
Not as a recommendation but Chancery Lane Research has published an interesting report which suggests ‘Investment Trusts outperform total return portfolios, passives and annuities even in an inflationary environment’. As clients know, we can use ‘anything’ to help achieve outcomes for our clients – it makes no difference to us – just what is best for clients. (Remember too that for us, our outcomes more especially at the moment are more skewed towards downside risk protection as well). However, these results could raise very challenging questions of other advisers who do not use Investment Trusts for their clients.
One most fascinating result (of which we were well aware but not quantified) is that over the 37 years from 1986, dividend income from Investment Trusts was the same or higher than the prior year 97% of the time. Just remember the calamities which we have faced over that time as well! For our clients we have worked through them all!
As our clients know, we do our utmost to inform them of the flexibility and options available and also of the natural income possible from a balanced and well-diversified strategy. If that income is enough, with all other income etc, to meet your bills then financial Utopia is in sight! Sadly however, the regulatory regime is default-driving more investors, especially smaller ones, to buy ‘products’ which they might well believe will meet their immediate needs, whether they are right or wrong for them (and unadvised) – often the latter.
Investment Trusts outperforming total return portfolios – FTAdviser
Interestingly, Janus Henderson’s latest research shows that global dividends rose to a record $606billion in the second quarter of 2024, substantiating the ‘common sense’ behind the above conclusions! That’s an 8.4% rise year-on-year.
Investment trends – where are they now?
Citywire’s survey notes investors should heed the past and learn from it. It is curious to see what the 10 biggest unitised holdings were in 2014 and now. One has closed-down altogether as interest slumped and only one fund is in the list today.
Maybe we shall be remarking on the absence of Passive funds from that list in 10 years as they’ve dominated fund sales for some years – there are reasons why that could indeed be the case. Remember – learn from history – don’t repeat it when it is wrong or bad.
Chinese household savings
The economy needs consumers to spend and consume but at the end of June, Chinese households had accumulated a record $20trillion in savings. Who remembers when Communist China was a third-world country and with significant comparative poverty… of course, not all the Country enjoys equality there but this is fascinating.
Bad advisers
Good to see the FCA ban and fine four advisers who pushed naïve investors into pensions which then sold wholly unsuitable Hotel ‘assets’ run by The Resort Group International in Cape Verde Islands. I hope that it is the beginning of a very long list, as the conspiracy and effective fraud runs very deep.
My best wishes
Philip J Milton DipFS CFPCM Chartered MCSI FPFS FCIB
Chartered Wealth Manager
Fellow Of The Personal Finance Society, Fellow Of The Chartered Institute Of Bankers
