So, very unconvincingly the Prime Minister supporting the Chancellor’s dire financial announcements brought the wrong sort of tears to her eyes, promptly seeing the cost of long-term UK Government debt rise by a whopping 5% and Sterling losing a cent instantly. Fortunately that was short-lived but we’re still paying far more than at the worst following Liz Truss’ ill-fated tenure.
It does mean the inevitability of tax rises on the ever-diminishing numbers in work have to pay for the ever-growing numbers who are not (and perhaps a ‘wealth tax’ which will drive even more affluent to leave, taking their money, investment and taxes with them).
It is either a portent leading the way for a new Chancellor (too late) or a recession – or both and maybe even a political crisis which could lead to a vote of ‘no confidence’ (in the government or indeed just the leader) – who would have thought that after just one year and such a majority. Still, one less cloudy fact – the UK economy rose by 0.7% in the first quarter (really a recovery from awful past figures), the most in the G7 but despite what the government says, one quarter does not a swallow make. Pushing that is hard to swallow.
Abroad, I knew it was down but did you know the US Dollar dropped by 10.7% in the first half of 2025 – its worst performance since 1973? That placed it at its lowest since the beginning of 2022 on a trade-weighted basis. There is a number of reasons for that but if you have global tracker pensions, ISAs or portfolios, then yes, that means you have lost a whack on the currency movement alone, as most of your money (over 70%) will be in the US. The last few days has seen it firmer as the world awaits Donald’s latest, after the deferral of the tariff deadline again. We are not dollar dominated for our clients.
An embarrassment of riches
It gives me great pleasure to announce yet another good performance month which propelled the funds we manage for clients to a new all-time record for us of £275million (and no, not at all a deluge of ‘new money’ either, I should add). (And no, there’s no ‘company super yacht’ or private island as the tongue-in-cheek picture suggests!)
Whilst the pessimist might suggest that such news is a portent of a change in sentiment, we remain confident that our value-led strategies remain very well-valued and not over-extended and despite what our Government seems to be trying to do on so many planes to destabilise things.
Of course, as ever, a rising tide helps float most boats but inevitably with such a diversified strategy base, some of our assets have fallen or remained static too, ready for another day tomorrow instead, even if biggest gainers have far-outstripped biggest losers.
What is doubly encouraging too is that recent out-performance (especially against the US) is evident and as the US counts for over 70% of all shares… you can draw your own conclusions for the ‘man down the golf club’ and his less ebullient conversation of late – Portfolio & Benchmark Returns May 2025 So, that should make 5 July statements read well though can general conditions last? A small pull-back would not be unwelcome.
At the same time, as our funds are up usefully overall, Terry Smith’s fabled Fundsmith has reported a disappointing half year to 30 June, losing money and underperforming the MSCI Global too. The group has been haemorrhaging money as investors have been leaving with £4.2billion going in the last year. It is the problem with populism – whether you are one star manager or another, fame can’t last for ever – at least we buy other managers primarily as the main thrust, so it makes no difference to us.
We buy what and who we think are best value at that time and change them as we need – that’s what we do for clients so they don’t have to do so. If the net outcome after our costs is better than the neutral outcome or what other ‘cheap funds’ are doing, then we and clients are very happy indeed. We do not hold Fundsmith in strategies.
The big guys
So, it is interesting when the experienced head of a large corporate broker says to me that he wouldn’t use any of the big firms for his own investments, saying that their hands are so tied in terms of what they can and cannot buy and their ability to be deft-footed is so limited by their size etc, so that so many smaller opportunities pass-them-by, whereas he lauded that smaller firms like our own can take objective judgements and then act.
He referred specifically to quoted investment funds, a field ripe for the picking and where we are significantly involved (significant for us anyway). He also referred to the sadness that there are fewer and fewer independent firms like our own out there and who are able to do the very best thing for their clients in this way – buying the best opportunities for them (we have no axe to grind) without all those constraints.
Most individual managers who used to have discretion don’t anymore, as the regulatory morass has stripped any individuality from so many, so instead, all they can then do is sell centralised approved ‘product’ ranges to all clients, products which are mainly basic, open-ended investment funds managed by others. If you are not with us, are you just a number in a large firm and one which cannot do what you imagine it could or should be doing for you and at the times it should?
Good news/bad news
ICG Longbow has completed the sale of an asset and a further 8p a share is being distributed on 19 July. The last two assets will be trickier to realise but with our reportable stake in the Fund, we’ve not done too badly here with total cash repayments, especially after chasing the shares all the way to the bottom. The residual loans and accrued interest could realise anything from 12p-45p even if the top end is rather optimistic.
The De La Rue takeover has completed and a useful £1.30 per share received, brokerage free. It’s been a long haul but again, we chased them all the way to the bottom and for many investors in this Company, it was retrieving past losses. The shares hit 30p in June 2023. We’re looking forward to recycling that £1.675million in tomorrow’s special opportunities!
Riverstone Credit Opportunities is continuing its wind-up and distributing 28% of its cash at the net asset value, so a useful uptick on recent purchases (albeit down on earlier levels) but there has been an exceptional income on top.
The AIC’s latest newsletter is interesting and notes that since the start of 2025 and despite President Trump (!), the average discount on REITs (commercial property Trusts) has dropped from 24% to 15%. In simple terms, all other things remaining the same, this means the average investor in these Trusts has made an investment return of 12%. In English, this means that regardless of what the underlying assets in these things have done, our investors have made 12% simply by ‘nothing happening’. We are pretty full of these so are very happy but there is still more to come. Those holding commercial property direct, or unitised funds, will have received an extra bonus over this time of… nothing.
I’ve shared the analogy before but if you invest £500 in something, the upside can theoretically be unlimited whereas the maximum downside risk is £500. Last Friday, one of our smaller and perhaps labelled esoteric AIM investments rose by a whopping £0.004 a share. However, that was 20%, a fifth. We also own a few shares in a very small precious metals’ mining company. It has announced excellent geological reports on a key asset and which could transform its prospects. A fortnight ago they were a penny…and despite the news and a small bounce… the shares remain extremely lowly priced. Even widows and orphans can afford a few hundreds of pounds of a much larger portfolio in something like that which could generate exponential gains for them! Of course, even we wouldn’t be able to buy enough shares to do that as it’s such a tiny company. It’s a strange old world.
Finally, another recent investment in a tiny cyber security firm on AIM has seen its shares rise 0.25p in a week – not much but still 26% and plenty of possible upside. I wish we could extend their exposure generally but it is not even practical for us either!
The polluter pays
Well, that’s not true… we have just had our latest invoice for our contribution to the FSCS. It’s a whopping £40,121.77 to help fund compensation for all those firms (primarily fraudsters) from the past.
It is hard for us to wonder how much of this could have been averted if the regulatory system had taken immediate heed of warnings it received about most of the core miscreants rather than leaving them to continue creating havoc and colossal distress to investors for some years afterwards.
Scottish Widows
No, we don’t have any money there at all, owned by Lloyds Bank and undertaking its investment management. Just as the US had finally started to come-off the boil after too long in the sun and after we read that enquiries about UK assets have been rocketing of late on valuation grounds, Scottish Widows has taken a corporate decision to cut UK share exposure from 12% to a miserly 3% (and only 1% for its ‘most conservative portfolios’). The group manages £72billion in its ‘default’ work-placed schemes.
The rhetoric notes this will be ‘enhancing risk-adjusted returns by capturing more growth opportunities in high-performing international markets’ – the US exposure will rise to up to 65% in January. It all sounds very plausible but in my book that statement is marketing gobbledegook. Indeed, in 2000, UK pension schemes had 50% of their share assets in the UK and since, that drifted to 4% last year. I suspect they’ll all be smarting of late.
They are not alone but as sure as eggs is eggs, we shan’t be following them and are very grateful indeed for our excessive exposure to cheap, poorly-performing assets globally – as invariably they are under-valued and indeed of late have instead been amongst the best performers too whilst in our view being of far lower risk as they have less distance to fall.
Investment Club
We are investigating the establishment of an ‘Investment Club’ for staff, something to inspire and encourage them and indeed something where they can make some money too! These used to be popular and perhaps now, with lower dealing costs generally and geared opportunities through ‘spread-betting’ firms, this is something which could become more widespread going forward?
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
