A total of 106 structured products made available to advisers since the start of 2011 have a Eurozone bank as a counter party, Investment Adviser has recently revealed. The figure represents 14 per cent of the total of 750 structured products issued to advisers and sold to clients over the period.
As Spain recently became the latest Eurozone state to see a group of its banks have their credit ratings cut, with Moody’s downgrading 16 of the nation’s lenders including ‘big three’ giants Santander, BBVA and La Caixa may of us may have been wondering what would happen if a Eurozone bank was to collapse. It’s true the capital held in structured products that used the bank as a counter party could be at risk although the European Central Bank is continuing to take steps to ensure the stability of the Eurozone.
Data from StructuredProductReview.com, which lists all structured products available through UK advisers, shows that 62 products launched since the start of 2011 are backed or partly backed by the UK arm of Spanish bank Santander, including 12 through its Abbey National subsidiary. These include 15 products issued by Legal & General, and four issues of Aviva Investors’ Defined Growth Plan, which include Abbey National among six counterparties.
StructuredProductReview.com founder Ian Lowes said: “Advisers should be very aware of counterparties in order to diversify - limiting exposure to one counterparty is critical.”
Enable’s IFA’s are able to help you to review your exposure to the Eurozone and would be happy to help you make sure your investments are diversified.
Tuesday, 29 May 2012
Investment in Green Futures
According to Dr Aled Jones, Director of Anglia Ruskin University’s Global Sustainability Institute in Cambridge. The pensions of many British workers are being put at risk by the City’s over reliance on high carbon investments, “The depth and breadth of our collective financial exposure to high carbon, extractive and environmentally unsustainable investments could become a major problem which affects all of us,” said Dr Jones. He chairs a working group for the Capital Markets Climate Initiative, a public-private initiative set up by Greg Barker MP, Minister at the UK Department for Energy and Climate Change.
“In both the FTSE 100 and the French CAC 40, two of the largest stock market indices in the EU, specialised oil and gas companies alone make up approximately 20 per cent of market capitalization; “To date investors have considered carbon constraints as something which will occur far in the future, and are therefore not material to asset valuation or portfolio management. This is no longer true.“The European Union Energy Commissioner has suggested that the EU will fix a new and stronger 2030 carbon target – and potentially a new renewable energy target – in the next two years.”
“These imminent policy decisions will impact on the value of all high carbon investments by placing absolute limits to the use of fossil fuels inside the EU and globally. As policy and technology over time reduce returns in high carbon areas while supporting low carbon ones, investing in high carbon sectors could result in stranded assets and poor returns.”
Climate change skeptic or not Enable IFA’s can review your investment exposure to high carbon areas.
“In both the FTSE 100 and the French CAC 40, two of the largest stock market indices in the EU, specialised oil and gas companies alone make up approximately 20 per cent of market capitalization; “To date investors have considered carbon constraints as something which will occur far in the future, and are therefore not material to asset valuation or portfolio management. This is no longer true.“The European Union Energy Commissioner has suggested that the EU will fix a new and stronger 2030 carbon target – and potentially a new renewable energy target – in the next two years.”
“These imminent policy decisions will impact on the value of all high carbon investments by placing absolute limits to the use of fossil fuels inside the EU and globally. As policy and technology over time reduce returns in high carbon areas while supporting low carbon ones, investing in high carbon sectors could result in stranded assets and poor returns.”
Climate change skeptic or not Enable IFA’s can review your investment exposure to high carbon areas.
All assets absolute increase
All asset classes have shown an absolute increase in assets in the first quarter of 2012, according to data published recently by investment research firm Camradata. The firm claims that the figures represent growing evidence of a “long-term recovery”. Our experienced Independent financial advisors at Enable of Bishop’s Stortford know real wealth management requires proper risk assessment, appropriate to the investor and time. Keeping the bigger picture in mind is what IFA’s are expert at.
In its latest report, Camradata figures also show that most equity classes have given returns of 20 per cent or more over the last three years, with “more managers reducing risk against their benchmarks and active managers, in particular, delivering value”.
Their data continue to show an upward trend in the number of investment houses active in most sectors, with the number featured in European equity, for example, rising from 36 to 47, while in US high yield the total increased from 17 to 25. Steve Butler, managing director of Camradata, said: “Broadly, there has been a bounce up in values and returns over the last three years. “It’s hard to see who could be disappointed with that kind of performance. What we’re seeing is managers continuing to create wealth against the same kind of bleak, market backdrop.”
Whether you are an active or passive investor wanting to take risks or minimize your risk, Enables independent Financial Advisors can help you look at your options.
In its latest report, Camradata figures also show that most equity classes have given returns of 20 per cent or more over the last three years, with “more managers reducing risk against their benchmarks and active managers, in particular, delivering value”.
Their data continue to show an upward trend in the number of investment houses active in most sectors, with the number featured in European equity, for example, rising from 36 to 47, while in US high yield the total increased from 17 to 25. Steve Butler, managing director of Camradata, said: “Broadly, there has been a bounce up in values and returns over the last three years. “It’s hard to see who could be disappointed with that kind of performance. What we’re seeing is managers continuing to create wealth against the same kind of bleak, market backdrop.”
Whether you are an active or passive investor wanting to take risks or minimize your risk, Enables independent Financial Advisors can help you look at your options.
Tuesday, 22 May 2012
Looking into Investment Trusts...
With the planned RDR changes just around the corner, investments trusts could see a 225% uplift in recommendations from IFAs once the new legislation is introduced, according to a recent survey from J.P. Morgan Asset Management.
The study, found that over a third of IFAs (36%) are likely to recommend investment trusts next year, an increase of 225% when compared to the 16% of IFAs who currently already recommend the closed-ended products to investors.
It is the broad spectrum of investment choice that is cited as the main reason IFAs would recommend investment trusts, with 49% of those who either already recommend the vehicle, or who are likely to saying this is the attractive element. Similarly, lower overall costs (33%) and a proven record which has resulted in strong, long term performance (28%) were the second and third biggest reasons for IFAs to recommend investment trusts to their clients.
David Barron, Head of Investment Trusts at J.P. Morgan Asset Management, said:
"Investment trusts present new opportunities as they evolve and develop with the markets, and offer a wide choice to investors; from generalist trusts providing a broadly diversified portfolio to highly specialist trusts that can be used to target very specific areas of investment. Additionally, their structure can be more suitable than other investment vehicles for both new and more established areas of investment."
If you want to explore whether Investments Trusts would work for your portfolio Enables IFA’s in Bishop's Stortford can talk you through your options.
The study, found that over a third of IFAs (36%) are likely to recommend investment trusts next year, an increase of 225% when compared to the 16% of IFAs who currently already recommend the closed-ended products to investors.
It is the broad spectrum of investment choice that is cited as the main reason IFAs would recommend investment trusts, with 49% of those who either already recommend the vehicle, or who are likely to saying this is the attractive element. Similarly, lower overall costs (33%) and a proven record which has resulted in strong, long term performance (28%) were the second and third biggest reasons for IFAs to recommend investment trusts to their clients.
David Barron, Head of Investment Trusts at J.P. Morgan Asset Management, said:
"Investment trusts present new opportunities as they evolve and develop with the markets, and offer a wide choice to investors; from generalist trusts providing a broadly diversified portfolio to highly specialist trusts that can be used to target very specific areas of investment. Additionally, their structure can be more suitable than other investment vehicles for both new and more established areas of investment."
If you want to explore whether Investments Trusts would work for your portfolio Enables IFA’s in Bishop's Stortford can talk you through your options.
Looking to America....
Keeping an eye on the bigger picture at Enable our Independent Financial Advisors often look across the pond to inform our wealth management approach. We followed the US on the way down perhaps we will follow them on the way up. Since the October 2011 lows, the S&P 500 is up very strongly, and both the unemployment and housing picture appears to be improving in the US.
Nothing goes up in a straight line and it would not be sensible to assume that a smooth upward trend would continue indefinitely. Despite the current positive signs, oil price fluctuation, the prospects for China, and the decelerating of US earnings growth and profit margins must all be taken into consideration when discussing the sustainability of the US recovery.
There have been concerns that oil prices in the US are high enough to break the economic recovery but it is important to remember that it’s the rate of change, rather than the scale of the price, that is more significant here. The job market continues to move in the right direction albeit at a slower rate more recently, a growing consumer confidence, a pick-up in credit growth, in addition to aggressive stimulus measures from the Fed – US consumers are now better positioned to weather volatility in energy prices.
It is also dependent on developments in the Far East. Fears of a hard landing for China’s economy, resulting in a drag on US and global growth, are widespread but possibly premature. China’s growth has certainly slowed, but a strong posting of 8.1 per cent growth in the first quarter of 2012 should calm immediate concerns.
Nothing goes up in a straight line and it would not be sensible to assume that a smooth upward trend would continue indefinitely. Despite the current positive signs, oil price fluctuation, the prospects for China, and the decelerating of US earnings growth and profit margins must all be taken into consideration when discussing the sustainability of the US recovery.
There have been concerns that oil prices in the US are high enough to break the economic recovery but it is important to remember that it’s the rate of change, rather than the scale of the price, that is more significant here. The job market continues to move in the right direction albeit at a slower rate more recently, a growing consumer confidence, a pick-up in credit growth, in addition to aggressive stimulus measures from the Fed – US consumers are now better positioned to weather volatility in energy prices.
It is also dependent on developments in the Far East. Fears of a hard landing for China’s economy, resulting in a drag on US and global growth, are widespread but possibly premature. China’s growth has certainly slowed, but a strong posting of 8.1 per cent growth in the first quarter of 2012 should calm immediate concerns.
Banking on Banks
With recent downgrading of some European banks in is hardly surprising that like technology shares after the TMT bubble burst in 2000, financial stocks are perceived as toxic.
While the technology sector suffered from a perception of overvaluation and irrelevance, among other issues, harder to remember in the wake of the Facebook floatation, the financial sector has to contend with other problems; higher capital and liquidity requirements, litigation, an anemic economic recovery, a sovereign debt crisis and so on.
It has, maybe been an easy decision for asset allocators to apportion less to the sector than their performance benchmarks. Surveys show that investors remain very underweight in the sector, even with the sharp rally in share prices in recent weeks.
We have to remember however that an investment in financials is not automatically an investment in European banks. European banks represent just 16.8 per cent of the MSCI World Financials index, and that includes the likes of HSBC Holdings and Standard Chartered. If you look at just Eurozone banks this falls to 6.3 per cent. At best, the rest of the financial sector has suffered collateral damage, and this is where the opportunities lie. The financial sector is not just banks and even more so, not just European banks.
At Enable our Independent Financial Advisors know that the way to mange your wealth is not just to keep calm and carry on but to keep the bigger picture in mind and spread your assets. Enable’s IFA’s can talk you through the options.
While the technology sector suffered from a perception of overvaluation and irrelevance, among other issues, harder to remember in the wake of the Facebook floatation, the financial sector has to contend with other problems; higher capital and liquidity requirements, litigation, an anemic economic recovery, a sovereign debt crisis and so on.
It has, maybe been an easy decision for asset allocators to apportion less to the sector than their performance benchmarks. Surveys show that investors remain very underweight in the sector, even with the sharp rally in share prices in recent weeks.
We have to remember however that an investment in financials is not automatically an investment in European banks. European banks represent just 16.8 per cent of the MSCI World Financials index, and that includes the likes of HSBC Holdings and Standard Chartered. If you look at just Eurozone banks this falls to 6.3 per cent. At best, the rest of the financial sector has suffered collateral damage, and this is where the opportunities lie. The financial sector is not just banks and even more so, not just European banks.
At Enable our Independent Financial Advisors know that the way to mange your wealth is not just to keep calm and carry on but to keep the bigger picture in mind and spread your assets. Enable’s IFA’s can talk you through the options.
Wednesday, 16 May 2012
Balancing your bonds...
Most wealth managing portfolios hold some bonds Enable's experienced IFA’s know that bond duration can be a useful indicator as to how the fund will perform, as the movement of bond yields is inversely correlated to the performance of the fund. This means that portfolio managers tend to hold different duration bonds in order to work out a weighted duration.
For example, in Chris Bowie’s Ignis Corporate Bond fund the duration is currently 7.6 per cent, slightly below the index of 7.8 per cent. This means the manager has less duration risk than the index. In short, this means is that for every 1 per cent that yields rise, the fund will lose 7.6 per cent, while for every 1 per cent that yields fall the fund will rise 7.6 per cent.
Last year Bowie stated he had duration greater than the benchmark, but says he had been shortening that position this year to now be slightly underweight the benchmark, adding that his fund is “getting ready to go quite a bit shorter.”
“Having duration risk will be one of the biggest risks over the next five years because yields are so low there is not much left to go for. I don’t think there is much left on the table.” At the moment 10-year UK gilt yields are trading around 2 per cent and have dipped as low as 1.9 per cent.
If you want to look at the distribution of your portfolio Enables experienced IFA’s are happy to talk it though with you.
For example, in Chris Bowie’s Ignis Corporate Bond fund the duration is currently 7.6 per cent, slightly below the index of 7.8 per cent. This means the manager has less duration risk than the index. In short, this means is that for every 1 per cent that yields rise, the fund will lose 7.6 per cent, while for every 1 per cent that yields fall the fund will rise 7.6 per cent.
Last year Bowie stated he had duration greater than the benchmark, but says he had been shortening that position this year to now be slightly underweight the benchmark, adding that his fund is “getting ready to go quite a bit shorter.”
“Having duration risk will be one of the biggest risks over the next five years because yields are so low there is not much left to go for. I don’t think there is much left on the table.” At the moment 10-year UK gilt yields are trading around 2 per cent and have dipped as low as 1.9 per cent.
If you want to look at the distribution of your portfolio Enables experienced IFA’s are happy to talk it though with you.
How to protect yourself against above target inflation
Many fund managers are taking short duration bonds to manage risk and enhance performance believing that yields have nowhere to go but up. So how does duration affect the risk and performance of a bond portfolio? Lets first define and quantify what is meant by duration and how it is applied.
Duration is a measurement of how long, in years, it takes for the price of a bond to be repaid by its internal cash flows. It is an important measure for investors to consider, as bonds with higher durations carry more risk and have higher price volatility than bonds with lower durations.
For the two most basic types of bonds the duration calculation varies: a zero-coupon bond has duration that is equal to its time to maturity; a bond that pays a coupon will always have a duration that is less than its time to maturity.
Thus on a zero-coupon bond the entire cash flow occurs at maturity, while a bond that pays coupons yearly and matures in, five or ten years will conversely repay the amount paid for the bond sooner.
Duration can also be used as a measurement of a bond portfolio’s sensitivity to interest rate movement in response to expectations that stronger economic activity will fan inflation, eroding returns on securities that pay fixed rates of interest. Enables IFA’s are always able to help you understand how to make the best of the bonds you hold in your portfolio.
Duration is a measurement of how long, in years, it takes for the price of a bond to be repaid by its internal cash flows. It is an important measure for investors to consider, as bonds with higher durations carry more risk and have higher price volatility than bonds with lower durations.
For the two most basic types of bonds the duration calculation varies: a zero-coupon bond has duration that is equal to its time to maturity; a bond that pays a coupon will always have a duration that is less than its time to maturity.
Thus on a zero-coupon bond the entire cash flow occurs at maturity, while a bond that pays coupons yearly and matures in, five or ten years will conversely repay the amount paid for the bond sooner.
Duration can also be used as a measurement of a bond portfolio’s sensitivity to interest rate movement in response to expectations that stronger economic activity will fan inflation, eroding returns on securities that pay fixed rates of interest. Enables IFA’s are always able to help you understand how to make the best of the bonds you hold in your portfolio.
How to make the most of your bonds?
Independent Financial Advisors like Enable acknowledge the fact that with continued equity market volatility many of the traditional ‘safe haven’ investment options like government bonds are offering historically low yields, so many investors are looking for alternatives.
Recent figures from the Investment Management Association for March however showed fixed income was the most popular asset class as a whole for the seventh month in a row with net retail sales of £660m. Also, the IMA Sterling Strategic Bond sector was the best selling of all IMA sectors for the month.
The sector, which contains funds that invest at least 80 per cent of their assets in sterling denominated fixed interest securities - or securities that are hedged back to Sterling - recorded net retail sales of £366m, the highest figure since April 2011, and significantly above the monthly average for the previous 12 months of £211m. Investor inflows into these funds mean it is the second largest fixed income sector at £25.6bn, second only to the £52.8bn Sterling Corporate Bond sector.
Andrew Sutherland, head of credit and aggregate at Standard Life Investments and manager of the £92.1m Standard Life Investments Strategic Bond fund, says most people think of bonds as having very few differences but he adds: “There’s a vast amount of difference in terms of risk and performance in bonds. You’ve got high yield which is very cyclical and high yielding, but you’ve also got your government bonds and things like index-linked and investment grade corporate bonds. So there’s quite a lot of variety and they all do different things at different times.”
Strategic bond management with Enable’s IFA’s could help you make the most of your wealth.
Recent figures from the Investment Management Association for March however showed fixed income was the most popular asset class as a whole for the seventh month in a row with net retail sales of £660m. Also, the IMA Sterling Strategic Bond sector was the best selling of all IMA sectors for the month.
The sector, which contains funds that invest at least 80 per cent of their assets in sterling denominated fixed interest securities - or securities that are hedged back to Sterling - recorded net retail sales of £366m, the highest figure since April 2011, and significantly above the monthly average for the previous 12 months of £211m. Investor inflows into these funds mean it is the second largest fixed income sector at £25.6bn, second only to the £52.8bn Sterling Corporate Bond sector.
Andrew Sutherland, head of credit and aggregate at Standard Life Investments and manager of the £92.1m Standard Life Investments Strategic Bond fund, says most people think of bonds as having very few differences but he adds: “There’s a vast amount of difference in terms of risk and performance in bonds. You’ve got high yield which is very cyclical and high yielding, but you’ve also got your government bonds and things like index-linked and investment grade corporate bonds. So there’s quite a lot of variety and they all do different things at different times.”
Strategic bond management with Enable’s IFA’s could help you make the most of your wealth.
Wednesday, 9 May 2012
Enable train for their 5 countries in 5 days challenge
South Asian millionaires increasing - do you need to revise your investment options?
A BRICdata report has recently suggested that the wealth management market for South Asian millionaires living abroad will increase in the next four years. As many as 21.6 million persons of Indian origin (PIO) and non-resident Indians (NRI) are currently living overseas, with the largest proportion of millionaires residing in the US. This is followed by the UK, the United Arab Emirates, Canada and Hong Kong.
The compound annual growth rate (CAGR) of the wealth management market for NRI millionaires living abroad rose to 9.4 per cent over the 2007-2011 study period. BRICdata also expects the total wealth of these individuals to increase by another 6.9 per cent by 2016.
The number of non-resident Pakistanis (NRP) living abroad reached eight million last year, according to the report, with the majority of millionaires living in the UK, followed by United States, the Persian Gulf and Canada. The Persian Gulf counties also hold the largest number of Bangladeshi millionaires, with 5.4 million non-resident Bangladeshis (NRB) currently live away from their home country. With 2.5 million persons of Sri Lankan origin and non-resident Sri Lankans (NRSLs) living abroad last year, Singapore had the highest proportion of millionaires.
It would seem that the South Asian markets are serving their entrepreneur’s well. If your wealth needs managing the Asian markets will probably prove vital for future growth. Enables IFA’s are always happy to talk through your investment options.
It would seem that the South Asian markets are serving their entrepreneur’s well. If your wealth needs managing the Asian markets will probably prove vital for future growth. Enables IFA’s are always happy to talk through your investment options.
Wealth Management - Fit for fulfilling your potential?
Part of any rounded picture in life is your health - key to any Wealth Management strategy is how you want to live your life. In a fit of madness one of our team at Enable decided to join the Isabel Hospice team and cycle 5 Countries in 5 days (500miles!!). The event is taking place from the 12th to the 17th of June 2012 in which time you will be able to witness a middle aged, balding, overweight IFA, passing through the UK, France, Belgium, Germany and ending in Holland.
Providing for the end of your life is vital and Hospices provide the ultimate place of dignity to end your days which is why they are so vital to fund. The Isabel Hospice was founded in 1982 by a number of dedicated people inspired by Isabel Last who herself had cancer. It was registered as a charity in 1983 and works throughout the eastern Herts area covered by Broxbourne Borough Council, East Herts District Council and Welwyn/Hatfield Council. The philosophy of the Hospice has always been to affirm the uniqueness of the individual and to focus on the highest possible quality of life for each patient in our care. Isabel Hospice is an independent body and is supported mainly by donations from the public. All care given by the Hospice is free to their patients. Part of living is giving and Enable are proud to have the opportunity to raise funds for such an important organisation. If you want to support Mike just follow his fundraising link.
Providing for the end of your life is vital and Hospices provide the ultimate place of dignity to end your days which is why they are so vital to fund. The Isabel Hospice was founded in 1982 by a number of dedicated people inspired by Isabel Last who herself had cancer. It was registered as a charity in 1983 and works throughout the eastern Herts area covered by Broxbourne Borough Council, East Herts District Council and Welwyn/Hatfield Council. The philosophy of the Hospice has always been to affirm the uniqueness of the individual and to focus on the highest possible quality of life for each patient in our care. Isabel Hospice is an independent body and is supported mainly by donations from the public. All care given by the Hospice is free to their patients. Part of living is giving and Enable are proud to have the opportunity to raise funds for such an important organisation. If you want to support Mike just follow his fundraising link.
The Secret Of Long-Term Financial Success
As Independent Financial Advisors, Wealth Management is key to our activities at Enable. As with all other IFA’s we are always looking for the best way to make returns over the medium term. At Enable we always advocate diversity and learning form others success and mistakes. One fund manager who also prefers not to put all her eggs in one basket is Margaret Lawson, co-fund manager of the SVM UK Growth Fund, a 12-year-old portfolio.
Lawson has seen the fund endure a difficult 2011, when it fell 8.2 per cent (A share class), falling behind the FTSE All-Share Index of UK stocks by 4.7 per cent, but over the longer term, this is a strong fund. Since its launch in March 2000, the fund has delivered a cumulative performance of 74.8 per cent, beating the index by 44.6 per cent. (Lipper data at 29 February, 2012.)
One of the “unique selling points” of a fund like this is how its managers divide it into three categories: its “core” holdings, “tactical” holdings and “alpha kickers”. A “core” segment holds the low-risk, robust selection of stocks that are rotated infrequently; a “tactical” segment contains stocks that are chosen for their exposure to shorter-term trends, such as changes in the economic cycle, and “alpha kicker” segment, which gets its returns from firms undergoing significant change and where shares often trade at a discount and offer potentially large returns.
Enable can see the benefit of being able to adjust the share that these three segments have of the total fund so that performance can be maintained and losses curbed in different economic conditions: recession, strong growth or sluggish growth, our IFA’s are always available to discuss your Wealth Management strategies.
Lawson has seen the fund endure a difficult 2011, when it fell 8.2 per cent (A share class), falling behind the FTSE All-Share Index of UK stocks by 4.7 per cent, but over the longer term, this is a strong fund. Since its launch in March 2000, the fund has delivered a cumulative performance of 74.8 per cent, beating the index by 44.6 per cent. (Lipper data at 29 February, 2012.)
One of the “unique selling points” of a fund like this is how its managers divide it into three categories: its “core” holdings, “tactical” holdings and “alpha kickers”. A “core” segment holds the low-risk, robust selection of stocks that are rotated infrequently; a “tactical” segment contains stocks that are chosen for their exposure to shorter-term trends, such as changes in the economic cycle, and “alpha kicker” segment, which gets its returns from firms undergoing significant change and where shares often trade at a discount and offer potentially large returns.
Enable can see the benefit of being able to adjust the share that these three segments have of the total fund so that performance can be maintained and losses curbed in different economic conditions: recession, strong growth or sluggish growth, our IFA’s are always available to discuss your Wealth Management strategies.
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