Investment companies The ongoing opportunity

Transcription

1 Investment companies The ongoing opportunity Citywire New Model Adviser Retreat: September 2015 For professional advisers use only

2 Position of FCA The FSA has stipulated in its Retail Distribution Review (RDR) that investment trusts should be included in the spectrum of retail investment products considered by independent advisers from 2013 Source: FSA Policy Statement 10/6: Distribution of retail investments 2

3 Managed Portfolio Service (MPS) Available on Transact, Novia, Ascentric and Verbatim. Defensive 5.7% 15.7% Balanced Growth 1.6% 20.8% 15.4% 14.2% 63.2% 63.3% Defensive Income 1.0% 18.2% Growth 0.4% 31.1% 6.5% 56.3% 74.3% 12.2% Balanced Income 0.9% 20.1% Dynamic Growth 1.1% 36.6% 67.0% 12.1% 58.1% 4.3% Closed Ended Passive OEIC / Unit Trust 3 Source: as at

4 Features of investment companies Closed-ended funds quoted on the London Stock Exchange Manager does not have to redeem units or create them on demand Fixed pool of assets Independent board Management fees Performance fees Awarding management contracts Amending mandates and controls on management Skin in the game 4

5 Discounts and premiums: Acencia Debt Strategies Source: Bloomberg, as at

6 S&W MPS Working the discount Source: Morningstar

7 For income enthusiasts Ability to build revenue reserves in stronger years and use these to smooth payout levels in weaker years Investment companies only required to distribute 85% of their net revenues Open-ended funds are required to distribute all of their net revenues 15% of income may be held in reserve for the future 7

8 Dividend heroes Investment trust Sector Consecutive years of dividend increase City of London UK Equity Income 48 years Bankers Global 48 years Alliance Trust Global 48 years Caledonia Investments Global 48 years Foreign & Colonial Global 44 years F&C Global Smaller Companies Global 44 years Brunner Global 43 years JPMorgan Claverhouse UK Equity Income 42 years Murray Income UK Equity Income 41 years Witan Global 40 years Scottish American Global Equity Income 35 years Merchants Trust UK Equity Income 33 years Scottish Mortgage Global 32 years Source: AIC as at Temple Bar UK Equity Income 31 years 8

9 A highly geared investment company /12/ /04/ /08/ /12/ /04/ /08/ /12/ /04/ /08/ /12/ /04/ /08/ /12/ /04/ /08/ /12/ /04/ /08/ /12/ /04/ /08/ /12/ /04/ /08/ /12/ /04/2015 Scottish Mortgage NAV MSCI World Scottish Mortgage NAV v MSCI World Source: Morningstar Direct, as at

10 ITs vs Open Ended Performance Sectors Investment Trusts 1 year 5 years 10 years OEIC/Unit trusts Investment Trusts OEIC/Unit trusts Investment Trusts OEIC/Unit trusts Global Global Equity Income UK Equity income UK All Companies North American Europe vs Europe ex UK Global Emerging Asia Pacific ex Japan Japan ITs overperforming OEICs ITs underperforming against OEICS The table s purpose is to show that, over the longer term, investment trusts have outperformed OEICs within the relevant IA sectors. This may be due to investment trusts specific characteristics and risks, as discussed elsewhere in this presentation. It is not intended to indicate that investment trusts outperform OEICs generally, because there are additional risk factors associated with investment trusts which must be considered prior to making any investment decision. Source: IA/Morningstar Direct, Canaccord as at Total return unweighted based on the IA sector and investment trust sector 10

11 High profile managers Temple Bar Jupiter European Opportunities Pershing Square Holdings BlackRock World Mining Law Debenture Henderson European Focus Woodford Patient Capital Edinburgh Finsbury Growth & Income City Merchants High Yield Asian Total Return Alastair Mundy Alexander Darwall Bill Ackman Evy Hambro James Henderson John Bennett Neil Woodford Mark Barnett Nick Train Paul Causer & Paul Read Robin Parbrook 11

12 MPS Investment process & research Portfolio Construction Distribution Technology Risk Graded Tactical Asset Allocation Research Open Ended Funds Security Selection Passives Investment Companies David Amphlett-Lewis Head of Passive Research Genevra Banszky von Ambroz Investment Companies Analyst James Burns Head of Investment Companies Research 100% 90% Your Portfolio 80% 70% 60% Alts - Property and alternatives Equities - Developed UK Bonds - Government Property - Property and alternatives 50% Equities - Developed International 40% 30% Bonds - Corporate Equities - Developing International Bonds - Index Linked 20% Cash 10% 0% Defensive Defensive Income Balanced Income Balanced Growth Growth Dynamic Growth Source: Investment Management and StatPro as at

13 Risk rated models annual risk and return since inception Source: StatPro/Morningstar Direct/ investment Management as at MPS inception date

14 Managed Portfolio Service Portfolio profile Distribution Technology Risk score 3 months (%) 3 months Benchmark (%) 6 months (%) 6 months Benchmark (%) 1 Year (%) 1 Year Benchmark (%) Since launch (%)* Since launch Benchmark (%) Defensive Defensive Income Balanced Income Balanced Growth Growth Dynamic Growth % 55% 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% -5% Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15-10% 3 - Defensive 4 - Defensive Income 5 - Balanced Income 6 - Balanced Growth 7 - Growth 8 - Dynamic Growth Source: Investment Management as at All figures total return only. * Launch date Benchmark: Composite Distribution Technology Benchmark. 14

15 S&W Range activity highlights past 12 months Name Reasons for trade Rationale Driver Aug Sold Axa US Short Duration High Yield Aug Bought BH Macro Aug Sold ishares Corporate Bond Sold in favour of macro hedge fund strategy, limited upside following yield compression Exposure to global fixed income and forex markets, strong focus on capital preservation Sold in favour of active management, concerns over index returns of the asset class Aug Bought Jupiter Strategic Bond Active management of fixed income allocation Allocation Switch active Valuation Manager Nov Sold Old Mutual Global Strategic Sold following an extended period of poor performance due to incorrect macro calls from the manager Performance Manager Nov Bought Polar Capital Japan (hedged) Increasing exposure to mid cap Japan, but hedging exposure to the Yen as expectations for the currency to continue its weakness Allocation Macro Nov Sold Henderson European Special Situations Manager taking fund to new boutique. Question marks over resource Nov Bought Henderson European Focus Favoured manager in the European multi cap space currently Mar Reduced Artemis Income Reducing UK long only exposure as market hits all-time highs Mar Bought Henderson UK Absolute Return Introduction of lower beta UK exposure Apr Bought Artemis US Extended Alpha Adding greater defensiveness to US allocation as part of rebalance between active and passive funds Jun Sold Artemis Income Reducing large-cap income bias in UK equity allocation Jun Bought Investec UK Alpha Introducing core growth fund to UK equity allocation Switch Switch style Style Switch style Manager Valuation Valuation Manager Jun Reduced Fidelity China Special Situations Banking profits after an exceptionally strong run from Chinese equities Allocation Valuation Jun Sold Newton Asian Income Jun Bought Schroder Asian Alpha Plus Departure of lead manager and question mark over income constrains on mandate Growth mandate from a strong team with a good performance track record Switch style Manager 15

16 S&W MPS features Platforms Novia Ascentric Verbatim Transact James Hay How many models DT aligned Yes Yes Yes Yes Yes Which DT models Investment Companies included? Monthly Factsheets Quarterly Update 3 to 8 3 to 8 3 to 8 3 to 8 4 to 7 Yes Yes Yes Yes No Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes AMC 0.3% (+ VAT) 0.3% (+ VAT) 0.3% (+ VAT) 0.3% (+ VAT) 0.3% (+ VAT) 16

17 Contact us James Burns Partner t: e: James joined in September 1999 and started working on the investment trust desk in January James leads the Managed Portfolio Service as well as the Multi Manager team. James sits on the Asset Allocation Policy Committee and he also co-ordinates the investment trust recommended list for the Private Client department. James graduated from the University of St. Andrews in 1998 with an MA (Hons) and is a Chartered Member of the Chartered Institute for Securities & Investment. Julian Polnik DFM Business Development t: e: julian.polnik@smith.williamson.co.uk Julian joined Smith and Williamson Investment Management in November 2011 as Head of Broker Desk. Julian has a BA Honours degree in Politics and Social Psychology from Loughborough University and a Diploma in Management Studies from the University of Westminster. He is a Chartered Fellow of the Chartered Institute for Securities and Investment. Lucy Mitchell Associate Director t: e: lucy.mitchell@smith.williamson.co.uk Lucy joined in April 2015 as Associate Director primarily to develop further the Managed Portfolio Service via platforms as well as the Bespoke DFM offering for the intermediary market. Lucy graduated from the University of Birmingham with a BSc in Economics and Political Science. She has also completed the IMC and Investment Advice Diploma (IAD). 17

18 Important information Risk warnings Investment does involve risk. The value of investments can go down as well as up. The investor may not receive back in total the original amount invested. Past performance is not a guide to future performance. Rates of tax are those prevailing at the time and are subject to change without notice. Clients should always seek appropriate tax advice from their financial adviser before committing funds for investment. When investments are made in overseas securities, movements in exchange rates may have an effect on the value of that investment. The effect may be favourable or unfavourable. Investing in alternative assets involves higher risks than traditional investments and may also be highly leveraged and engage in speculative investment techniques, which can magnify the potential for investment loss or gain. Investments in emerging markets may involve a higher element of risk due to political and economic instability and underdeveloped markets and systems. Please note that bond funds may not behave like direct investments in the underlying bonds themselves. By investing in bond funds the certainty of a fixed income for a fixed period with a fixed return of capital are lost. Shares in AIM companies are likely to be high risk and volatile. Their value, and the income arising from them, may go down as well as up, and there is the possibility that investors could lose their entire investment. Shares in an AIM company may be illiquid and it may be difficult or impossible to sell them. Investors should take independent investment and taxation advice regarding AIM investments and qualifying tax relief, which can be provided by. In relation to any guided architecture investment options, Investment Management (SWIM) is unable to assess or provide advice on the suitability of any product or service for individual circumstances. No consideration has been given to the suitability of any investment or service for the particular needs of any recipient. SWIM will not be responsible to any other person for providing the protections afforded to retail investors or for advising on any investment as a result of using this service. 18

19 Disclaimer This document contains information believed to be reliable but no guarantee, warranty or representation, express or implied, is given as to their accuracy or completeness. This is neither an offer nor a solicitation to buy or sell any investment referred to in this document. Smith & Williamson Investment Management documents may contain future statements which are based on our current opinions, expectations and projections. Investment Management does not undertake any obligation to update or revise any future statements. Actual results could differ materially from those anticipated. Appropriate advice should be taken before entering into transactions. No responsibility can be accepted for any loss arising from action taken or refrained from based on this publication. The officers, directors and employees of Smith & Williamson Investment Management, and affiliated companies and/or their officers, directors and employees may own or have positions in any investment mentioned herein or any investment related thereto and may trade in any such investment. Issued by Investment Management which is a trading name of Investment Management LLP. Authorised and regulated by the Financial Conduct Authority (LLP registration number is ). Ref: db 19