While the FTSE 100 is still trading in the 6,700s, this news meant – along with other factors – that the UK equity market is in negative territory over this week.
Nevertheless, the consensus view is that we will have the ‘Santa rally’ which everyone has been anticipating, which should provide investors with some festive cheer.
On the fund management side of things, outlooks for 2015 have been coming in thick and fast which is always good news for us journalists.
The common theme among them, however, is no one seems to have a particularly clear-cut view as to what will happen over the next 12 months.
With the UK general election and the prospect of higher interest rates both on the cards, it is easy to see why.
Anyway, here are our favourite stories of the week.
Have a great weekend! You think 2014 has been difficult for investors? Just wait until 2015, warns Brookes
Starting with an outlook for the year ahead, FE Alpha Manager Marcus Brookes (pictured) – manager of the Schroder MM range – warned that 2015 will be an even more difficult year for investors than it has been so far in 2014.
His major concern is that “almost every asset class offers investors scant potential return for their risk”, especially as he foresees higher interest rates next year which will generate equity market volatility.Brookes’ major bugbear, however, is the bond market – which has surprised many so far in 2014 as yields have fallen and not trended upwards as most investors were anticipating.
However, with 10-year gilts yielding below 2 per cent again, he says it just can’t last.
Performance of index in 2014
Source: FE Analytics
“Almost irrespective of one’s economic outlook, the margin of safety in fixed income markets is wafer thin,” the manager said.
The message is clear – get out of fixed income funds. Instead, the manager has a very high weighting to cash and alternative investment strategies.
Everyone has missed the “real enemy” in the passive vs active debate
Next on the list was on the subject of the age-old battle between active and passive funds.
We came at it from a slightly different angle as Premier’s Simon Evan-Cook told news editor Gary Jackson that regardless of where you stand in the active versus passive debate, the “real enemies” of investors are lazy managers who masquerade as being active while giving sub-standard returns.
“While we frequently lock horns with the passive camp, we think the real enemies are closet trackers. This sub-sector of the investment industry masquerades as active management to justify higher fees, but provides a service that is little different (and frequently inferior) to cheaper index trackers,” the manager said.
“The most obvious problem with closet trackers is that they are poor value for money. Holders of such funds are paying significantly more than holders of the cheapest index trackers, yet they receive worse results (mainly, but not entirely, because of the higher charges they pay).”
He says to avoid closet trackers, investors should focus on funds which have a high active share.
Martin Gray and James Sullivan back in business: How their fund range is shaping up
Editor Josh Ausden kicked off the week with an interview with former Miton manager James Sullivan, who is teaming up with his previous co-manager, Martin Gray (pictured), to launch a new fund range at Coram Asset Management.
Both have become renowned for their bearish stance on the current market and have a good track record of protecting investors so, if Marcus Brookes’ prediction comes true, investors may want to take a closer look at their new offering.“We’ll be looking to launch a range of global multi-asset funds, made up predominantly of other collectives – not only open-ended funds but investment trusts, ETFs and so on,” Sullivan said.
“This is what we did and do best. There’s no reason to change anything. Ultimately we’ll be looking at two or three funds covering the risk spectrum – initially a cautious and balanced fund and then potentially one that’s more growth focused.”
The equity funds that have made you money year-in, year-out
The market can be a cruel mistress and in this article, which was also written by Ausden, we looked to see which pure equity funds in the IMA universe have managed to make you money in at least eight of the last 10 years.
The study showed that there are some long-only managers who have a proven ability of protecting against the downside, whilst taking part in rising markets as well as, according to FE Analytics, 33 pure equity funds have managed to make money in an impressive nine of the last 10 calendar years.
Those included Veritas Global Focus, Invesco Perpetual High Income and Liontrust UK Growth.
The fund eyeing First State and Aberdeen’s crown
Last, but by no means least (especially as it was written by me), we spoke to Erik Landgraff who is hoping that his top-performing Skagen KonTiki fund can steal Aberdeen and First State’s emerging market crown.
It certainly has all the credentials, given that it has beaten Aberdeen Emerging Markets Equity and First State Global Emerging Markets Leaders over the longer term.
It has also beaten its MSCI Emerging Markets benchmark in nine out of the last 10 calendar years.
Issues investors need to be careful of, however, is that the Norwegian-domiciled fund is already £5bn and the managers have the ability to invest up to 50 per cent of their assets in stocks listed outside of emerging markets.
While Landgraff says it is unlikely that this weighting will ever go above 30 per cent and also that all those companies generate the large majority of their business in the developing world, it’s something investors should be aware of.
