Investors continuing to pull sharply away from UK funds and park their cash in absolute return, the Financial Conduct Authority moving to fine the founder of collapsed firm Keydata and the Wealth Management Association criticising RDR have been some of the stories dominating the headlines this week.
A lot can happen in the investment world over seven days and so you don’t have to look over a week of headlines, FE Trustnet has rounded up the main stories to break over the past few days.
Absolute return funds capture best retail sales on record
Retail investors poured their money into absolute return funds in April this year, the latest Investment Association figures show, while largely steering clear of UK portfolios.
The IA Targeted Absolute Return sector was the best selling peer group in April, following net retail inflows of £529m. FE Analytics shows Newton Global Dynamic Bond, Insight Absolute Insight and Threadneedle UK Absolute Alpha were among the most popular products of the month.
These are highest absolute return retail sales on record and take total retail inflows into the sector to just under £1.3bn over the past six months.
IA Europe ex UK came in second place with net retail sales of £397m, followed by IA Property with £265m, IA Short Term Money Market with £218m and IA European Smaller Companies with £179m.
However, the IA UK All Companies sector was hit by its sixth straight month of outflows after another £829m was taken out of the sector. The peer group has lost money in 11 of the past 12 months.
Keydata founder faces record £75m fine
The Financial Conduct Authority (FCA) is seeking to fine Keydata founder Stewart Ford a record £75m – which is almost 20 times its previous highest fine against an individual – after the collapse of the firm prompted losses of hundreds of millions of pounds among investors.
Keydata specialised in traded life policy investments, which are often known as ‘death bonds’ as they based on the life insurance policies of the dying who have sold them on to gain a payout ahead of their death.
The firm collapsed six years ago after the financial regulator highlighted that its products were ineligible for inclusion within ISAs. It was put into administration by the Financial Services Authority (FSA) on the back of concerns that it would not be able to meet its resulting tax bill.
A decision notice from the FCA says Ford acted “recklessly” and with “clear and acute” conflicts of interest, while Keydata’s promotions were misleading, its products inadequate and investors were told they could be held in ISAs.
The FCA is also seeking to fine former Keydata sales director Mark Owen and former compliance officer Peter Johnson £4m and £200,000 respectively. All three have referred their decision notices to the Upper Tribunal.
Ford denies the FCA’s claims and is counter-suing the FCA and administrators PwC. He said in a statement: “The FSA set out deliberately to destroy Keydata and did so without any proper reason.”
“The FSA and PwC collaborated and conspired to carry out a regulatory ‘hatchet job’ on Keydata and on me.”
Aberdeen to buy US private equity manager FLAG
Aberdeen Asset Management has bought US-based private equity and real asset solutions manager FLAG Capital Management.
FLAG has total assets under management of $6.3bn (£4.1bn) and focuses on venture capital, small- to mid-cap private equity, and real assets in the US, as well as private equity in the Asia-Pacific region.
The acquisition fits in with Aberdeen’s aim of growing its global alternatives platform and solutions provision business through multi-manager coverage of hedge funds, property and private market allocations, infrastructure investments and pan-alternative capabilities.
Martin Gilbert, chief executive of Aberdeen, said: “Institutional investors are increasingly looking towards alternative asset classes, including private market allocations, to diversify their portfolios and enhance returns. This transaction is in line with Aberdeen’s strategy of undertaking clear value-added acquisitions that will assist with accelerating business growth in this area.”
“FLAG meets this objective in two ways. Initially, it strengthens further our private market capability by bringing additional Asian expertise and new US resource. This will also benefit our overall pan-alternatives platform. Secondly, FLAG deepens and expands our US client base, which is a key growth market for Aberdeen.”
BNY Mellon launches Dynamic Total Return fund into Europe
BNY Mellon Investment Management has launched a UCITS version of its Dynamic Total Return strategy, expanding its reach from US investors to those in Europe and the UK.
The Dublin-domiciled BNY Mellon Dynamic Total Return fund will aim to keep pace with global stock markets with lower volatility and will take a multi-asset approach, investing across equities, bonds, commodities and currencies.
The fund will be managed by the multi-asset team at BNY Mellon investment boutique Mellon Capital Management. In keep with his management of the US BNY Mellon Dynamic Total Return strategy, Vassilis Dagioglu is lead manager on the European vehicle.
Dagioglu said: “The fund is a diversified growth fund which seeks to profit from mis-pricings across assets and between markets.”
“Using forward-looking valuation models which incorporate expectations for future cash flows, we apply our fundamental analysis in a systematic process on a big scale, on a frequent basis, and with a strong emphasis on downside risk control.”
WMA says RDR definition of independence should be scrapped
The Wealth Management Association (WMA) has said the description of ‘independent’ financial advisers laid out in the EU’s MiFID II regulation is better than the one used in the UK’s retail distribution review (RDR).
In its response to the Financial Conduct Authority's discussion paper on MiFID II, the trade body argued that the RDR’s definition of ‘independent’ is unclear and called for it to be replaced by the description used in MiFID II.
The group, which represents 110 wealth management firms, highlighted a number of problems with RDR’s definition of independent, including the fact that advisers are unable to conduct the required comprehensive and fair assessment of all retail investment products given a lack of comprehensive market data on some of them.
“In summary, we believe the RDR should be replaced by the provisions in MiFID II. Our view is that the provisions of MiFID II are comparable to the RDR but more accurately reflect the manner in which independent advice is provided in the market,” the WMA said.
“It is simply not practicable for firms to consider all types of products that may be suitable for their clients’ needs and it is misleading to give consumers the impression that they can. We would emphasise that in adopting the MiFID II requirements we would expect and support the FCA adopting a rigorous approach to ensuring independent firms met the requirement to assess a sufficient range of different instruments.”
