Savers pulling over £1bn from their pension funds and research highlighting some of the industry’s worst relative performers are just some of the stories to make the headlines this week.
There’s a lot of financial news out there and so you don’t have to read it all, we’ve pulled together some of the week’s biggest stories.
Pension withdrawals hit £1bn after new freedoms
More than £1bn has been transferred out of UK pension pots in the two months after the government’s overhaul of the retirement savings system came into force, the chancellor told the House of Commons this week.
George Osborne told MPs that 60,000 people have so far taken advantage of pension freedoms that give them access to their pots without being hit by high charges and do away with the need to buy an annuity on retirement.
“So far, in the few weeks since they came into effect, 60,000 people have made use of them. More than £1bn has been transferred out of people’s pension funds as a result,” the chancellor said.
“It is a sign that this is a real success, but we have to make sure that people get the best advice, that the market responds, and that companies up their game in helping customers make use of these freedoms. We will be watching these things very carefully.”
The pension overhaul, which was announced in the 2014 Budget, scrapped the 55 per cent tax charge for those who want to access their entire pension at retirement. Instead, those who take their pension as cash get the first 25 per cent tax free and the remaining 75 per cent taxed at their marginal rate.
SF Webb Capital Smaller Companies Growth tops Chelsea DropZone
Chelsea Financial Services has published its latest report into persistently underperforming funds, with SF Webb Capital Smaller Companies Growth holding the dubious top spot after underperforming its average peer by 96.6 per cent over the past three years.
Performance of fund over 3yrs
Source: FE Analytics
“SF Webb Capital Smaller Companies Growth is still top of the list, although the manager continues to slowly claw back performance (last time round the underperformance was 106 per cent compared with 96 per cent today),” Chelsea said.
“However, with less than £2m in assets under management, one wonders why they don't just call it a day and put us all out of our misery.”
First State Global Resources came in second place on the DropZone with three-year underperformance of 69.17 per cent, followed by HC FCM Salamanca Global Property, Elite Charteris Premium Income and FP HEXAM Global Emerging Markets.
Sebastian Lyon’s Troy Trojan fund was ranked 10th on the list following three-year underperformance of 23.77 per cent. Chelsea’s Darius McDermott said this was the “biggest disappointment” of the research and FE Trustnet took a closer look at what investors should do with the fund.
Fed signals likely rate hike before end of 2015
The Federal Reserve has decided to hold key interest rates at their historic lows but has signalled that it expects to make the rise before the end of the year, as broadly expected by the market.
Fed chair Janet Yellen said there were signs the US economy had started to strengthen following a poor start to the year but said the central bank wanted to see more “decisive” evidence of recovery before making the first increase.
Rick Rieder, chief investment officer of fundamental fixed income at BlackRock, said: “While we believe the data is currently strong enough for the Fed to act, the committee will likely be very deliberate with this first move. Indeed, the central bank significantly lowered its real GDP growth forecast for 2015 (reflecting the first quarter weakness), but it modestly upgraded the growth prospects of 2016 and 2017.”
“Further, when judging the path of the target federal funds rate, the committee consensus implies lift-off for later this year, but also suggests we will see a shallower trajectory of rate increases in 2016 and 2017 than had been previously estimated.”
“In our view, the specific date, which we still anticipate to be September, with some outside possibility of July or October, is significantly less important than the pace of policy rate change. Still, we think that the Fed has been very clear – with Fed chair Yellen using the word ‘gradual’ 14 times in her last speech, highlighting that the pace will be very slow.”
Ecclesiastical to rename as EdenTree Investment Management
Responsible investment specialist Ecclesiastical Investment Management plans to rebrand itself as EdenTree Investment Management following a review.
The firm carried out research across a number of focus groups to choose a name that reflects its standing in the world of socially responsible investments and will switch over to its new identity on 6 July 2015.
Sue Round, director of group investments, said: “This marks a major strategic milestone for the company and the rebrand represents our future growth ambitions.”
“We will continue to operate an active, value-based and long-term approach to stock picking, building on the long track record of delivering profit with principles for investors and charities. Responsibility forms the backbone of everything EdenTree does, from our long-term investment approach to our stance on sustainability.”
Liontrust profits jump after inflow surge
Liontrust Asset Management has posted a 45 per cent increase in profits after the firm’s inflows showed a significant increase over the year to 31 March 2015.
The group reported adjusted pre-tax profits of £12.1m, up from £8.4m one year earlier, supported by net inflows rising 75 per cent from £381m to £667m. Total assets under management now stand at £4.5bn.
Liontrust chief executive John Ions said: “The key to the success of the business has been, and will continue to be, the strength of our fund management teams and long-term performance, the increasing breadth of our distribution capability both in the UK and internationally, the distinctiveness and visibility of the Liontrust brand and the robustness of the business' infrastructure to support and help drive fund management, sales and marketing.”
"Nothing is ever as straightforward as it seems and there are rarely shortcuts to success. Instead, it is achieved from strong foundations and with a clear vision and strategy going forward. I have great confidence, therefore, that we can take advantage of the many tailwinds behind the fund management industry. These include demographic and regulatory changes that mean we are all going to have to take more responsibility for saving for our retirement.”
Numis Securities maintained its ‘buy’ rating on the company, arguing that as a strong UK retail name it stands to benefit from the move from institutional to retail products in the pensions space.
