What must rank as one of the most hard-hitting, thought-provoking critiques of the investment management industry deserves to be widely read by investors and the firms that serve them. ‘Let’s Talk About Actual Investing’, by Stuart Dunbar, a partner at fund management group Baillie Gifford, explains why the investment industry has lost sight of its original goals; why most “active” investment managers are anything but that; and how short-term business priorities and performance measurements are damaging long-term wealth creation.
The UK equity market lagged international stock markets in the first half of 2018, and it was the same story in the third quarter, with the FTSE All-Share index posting a loss of 0.8 per cent. In contrast, the FTSE World index returned 6.2 per cent in sterling terms.
While the underperformance of UK equities may whet the appetite of more contrarian-minded investors, as far as our model portfolios are concerned, it was a big factor behind eight of the 12 falling short of their relevant FTSE UK Private Investor index benchmark in the three months to 1 October.
Each quarter, Money Observer takes a look at our active Rated Fund list, providing a breakdown on a sector-by-sector basis.
Actively managed Money Observer Rated Funds that focus on global technology and biotechnology themes and the red-hot US stock market dominated the list of top performers in the three long, hot summer months to the end of September.
An amazing 97 per cent of global stock market returns since 1973 have accrued during the months from October to April each year. However, volatility also tends to reach its peak in October, a fact underlined by famous October crashes in 1929, 1987 and, more recently, 2008.
Timing the market is a notoriously difficult way to make money. You have to be ‘all in’ to win – or stay out of the game if you can’t take the pressure.
The increasing menace of Trump-instigated trade wars is testing the mettle of even the most optimistic investors. Shares in tech bellwethers such as Netflix, Facebook and Twitter fell by 20 per cent or more following guidance on their prospects when second-quarter results were announced in July: the brutal reaction from investors clearly shows that nerves are fraying.
Among the top 10 Rated Funds for the second quarter, those with a global growth or US equity focus stood out, as well as those focused on UK smaller companies.
The dollar’s rise against sterling over the quarter helped to propel global and US-focused funds to the top of the leaderboard. It was also beneficial for the FTSE 100 index, as up to 80 per cent of earnings from the index’s constituents are sourced in dollars.
In the famous cult zombie film Night of the Living Dead and countless subsequent variants on the theme (most of them pale imitations, aside from the comedy parody Shaun of the Dead), the only way to ‘take out’ the zombie was to take out the head, one way or another. I was reminded of this visceral image after re-reading an Inside Money column from around this time last year, headlined ‘June signified a great deal more than the end of May’.
Are investors in emerging markets in for a nasty shock? The omens do not look good. Emerging market currencies are in the throes of the worst sell-off since 2015; the rising oil price and a resurgent dollar are strong headwinds against growth; Argentina’s right-wing reformist government is seeking a credit line from the International Monetary Fund (barely a year after selling global investors a 100-year bond that was more than three times oversubscribed); and the continuing threat of a US/China trade war hangs over the Asia Pacific region.