Investors are increasingly concerned about the impact of climate change on their investments. An alarming report by the United Nations Intergovernmental Panel on Climate Change (IPCC) projects that emissions needed to be 40% to 70% lower, if we want to avoid climate catastrophe. Companies will be forced to adapt their business models to the policy, technology and market changes needed to facilitate the transition to a low-carbon economy.
Our new global value exchange traded fund (ETF) portfolio has produced a negative return over the three months to the end of November. In total, the £8,000 portfolio was down to 0.87%, losing a total of £69 between 2 September and 2 December.
The ETF fee war shows no sign of abating. On the contrary, fee cuts have become part and parcel of life in ETF-land. Europe still lags behind the US when it comes to aggressive price-cutting. On this side of the Atlantic, we have yet to see zero-fee funds, let alone funds that actually pay investors, albeit temporarily, for the honour of holding them. Still, it’s clear that the only direction for ETF fees in Europe is south.
Value is one of the few consistent predictors of investment returns, and when it comes to attempting to profit from value investing, there are plenty of ways to skin the proverbial cat.
Our new global value portfolio seeks to profit from the eight most undervalued single-country markets in the world, out of the 40 that are investable and accessible using ETFs.
The gating of Neil Woodford’s flagship Equity Income fund in early June has alarmed investors. However, Woodford invested the fund in small and unquoted stocks that are difficult to sell quickly, listing some stakes in unquoted companies in Guernsey simply to circumvent the regulator’s rule that caps at 10% of net asset value (NAV) the proportion of unlisted securities an open-ended fund with daily dealing can hold.
Despite some recent signs of slowing down amid the ongoing trade war with the US, China remains among the fastest-growing emerging markets. The economy has been posting high single-digit GDP growth over the past two decades thanks to rising domestic consumption and infrastructure investment.
China has become a mainstream investment in many portfolios, and this is only likely to increase in coming years. Exchange traded funds (ETFs) offer investors easy access to the Chinese growth story, but navigating the country’s equity market is not straightforward.
When you invest in – for example – an S&P 500 ETF, you are tracking the movements of the US large-cap equity market, but you are also left at the mercy of the USD/GBP exchange rate.
This is not a trivial point. Since the Brexit vote in 2016, the pound has dropped 15% against the US dollar, boosting already strong US equity returns to UK-based investors.
Investor interest in passive investment continues to grow at a healthy clip across the globe, and investors in ETFs are leading the charge into passive funds. This is particularly the case in the US, where ETFs have become akin to a default investment option.
In the UK and mainland Europe, the trend is also positive. Flows into ETFs in the first four months of 2019 totalled €30 billion (£26.5 billion). The value of assets invested in ETFs in Europe is nearing €800 billion (£710 billion), up from €200 billion (£175 billion) at the beginning of the decade.