Alan Smith discusses his reasons for a passive investment approach.
Alan Smith, the CEO of London based Capital Asset Management and Morningstar Adviser Workstation user, discusses the reasons he’s taken a passive approach to investing since the financial crisis.
Alan and his team use Adviser Workstation to analyze their clients’ asset allocation and ensure they are properly allocated given their risk profile.
A sneak peak at the new Global Fund Research Report
Since April of 2010, Morningstar and OBSR fund analysts have been harmonizing their processes and methodologies for rating funds and writing reports. The two ratings have been linked and users of Morningstar tools can take advantage of the increased ratings coverage and expanded expertise the larger analyst team provides. The culmination of this process will come later this year (Q4) when Morningstar will launch a unified global fund rating and analyst report.
The new rating and report will replace the existing Morningstar qualitative rating andthe OBSR rating while combining a wealth of analysis and data in one report. These reports will be universal worldwide, allowing for wider coverage of funds and a consistent approach to fund analysis for investors.
The new rating scale will consist of 5 ratings: AAA, AA, A, Neutral, and Negative. AAA funds will be best of breed and will reflect the analysts’ highest level of conviction. A Neutral fund is one that is not likely to standout, either positively or negatively. And a Negative rated fund will be one that has at least one flaw that is likely to significantly hamper future performance. For a complete explanation of the new rating scale, please click here.
For more details and a sample of the global fund research report, please visit our press kit here.
I am pleased to confirm the new Risk Tolerance Questionnaire will go live on 16th July 2011.
Morningstar’s primary goal and driving force has always been to equip investors and their advisers with accurate, timely and insightful data, research and tools that enable them to make better, more informed investment decisions.
The BBC Panorama programme 13 June 2011 – ‘Can you trust your bank’, in our view highlighted the problem with transactional/sales driven so called ‘advice’. The programme’s focus on poor ‘advice’ through illustrations of individual behaviour within a number of banks highlights the need and value of truly independent advisers, who establish a detailed knowledge of their clients and a long term non-transactional focused relationship.
Financial Advisers, powered by Morningstar, can be certain that they are supported by a business that has their client’s investment interests at the forefront. Morningstar provide your business with a scalable robust investment process, one that you can be confident of and your clients happy with. In mid July we will enhance that process with the release of our latest risk profiling tool which has taken into account the FSA’s good practice guidance. It’s important to make clear that tools should provide structure and promote consistency within your business but they are still just an aid to an adviser’s investment process. After all, the client is buying into your advice proposition and the role of Morningstar is to facilitate that.
Our latest RTQ goes further than ever in helping advisers and their clients understand the risk a customer is willing to take as well as their capacity for loss. The Morningstar Risk Profiling Tool, has been created by Ibbotson Associates (part of the Morningstar Investment Consulting business), who are also responsible for creating the asset allocation guidance models.
Clearly, the recent review of wealth management firms, where 14 out 16 firms posed a high or medium-high risk of detriment to their customers, tells us it’s not just the banks that have issues executing best advice practices and underlines the importance of having a robust investment process in place while being supported by a truly independent business partner such as Morningstar.
We here at Morningstar are very proud to announce a strategic partnership with Technical Connection to deliver a gap fill day in September as well as ongoing content and commentary on this blog. Technical Connection are the financial services sector’s pre-eminent supplier of technical insight, support , CPD and proposition development on all aspects of tax, investment, protection, pensions and all aspects of the financial planning process.
Technical Connection is based in Staple Inn, London and is led by Tony Wickenden and John Woolley.
You can find more about their products and services, including a free trial of Techlink Professional, technical connections knowledge management, research, business generation, client communication and CPD plaftorm here: www.technicalconnection.co.uk and www.techlink.co.uk
Below is a brief sample of some of the content you’ll find on the Techlink website:
DWP Consults On Regulations To Permit Reduction Of Pension Benefits Where Scheme Meets Member’s Annual Allowance Charge
SYNOPSIS: The DWP is consulting on amending regulations which are designed to enable a member’s scheme benefits to be reduced where he has elected for his scheme to meet all or part of his annual allowance tax charge.
The Government has confirmed that it will permit pension scheme members subject to an annual allowance charge of more than £2,000 to elect for all or part of that charge to be paid by their scheme with their benefits being appropriately reduced to allow for this. Legislation to enable this has been included in Schedule 17 to the Finance (No.3) Bill 2011. However, Section 91 of the P..continued on the Techlink website
RLP Savings __
SYNOPSIS: The tax benefits of an RLP make it a “no brainer” for employee life cover
The following example illustrates the significant savings that can be secured through the provision of life cover for an employee through a Relevant Life Policy. Provided all the conditions are fulfilled (including the absence of a tax avoidance motive) there is no statutory limit on the level of cover/premium. In the example, comparing the cost of providing the same life cover through a..continued on the Techlink website
France To Introduce Property Tax For Foreign Owners __
SYNOPSIS: France to introduce a 20% tax on rental value on holiday homes.
The French Government has approved a new tax on non-resident property owners which would affect British people who own homes in France. The tax will be debated in the French parliament in July and if enacted will come into effect next year. The tax will be set at 20% of a property’s nominal rental value and is being seen as a second owner levied tax on top of the current taxe fonciere (levi..continued on the Techlink website
Discounted Values Under Discounted Gift Trusts __
SYNOPSIS: The recent decision in the sex equality case of Test-Achats raises questions as to whether the current method of valuing the income rights under Discounted Gift Trusts needs to be revised. HM Revenue and Customs has now made a statement on this.
The Discounted Gift Trust (DGT) enables an investor to invest a cash sum in a single premium bond that is held subject to a special trust that gives ‘income’ rights to the settler whilst alive and death benefits to a trust – typically a discretionary trust…continued on the Techlink website
Technical Connection
020 74051600
Derek.Lovell@technicalconnection.co.uk
Clare.Thomas@technical connection.co.uk
The gap fill day is scheduled for September 14th in London. For further details please call 0203 107 0040 or email events.rsvp@morningstar.com.
The details of the UK’s first quarter economic performance were released last week and I was surprised that the figures received relatively little coverage given their shock value.
In a nutshell, the UK was only spared a re-entry into recession by an abnormally high contribution from net exports. The underlying figures were pretty dire, with consumption and business investment recording recession-like declines. The poor performance of the private sector is perhaps particularly concerning given its importance to establishing the sustainability of the fragile economic recovery – it needs to offset the government austerity regime.
Before considering emigration, it is of course possible that the weakness proves to be temporary and certainly the employment data and business surveys point to a better outlook (although they also did in Q1). Moreover, the nominal GDP figures were strong, with growth in Q1 of 2.2% q/q or at an annual rate of nearly 9%! From a household consumption perspective, the respective figures were 2.1% nominal q/q compared to -0.6% real and suggest UK consumers spent merrily at a near 8½% p.a. rate, just much more went on (temporarily?) higher prices. Together with the prospect of future revisions it is probably sensible to treat the “real” numbers with a degree of caution if not outright suspicion.
Even so, the net trade figures are highly unlikely to be repeated and, as has been suggested many times before, the UK economic outlook can be described as challenging at best. It is hard to envisage any near-term rate rise and here’s hoping that Sterling doesn’t slide precipitously and overall confidence in the UK can be maintained.
To join the conversation on the OBSR blog, please follow this link:
http://www.obsrfundratings.co.uk/Default.aspx?alias=www.obsrfundratings.co.uk/blog
By Andy Brunner
Morningstar's Holly Cook with M&G's Head of Fixed Interest Jim Leaviss
If you attended the Morningstar Investment Conference earlier this month and you’d like to hear more from some of this year’s speakers, their post-presentation interviews are available below. If you didn’t attend and you’d like to hear Richard Buxton’s take on UK equities, or Robin Batchelor’s view on global commodities markets, to name a few, have a look and put next year’s conference in your diary!
Jim Leaviss (M&G): M&G’s Head of Fixed Interest explains his outlook for inflation and discusses vehicles to protect against rising prices
Burns: Know What You Own in ETFs: ETFs suit investors both large and small, but the right investment idea can be completely ruined by bad execution of that idea, says Morningstar’s Scott Burns
Collings: Emerging Markets Far Safer In Long Term: HEXAM’s Bryan Collings says focusing on short-term risk when investing in emerging markets is akin to creating a “weapon of mass wealth destruction
Dr Savage: Monte Carlo Modelling in Everyday Life: Drs Paul Kaplan and Sam Savage explain how stochastic modelling and Monte Carlo simulations are used in everyday life as well as asset allocation theory
Bonham-Carter: Industry Faces Multiple Challenges: Jupiter CEO Edward Bonham-Carter says the investment industry is just starting to address the challenges of rising longevity and a changing pension environment
Thompson: Stable Career Deserves Riskier Portfolio: Ibbotson Associates’ John Thompson explains how a more volatile career choice deserves a more conservative portfolio, and vice versa
Rogoff: The Tech Sector is Awash with Cash: Polar Capital’s Ben Rogoff says the tech sector is unique in terms of its net cash position, but large-caps are generally not the best place to invest
Jordison: A Dull Outlook for UK Property: Don Jordison of Threadneedle Property says there’s little risk of major upside or downside from here, but UK property has some solid areas
Abercrombie: European Banks Cheap for a Reason: Schroders’ Justin Abercrombie outlines three potential fat pitches–volatility in store for European financials, a less discerning GEM investor, and undervalued defensives
Greetham: Our Model Says We’re in Overheat Stage: At the Morningstar Investment Conference, Fidelity’s Trevor Greetham outlines how various assets perform in differing stages of the economic cycle
Taggart: Don’t Invest in CEFs Just for a Discount: Morningstar’s Mike Taggart says investors should select closed-end funds that primarily suit their portfolios; any discount should be considered a secondary bonus=
Stewart Cowley (OMAM): The Head of Fixed Income at OMAM explains why investing in government bonds currently “doesn’t make any sense” and discusses more attractive ways to protect one’s investment.
Richard Buxton (Schroders): Schroders’ Head of UK Equities says the continuation of good profit growth, good cash flow and balance sheet repair means there is plenty of opportunity in UK equities.
Robin Batchelor (BlackRock): BlackRock’s Robin Batchelor says smaller oil companies don’t have the same volume growth challenges that larger integrated oils players face.
Morningstar Adviser Forum at St. James Park in Newcastle
Morningstar Adviser Forums now provide gap filling sessions and up to 5 CPD points for attending. The half-day forums have become a great opportunity to gain valuable insight from some of Morningstar’s and OBSR’s brightest minds – our analysts.
As the investment industry evolves and greater demands are placed on advisers, Morningstar will continue to provide thought leadership and an independent opinion on investment products of all types. Presentations at the forums so far this year have included:
A presentation of our award winning research and financial planning software, Adviser Workstation, is also a staple of the forums. Current users have benefited from dedicated training sessions at each forum – both group training and 1-to-1 sessions are available.
Overall, the forums have been a fantastic opportunity for us to meet advisers and for users of our software to get the most out of the Morningstar tools and research they use everyday. If you would like to see what Morningstar has to offer independent financial advisers or if you would like to get more from your current subscription to Adviser Workstation, we would love to see you at a future forum. You can check future dates and register here.
It was fantastic to see so many of you at the conference this year, we sincerely hope you that enjoyed yourself and that you came away feeling energized and full of ideas. If you missed any of the presentations at this year’s conference or just didn’t manage to take notes fast enough, below are links to the slides from each presentation. Videos of many of the presentations will be available soon.
Enjoy!
John Thompson Gap Fill Session (points collected by on-site attendance only)
Over two days jam-packed with investing passion and expertise, attendees of the Morningstar Investment Conference learned that Schroders’ Richard Buxton is kept awake at night by the sovereign debt crisis (and his two new kittens), heard Old Mutual’s Stewart Cowley compare the US to an “80 times leveraged hedge fund”, and had an opportunity to contrast this with comments from Fidelity’s Trevor Greetham that Obama’s pro-growth stance is the way to go.
No fewer than 20 leading investment specialists imparted their knowledge on the past, current and future investing environments, plus additional insight into their personal areas of expertise. There was an awful lot of talk about the US economy and monetary policy. “The US is acting like an emerging banana republic,” opined M&G’s Jim Leaviss, while Stewart Cowley made his thoughts—verging on disgust—at the Obama government’s current policy firmly known, and in stark contrast Trevor Greetham applauded the US stance and instead chastised European leaders for not following in their footsteps.
The highlights are too numerous to mention but stand-out memories include HEXAM’s Bryan Collings providing a staunchly bullish view of emerging markets opportunities, in which he said it is highly unlikely that emerging market growth will lose momentum unless there is a major crisis that hits all the developing economies, and the only economies able to trigger such a crisis are developed markets. Polar Capital’s Ben Rogoff gave an impassioned presentation on the tech sector, successfully managing to make cloud computing and software as a service (SAAS) sound not only almost sexy but also like a particularly exciting area of investment. Threadneedle’s Don Jordison displayed such confidence in his team’s ability to look after clients’ money in the property space that he quipped that if a fund has “Threadneedle” at the start of its name then it’ll outperform. And, in addition to his feline experiences, Richard Buxton told the 300-strong audience that UK corporates are in notably good health and consumer-driven stocks are even starting to outperform, much to his pleasant surprise.
Full coverage of each presentation can be found at Morningstar.co.uk.
After months of planning and anticipation, the 2011 Morningstar Investment Conference takes place this week at the Park Plaza Riverbank hotel in London. We are extremely excited to have so many advisers registered to attend this year and can’t wait to catch up with familiar faces and meet new ones. For a preview of the conference and the agenda, have a look here:
2011 Morningstar Investment Conference preview
Please stop by the Morningstar booth and meet our team if you haven’t done so already. We will be available to discuss the Adviser Workstation and provide training as space permits. We’ll also have quite a few fund analysts on hand so please take advantage of their insight and expertise.
Can’t wait to see you all there!