Here’s our weekly summary of the content in some of the leading National Media’s Money Sections this weekend. It’s a great way to catch up with what content your clients are likely to be reading in the money pages and which may underpin some questions they have at your next review meeting with them.
Unusually, the whole front page of yesterday’s Sunday Times Money Section is about one man – Terry Smith. It’s because of the 10th anniversary of FundSmith Equity and entitled “Happy anniversary Mr £53m – the last of the star fund managers”. Ali Hussein’s article gives plenty of reasons why investors will be have been happy with the fund to date but she does go on to say “Terry Smith has built the biggest investment fund in Britain, so why isn’t everybody happy?” The article outlines his investment approach, the concentrated nature of the portfolio and the exemplary performance that has been achieved for investors. On the other hand, the article also reports on its absence from many investment firms’ best buy lists – including that of Hargreaves Lansdown. In HL’s case the article says that the reason for this is that “Fundsmith does not provide it with enough data to make a thorough analysis” however also in the article it is reported that Smith has said in response to such comments in the past that “given HL’s poor fund-picking record he would worry if he was included in its list”. Ouch!
But not content to leave it at that, James Coney has also taken up the Terry Smith mantle with an opinion piece reminding readers to “hold all fund managers to proper scrutiny”. He goes on to say that “despite the dazzling returns, there are several ways in which Fundsmith operates that I don’t like” and then comments that it does not publish its full long form accounts online, only its short form accounts. As he says, this is fully compliant with regulations but “it makes it harder to get details of holdings”. He rounds off with this “You should should absolutely invest in Fundsmith but don’t do it because of the brilliant returns in the past or because you like Terry Smith. Do it because you have read his owner’s manual and looked under the bonnet of the fund by reading the full annual accounts.” So there you go!
“We’re going to court”. Talking of star fund managers, it’s the fallen star Neil Woodford whose problem-hit fund empire is behind this headline over at the Financial Mail on Sunday. In the article Jeff Prestridge reports that one of the five firms (Harcus Parker) looking to obtain compensation for investors in Woodford Equity Income Fund is set to launch a multi-million pound class action by the end of the year.
And on a much more positive note, MoS is also marking the fact that this week is “Good Money Week” with an article highlighting how “The Attenborough Effect” is having a marked impact on investors who are increasingly looking at matters of sustainability when it comes to their investment portfolios as well as their daily lives. Here at IFA Magazine we’ve always been strong supporters of the move towards responsible investment and we’re pleased to see the national media giving it well deserved coverage.
Meanwhile, the Financial Times Weekend reports that far from turning investors away from environmental, social and governance (ESG) investing, the crisis has heightened interest in sustainable portfolios in general. A survey this month by RBC Global Asset Management found that the pandemic had led more than a quarter of professional investors to place more importance on ESG considerations.
In the nine months to the end of September, new money going into climate-aware funds totalled nearly €37bn out of total sustainable fund inflows of €134bn — just over a quarter, data from Morningstar, the funds research company, show. The previous year, this proportion was just 15 per cent, with flows significantly lower too at €12bn.
With climate change orientated responsible investing in its infancy and interest so high, investment houses have been falling over themselves to launch products. That has led to fears of so-called greenwashing, where funds appear to be more climate-friendly than they really are. Regulators in the UK and Europe are on the watch for these cases. A new set of sustainable investing rules from the European Union that comes into effect next March is intended to clamp down on greenwashing and make ESG funds easier to compare by forcing asset managers to disclose more on their investments.
On a different subject, bogus applications for coronavirus support loans in the UK have gone almost entirely unreported according to the FT, with less than 0.5 per cent of the expected fraud cases being flagged to the police.
However, earlier this month, government spending watchdog, the National Audit Office reported that the Bounce Back Loan Scheme alone had delivered £36.9bn to more than 1.2 million applicants. Separately the Cabinet Office has warned that fraud losses from these loans were likely to be “significantly above” the typical range of 0.5-5 per cent — suggesting at least £1.85bn had been claimed dishonestly.
With BBLS sums limited to a maximum of £50,000 per applicant, those fraud losses would statistically be widely spread, stemming from at least 36,900 of the loans applied for to date, according to FT calculations. The relatively small number of crime reports suggest that fewer than 0.5 per cent of the expected bogus applicants have yet been detected. Action Fraud’s numbers also include reports relating to the Coronavirus Business Interruption Loan Scheme, for which there have been 73,000 successful applications — meaning the proportion of detected frauds compared to the overall number of loans being approved at this point could be even lower.
Our last FT extract highlights its report that the chairman of Royal Mail has warned that its duty to deliver the post six days a week is “not economic” as it stands.
“We should be pivoting towards parcels, as well as keeping the basic tenets of the USO — one service that goes everywhere in the country at one price point — but recognise that people want parcels equally if not more than they want letters,” he told the Financial Times
His comments come as a regulatory review takes place into what users need from the former state-owned monopoly.
As coronavirus spurs an online shopping boom and hastens the decline of paper-based correspondence, Royal Mail has forecast a “material loss” at its main UK operation this year despite higher revenues. It blamed extra overheads from elevated staff absences and protective equipment, and the higher costs of handling parcels compared with letters.
Finally, The Sunday Telegraph’s Head of Personal Finance, Lauren Davidson, offers a cautionary article on monitoring and maintaining financial resilience in the Money Section of Sunday’s paper. Noting that everyone believes it can’t happen to them she references the FCA’s report published last week that suggests that there are roughly 12 million adults living in Britain that fall into the “low financial resilience” bracket. With at least two million having lost financial resilience this year alone the Report noted that a third of adults saw household income drop during the Covid 19 crisis.
As the furlough scheme comes to a close and the government’s replacement scheme is considerably less generous she reminds readers that the deadline to apply for the final three months of mortgage repayment support is also rapidly approaching.
It’s clear that now more than ever access to sound financial advice will be uppermost in people’s minds.