They’re a resourceful bunch, our readers. Thirty six hours into what the RMT had declared to be the capital’s worst transport stoppage of the year, the Coleman Street offices of JM Finn were packed with attendees for the latest – and perhaps the best – of our London seminar events.
They came by taxi, by car, by bus, by overland rail, by walking, and – let it be said – by a London Underground service that was clearly as determined as we were to keep the show rolling. If Goering couldn’t close London down, we were damned if a few ticket station operatives were going to succeed. And after a warm welcome from JM Finn’s Brian Tora – not to mention a rousing vote of thanks to our doughty audience – the proceedings began.
The Local Butcher Versus the Supermarket
Tom Caddick, at Santander Asset Management, opened the debate with a lively illustrated presentation on the challenge that low-cost passive investments have been presenting to the traditional active management sector – and on the important role that active management can play, especially in the face of commoditised, one-size-fits-all products from the supermarkets that really can’t deliver the tailored services that individuals really need.
That’s not to say that passive investments are wrong – far from it. As Tom, acknowledged, the debate about active versus passive is getting a little long in the tooth. A better way forward is to try and combine the strengths of both approaches for optimum cost-effectiveness and, hopefully, outperformance. An excellent presentation which left us with us plenty to think about.
Next to take the platform were Annabel Brodie-Smith from the Association of Investment Companies and Simon Cordery of F&C’s Smaller Companies Trust, who took us further into the particular benefits and advantages of investment companies.
As a species, IT managers are consistently outperforming their open-ended counterparts these days in the great majority of investment sectors. But I’ll bet that not many of our delegates had really thought about the ways in which ITs distinguish themselves from their OEIC competitors – the liquidity issues, the ability to hold diversified assets, and – let’s say it loudly – the freedom from the constant worry that plagues OEIC managers about how they might be forced by redemptions to abandon promising positions.
That’s an important consideration. Simon and Annabel both stressed that, because an IT manager is the master of his own ship, he can go into emerging markets, smaller companies and sometimes higher-risk situations in a way that the OEIC manager would simply not be able to do.
As for what qualifies as a ‘smaller company’ these days? – well, you’ll have to catch Simon’s presentation in Manchester on that one. But both speakers were agreed that IT managers need to be constantly on the ball, and that their positions are constantly under review. Which is exactly as it should be.
And so to Source ETF, who gave us one of the most polished and informative presentations we’ve ever had on the subject of exchange traded product s – the alphas, the enhanced betas, the targeted indices, the physicals, the synthetics, and a thousand questions you never dared to ask about counterparties, leverage and all the rest of it. Unmissable, and utterly informative.
Michael John Lytle, chief development officer at Source, joined with Dominic Clabby, director of IFAs and platforms and Fabrizio Palmucci, director of fixed income, to provide and entertaining and utterly informative account.
They left us in no doubt that we haven’t seen the half of what ETFs are going to accomplish in Britain, and in Europe as a whole. The state of development in America has already taken off in ways that we just haven’t seen yet on this side of the Pond. It’s coming soon.
Source also talked us through some of the innovative ways in which ETFs can overcome barriers to foreign investment. We’ve already mentioned on this website about how ETFs can get UK investors into so-called MLPs, which are funding US oil industry developments but which are normally only tax efficient for US residents. But there was much more beside. Try and catch our Manchester seminar for more on this!
It Isn’t All About Cost
And finally, back to Mike Mount from JM Finn, who focused his address on the ways in which we can bring all these conflicting strains together for our clients.
What’s the right balance between active and passive? It depends, he said. When the markets are feeling upbeat and active funds are starting to show their paces, it’s appropriate to overweight. And when things are less certain, some adjustment is in order. The advantage of passives is still that they beat actives on cost – and the skilled adviser’s task is to achieve the optimum balance of the two, balanced against performance, that will deliver the best outturn to the client at the most reasonable fee level.
And so, over lunch, to the eleventh man, cricketing legend Alec Stewart, who gave us a lively and entertaining series of deliveries, in the face of an overwhelming Aussie victory in the last Ashes series.
England’s most-capped player didn’t try to dodge the bouncers from the audience at all – cricket, he made it clear, is quite a political thing for our colonial cousins, and we should have expected the thrashing we got, first from the Aussie press and then from their miraculously improved bowlers. The questions from the floor were very memorable, and so was the banter. Alec will be hoping for more of the same next week in Manchester. Alec is a JM Finn ambassador.
Still Time for Manchester
Speaking of which, there’s still time to register for the 7th May seminar in Manchester, when the same extensive range of essebtial topics will be discussed. We look forward to seeing you!