BBC Radio Scotland – Amanda Forsyth on “Good Morning Scotland”


Amanda Forsyth – Investment Manager & Business Development

In an outside broadcast from the Edinburgh Festival, Amanda Forsyth and BBC Radio Scotland’s Andrew Black take the temperature of the US economy and its trade relations with Japan; touch on the developing strategy at Pets at Home; discuss the challenges facing Norway’s Wealth Fund in divesting fossil fuel investments; and highlight the industrial relations issues at Ryanair. Andrew also has a go at stand-up comedy. From 51 minutes into the programme.

BBC Radio Scotland – Amanda Forsyth on “Good Morning Scotland”


Amanda Forsyth – Investment Manager & Business Development

Amanda Forsyth and BBC Radio Scotland’s Andrew Black discuss the second-half weighting of blockbuster movies for Cineworld; the proposed name change of Majestic Wine; the impact of Woodford’s woes on Hargreaves Lansdown; and the challenges facing Tulloch’s management team at Aviva. From 51 minutes into the programme.

The MAM Blog – Project Heather: The Relaunch of a Scottish Stock Exchange

Ross Middleton Senior Investment Manager, Murray Asset Management
Ross Middleton – Senior Investment Manager

A Scottish Stock Exchange was originally launched in the 1960’s, lasting 11 years until it was merged with the London Stock Exchange in 1973. However, the re-establishment of a Scottish Stock Exchange has moved a step closer through an initiative known as Project Heather.

Headquartered in St Andrews Square in Edinburgh the plan is also to have offices in Glasgow and Aberdeen. Approximately 45 jobs will be created from the new venture and following an initial investment package announced in March, the founders have also secured a £750,000 grant through Scottish Enterprise.

The new exchange is aiming to focus on those companies wishing to raise capital that are making a measurable and positive social and environmental impact. This will be measured through meeting certain criteria prior to listing and also by achieving ongoing targets. Those leading the project are hoping to use their connections with entrepreneurs and firms within a number of sectors including renewables and construction.

The objective is for the exchange to be complimentary to other existing exchanges with the founders emphasising their plan is to attract new investment rather than encouraging established firms to move their current listing.

The exchange has partnered with Euronext, Euroclear and European Central Counterparty in order to provide leading technology and market infrastructure.

The new initiative will be more cost effective for listing than other stock exchanges and the aim is for the exchange to be launched by the end of 2019.

The MAM Blog – Decline of Government Bond Yields

Stuart Ralph Investment Manager, Murray Asset Management
Stuart Ralph – Investment Manager

From the interest rate lows of 0.25% under Ben Bernanke and Janet Yellen, the benchmark rate of the US Federal Reserve[“the Fed”] began to rise from December 2015 as historically low levels of unemployment and tight labour markets prompted fears that inflation would spike higher. Following President Trump’s appointment of Jerome Powell as Fed Chair, the rhetoric continued to point towards further rate rises, such that by December 2018, the rate had increased to 2.5% – where it currently stands today. In addition to further rate rises, the Fed also signalled its intent to reduce the $4 trillion of Quantitative Easing (QE) debt held on its books, a legacy of the Financial Crisis. In effect, to begin a slow reversal of the stimulative monetary policy put in place following the financial crisis.

While cautionary tales of fighting the Fed are plentiful, the market became increasingly rattled with their intent, citing policy mistake and highlighting associated economic risks. These and other concerns prompted a deterioration of investor confidence and the sharp decline of equity markets over the 4th Quarter 2018. Combined with President Trump’s criticism of its monetary policy, the Fed has since moderated its language and tone. US-Chinese trade tensions, benign wage growth and contained inflationary pressures have allowed the Fed to signal that it will keep rates at 2.5% until 2021 and hint that it may lower the rate if economic conditions deteriorate.

Since the start of the year, yields have steadily fallen, resulting in a lower and flatter yield curve. In the illustration below, we can see that in the past few days, the yield on the 10 year US Treasury Benchmark Bond has fallen markedly below the Fed Funds rate of 2.5%.

A similar dynamic has been played out in the UK, with the UK 10 Year Gilt having fallen below the Bank of England Base Rate of 0.75%

The graphs above indicate renewed concern and suggest that financial markets anticipate a Fed forced to cut interest rates as growth disappoints and inflationary forces fail to materialise. In the UK, the market believes further rate rises unlikely.

There is little doubt that global Central Banks have recently re-appraised economic conditions and tempered plans to reverse the monetary policy of the QE era and there are times the Fed (and others) have been behind the curve, and eventually moved towards the market view. However, there is clearly a risk that markets are putting too much store in a weak US growth scenario, by expecting an aggressive rate cut to 2.0% (a reduction of 0.5% points). In other words, Government Bond Yields may have overshot the mark, particularly given tentative signs of a fragile de-escalation in trade tensions between the US and China.

With the recent reassessment of monetary policy, investors should gain some comfort that Central Banks are positioned to support growth if and when required, and such action should help underpin financial markets over the medium term.

BBC Radio Scotland – Amanda Forsyth on “Good Morning Scotland”


Amanda Forsyth – Investment Manager & Business Development

Amanda Forsyth and BBC Radio Scotland’s Andrew Black discuss the headwinds that caused Lufthansa to warn on profits; examine Ashtead’s role as bellweather for the US construction industry; list some of the ways Kier is seeking to ‘future proof’ its business; and review the impact on Huawei’s sales – and production – of the US government’s sanctions. At 50 minutes into the programme.

The MAM Blog – The Discontented Consumer


Amanda Forsyth – Investment Manager & Business Development

The most recent data from the Office for National Statistics shows the unemployment in the UK continues to hit new lows – only 3.8% of the workforce is, we are to understand, without a job.


 

Why, then, is the story from the high street so markedly different? Thanks to comparisons with the period when the Beast from the East kept shoppers away, the month of March saw a sharp year-on-year rise in retail sales; but the underlying picture is less rosy, with 23,000 stores expected to close during the course of 2019. The high-profile collapse of Debenhams has been accompanied by a litany of other retailers announcing that they are calling in administrators – fashion chains like Pretty Green and LK Bennett, the bathroom suite distributor Better Bathrooms and Patisserie Valerie are all on the list of failures in the first quarter.

Nor is the blame entirely to be laid at the door of the online onslaught. Online retailers Wine Direct and Miss Shoes also suspended trading, the latter citing intense competition among their reasons for failure.

 

There is certainly a fierce battle for the attention of the UK consumer, but one would have thought that with so many in work, there should be enough retail spend to go around. The devil, though, is in some of the detail of the unemployment data. The growth in zero-hours contracts means that a worker can be regarded as employed, while still failing to secure any earnings; and the result of that has been a fall in productivity and consumer confidence.

The challenge, therefore, is to overlay on the rosy employment picture a realistic assessment of the shopper’s wallet, and both high street and online retailers must work hard to retain a share of that slim purse.

 

BBC Radio Scotland – Amanda Forsyth on “Good Morning Scotland”


Amanda Forsyth – Investment Manager & Business Development

Amanda Forsyth and BBC Radio Scotland’s Andrew Black examine Uber’s fortunes since it listed in the US; discuss ways that FirstGroup can keep its activist investors happy; the improving trend of advertising at Daily Mail & General; and the likelihood of De La Rue delivering on market expectations, despite losing their passports. At 51 minutes into the programme.

The MAM Blog – Reviewing a fund

Charles Robertson Senior Investment Manager, Murray Asset Management
Charles Robertson – Senior Investment Manager

I was recently asked by a client to provide some comments in relation a recently launched Investment Trust because they were considering purchasing shares. The following is a summary of my reply and it provides a useful insight into how we review a fund.

The launch of the fund involved was incredibly popular and as a result it raised far more money than was expected (roughly 3x more). Generally, Murray Asset Management do not participate in fund launches which attract such a level of support because:-

• Too much hype – triumph of marketing
• Too much support from retail investors
• Tend to involve a ‘star’ fund manager with a long and successful track record based on a particular investment style

Retail investors may not fully appreciate the characteristics/risks of the fund they are supporting and may quickly become disillusioned if short-term performance is disappointing. Typically, if this leads to a lack of demand for the shares then the share price may move lower (and independently to the Net Asset Value performance). Investment styles may go in and out of favour – marketing typically focuses on a ‘here is what you could have won approach’ if you had only invested five years ago in the fund. However, you could not invest in the fund five years ago and so we treat any such performance claims with a healthy degree of cynicism.

However, the fund involved has a number of attractive features, but again some of these require further consideration:-

• A focus on global small and mid-sized companies (good) – but really not that small with the average investment being in a company with a market capitalization of approx. £7 billion
• A long term investment approach (good)
• A focus on quality (good) – particularly if economic headwinds are starting to build
• A concentrated portfolio (good – but adds to risk)
• A clearly defined investment strategy (good).

Typically, we favour managers who have the experience of being ‘through an investment cycle’ – i.e. through both good times and bad. There are other factors to take into account when reviewing a fund, for example costs and the investment opportunity relating to the asset class involved. Finally, given it is an investment trust the share price needs to be considered in relation to the Net Asset Value.

It would be wrong for me to provide details of the recommendation we made, but hopefully the comments are a useful insight into how we begin to construct a recommendation.

The MAM Blog – What does Compliance actually do for clients?


Lisa Hamer – Compliance Director

One of the few times I have heard compliance discussed with any real enthusiasm (aside from with other Compliance professionals) was when ‘Comply or Die’ won the Grand National in 2008! Compliance is the reason we have to issue so much information to clients, and obtain so much from them in return – it is just a burden! Or is it?

Actually, Compliance is your champion and protector. In conjunction with MAM’s Management Board, it ensures that the firm meets all regulatory requirements – everything from financial solvency to suitability of advice.

Suitability is the reason that we need to ask for so much information from clients, both at the outset of our relationship and periodically thereafter. We need to ensure that our services, investment decisions and advice are suitable; that our clients understand any risks involved and have the financial capacity to bear these. We need to regularly review our clients’ circumstances to ensure any changes are considered in our on-going advice and investment decisions. In order to do this, we need a lot of information.

What may seem to be intrusive questions are extremely important. Would you trust a medical diagnosis based on your answers to a few simple questions, or would you trust the one based on a comprehensive and detailed review of your current and past history? Similarly, which analysis of your financial needs would you trust if done on the same criteria?

Yes, we have compliance obligations but primarily we want to do the very best for our clients, and this means asking for quite detailed information in order to undertake a comprehensive analysis of needs and so propose suitable, effective and tailor made solutions.

So, rather than being intrusive or inconvenient, our requests for information are the foundation for suitability.