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.

The MAM Blog – Tapered Annual Allowance


Richard Johnston – Financial Planning Director

The Annual Allowance (AA) restricts the value of pension contributions that can be made by an individual in a given year and, for some years now, the standard AA has stood at £40,000.

Since April 2016, however, the AA has been tapered for those with high levels of income and the rules relating to it can lead to complex calculations being required to determine the AA that is to apply. Typically, the taper applies when income exceeds £150,000, but that is further complicated by the fact that employer contributions are also deemed to be income, and there is a get out of jail card which can be played if income, according to an alternative definition, is below £110,000.

At worst, the taper reduces the AA to £10,000, which is typically achieved once income reaches £210,000, as £1 is lost for each £2 of income above £150,000.

The taper is all the more relevant now because whilst AA rules may permit a person to carry forward unused AA from the previous three tax years, it is now the case that all of those years could be subject to the taper, so a separate calculation may be required for each.

The matter is even more complex for those with defined benefit pension schemes, because 1) a special formula is used to calculate AA usage and 2) it can be difficult to predict what AA usage will occur for a current tax year, in order to decide whether to make a top-up contribution to a personal pension.

It is, therefore, the case that the seemingly simple question of ‘How much can I contribute to my SIPP this year’ may, in fact, be a complex one that requires some time (and a good spreadsheet!) to calculate. For those who may be affected, it is important to assess the position sooner rather than later

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


Amanda Forsyth – Investment Manager & Business Development

Amanda Forsyth and BBC Radio Scotland’s Andrew Black take a fast-moving look at FMCG giants Unilever and Reckitt Benckiser; assess whether the history of the Facebook float has informed the pricing of Pinterest; and discuss the balance of pressures on franchisor and franchisees at Domino’s Pizza. At 52 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 review the continued fallout of Debenhams shares as management struggles to make shopping fun again; assesses the ability of Just Eat to deliver on expectations in the face of hot competition; note the short term filip Aggreko enjoys from the Olympics; look forward to Legal & General’s results announcement; and judge PageGroup’s succcess in converting higher consultant numbers into higher sales. At 50 minutes into the programme.

The MAM Blog – US-China Trade Wars – What Price Services?


Simon Lloyd – Chief Investment Officer

As tensions remain high in the ongoing negotiations between representatives of President Xi Jinping of China and President Donald Trump of the US, all eyes are on the next deadline of March 2nd. If insufficient progress has been made by that stage, tariffs on $250bn worth of Chinese goods will rise from 10% to 25%, with impacts expected both in China and the US. At present, the expectation is that Mr Trump will stand by his Tweet from 24th February, delaying that punitive hike.

However much less attention is being paid to what are, arguably, at least as important to international business; the supplies of services. While automotive parts and food ingredients are tangible evidence of the two countries’ reliance on one another, there is arguably much greater value to be obtained for the US if access to banking and financial services was opened up. When China joined the WTO, it undertook to let in foreign electronic-payment services; however, Mastercard and Visa have both struggled to make any headway with the authorities. American Express was finally granted a license in late 2018, after agreeing to form a joint venture with Lianlian Group; while Mastercard may finally break a deadlock by linking up with Chinese clearing house Nets Union Clearing Corp.

At the same time, telecommunications services remain resolutely dominated by Beijing; freedoms promised are, eventually, shown to be only very narrowly defined, and permitted only at a pace that befits a nation of long history and long memory.

So, while the US soybean market continues to struggle, the stakes for service industries in the ongoing trade conflict are high enough to give both Mr Xi and Mr Trump vertigo, should either of them look down.

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


Amanda Forsyth – Investment Manager & Business Development

Amanda Forsyth and BBC Radio Scotland’s Andrew Black compare and contrast Honda’s planning cycle and that of the UK government; debate HSBC’s role as bellweather for US/China relations; look to the long term stay at Intercontinental Hotels; and dig up the details of BHP Group’s results. At 51 minutes into the programme.