View more on these topics

Don’t write off America

Following on from my comments about the Platform Conference organised by Cofunds last week, I was interested to receive details of which funds were proving most popular among its users.

The figures produced for the third quarter showed the cautious managed sector to be holding on to its top spot, with just a modest decline from 32 per cent of net sales in the second quarter to 30 per cent.

With only one other sector creeping into double figures – sterling strategic bond funds with 10.2 per cent – it is clear that advisers are taking the cautious option seriously.

Whether this is wise is questionable. The variation in performance among cautious managed funds is a reflection of the widely drawn guidelines. No wonder the IMA has been considering introducing a new sub-sector in this area.

But contrast that with figures published by the Investment Management Association and you realise other investors are being less cautious. During the quarter ending on September 30, bond funds were the clear winners, with global bonds leading in September and July and sterling corporate in August.

True, cautious managed did succeed in topping the charts in June, but that was the only month they did.

Fears have been expressed that a bubble in bonds might be developing. In the end, it is what might happen to inflation and thus interest rates that will count most.

However, I do find the way in which private investors express their views on likely outcomes through their preferences in the funds market a little worrying.

For example, earlier during the year, when markets wobbled, absolute return funds led the field for three months and property for another three, according to the IMA. Neither sector guarantees protection from the return of difficult conditions.

Interestingly, the worst-selling sectors in net retail terms recently have been UK all companies and North America.

The US, which really is what North American funds are mainly about, does provide something of a conundrum. On the one hand, they have a massive deficit problem, a consumer sector that is still overborrowed and a weak currency. On the other, they remain the world’s biggest economy, are heavily self sufficient and enjoy a better demographic than China, Japan and much of Europe.

Investors have been caught out in the past when they have ignored America. It is a resilient nation with a strong work ethic and has led on technology for some time. In much of the 1990s, British investors eschewed the US in favour of the Far East but by the end of the decade it had been proved that America had been the place to invest.

Life became much tougher as the new millennium dawned but writing off this bastion of capitalism could prove to be a mistake once again.

So where is North America in the Cofunds table? Not quite as far down the list as the IMA figures might suggest. Ranking 11th out of 17 sectors listed, they do account for a little over 3 per cent of net sales – around one-tenth of that of cautious managed.

But at least they are in positive territory. Two sectors shrank during the quarter – Europe ex UK, was down by1.9 per cent and money market funds were 2.4 per cent lower.

While low interest rates will doubtless influence this, when the public is turning away from cash it must be time to be really cautious.

Brian Tora is a consultant to investment managers, JM Finn & Co

Recommended

Aegon boosts lifetime income plan

Aegon has made enhancements to its unit-linked guarantee product, Aegon Secure Lifetime Income, including a guaranteed minimum annual increase of 3.25 per cent to the income base for new customers. New ASLI customers who are not yet taking income will receive the annual boost regardless of the underlying investment performance. Aegon says, in addition, the […]

Trustees will decide if fee is retained

Nest’s trustee board will have the power to retain a contribution charge after the Government’s set-up loan has been repaid. Responding to a question from Money Marketing at a Nest briefing last week, Nest managing director of scheme development Helen Dean outlined the extent of the trustees’ powers. She said that, while it remains an […]

One platform OK for most clients

The FSA has confirmed that IFAs can use a single platform to service “the majority” of their clients as long as it is in line with clients’ best interests and leads to suitable advice. In its consultation paper on platforms, published last week, the FSA says: “Assuming that use of a platform is in line […]

Who cares?

By Tracey Dickson, marketing consultant There are almost 7 million carers in the UK – that’s around 10 per cent of the population who provide unpaid care for a disabled, seriously ill or older loved one.1 But according to a report from the charity Carers UK, 20 per cent of people providing 50 hours or more of care […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment

    Close

    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm

    Email: customerservices@moneymarketing.com