By Annabel Brodie-Smith
Last weekend, literally overnight, summer arrived. After a cold and miserable spring cooped up, it’s such a relief to get outside in the sunshine again. We have been tackling the weeds at the barn and have bought our first ever lawn mower. I have been sewing wild flower seeds to hopefully create a new, wild walled garden with a big willow tree in the middle. And I have of course been enjoying a lovely glass of rose or two in the garden. “Inflation is the silent assassin of wealth” according to the much-respected manager of Murray International, Bruce Stout, and inflation continues to be the key debate for markets. Will the government spending and pent-up demand from lockdown spark inflation? Will it be prolonged or short-lived, and will rates have to rise or not, and if they do by how much? Or is it according to the Financial Times a “ketchup bottle economy”, where the global economy’s many bottlenecks which are pushing up prices are acting like a traditional sauce bottle. “You can shake and tap all you want, with no result - until suddenly it all comes flooding out.” So today’s shortages will be tomorrow’s surplus and price rises today will result in price falls tomorrow. We will wait and see…
The good news is that whatever happens, many investment companies have been offering an inflation-busting income over the past five years due to their ability to keep dividends in reserve to use when times get tough. 94% of the dividend hero investment companies (the companies that have raised their dividends for 20 or more consecutive years) have delivered compound annual dividend growth ahead of the UK Consumer Prices Index (CPI) which is 1.8% per year over the past five years. And 92% of the next generation of dividend heroes (companies that have increased their dividends between 10 and 19 years) have delivered five-year dividend growth ahead of the CPI. Read more about this and hear from the managers of Murray International, City of London and JPMorgan Claverhouse on the topic.
On dividends, freelance journalist Faith Glasgow has dived in this month aiming to demystify them. Do you know the difference between final and interim dividends and what does ex dividend and cum dividend mean?
Moving onto another area which I’m personally very interested in – the future of commercial property. How much of our future work will be done from home or the office? I love working from home. No commute is a big plus, and I’ve stopped fretting about the nonexistence of Crossrail. But I do miss getting together with my colleagues and friends in the industry and the office was a very welcome sanctuary from domestic life.
So Ian Cowie has been looking at this question and how the outcome will influence the fortunes of property investment companies. Of course, as Ian mentions, the investment company structure is the appropriate one for hard-to-sell assets like property. Aviva have recently decided to close their open-ended UK property fund after it had been suspended for 14 months. The question for investors is whether “fortune may favour the brave” and whether buyers will “identify overlooked and underpriced bargains” or not.
Finally, do listen to my fascinating conversation with three wealth managers as to why they invest in investment companies and what they add to their clients’ portfolios. I spoke to Ben Conway at Hawksmoor Fund Managers, Tomiko Evans at Crossing Point Investment Management, and Saftar Sarwar at Binary Capital Investment Management. You can also read their opinions and their outlook for the future of the industry alongside the view of James Sullivan at Tyndall Investment Management. Investment companies’ ability to invest in hard-to sell assets like unquoted companies is seen as a big benefit for the future as more companies stay private for longer. They also think that investment companies will provide alternative and innovative routes to ESG investing.
Wealth managers Ben Conway - Hawksmoor Fund Managers, Tomiko Evans - Crossing Point Investment Management, and Saftar Sarwar - Binary Capital Investment Management, explain the benefits of investment companies.
Hopefully Flaming June will continue.
Annabel Brodie-Smith Communications Director, AIC
