by Nick Britton
Nick Britton
So the kids are back at school, those summer tans are fading, I've got my woolly jumper back on – all the usual signs of the turn of the season. And yet despite the government’s exhortations for everyone to go back to Pret, things aren’t back to normal – far from it. The question is not so much when that will happen, as what ‘normal’ will look like when we get there.
Take property funds, for example. The 'material uncertainty' over valuations has been lifted and a handful of funds have reopened for trading. But the remainder of the suspended property funds have yet to open the floodgates and nor have we much idea when they will.
The more interesting question is what form a new-look open-ended property fund might take. Both the FCA and the Investment Association have acknowledged the problems with the daily-dealing structure for handling illiquid assets. Yet there is still resistance to the idea of notice periods, with arguments ranging from their perceived complexity to worries about ISA inclusion. Our Chief Executive Ian Sayers takes on these arguments – and I think rebuts them pretty convincingly – in his latest article. What do you think?
It doesn’t seem four years since we were pondering the impact on investors of a possible Trump victory in the last US presidential election. Now we’re pondering all over again, with the difference that Trump is the known quantity this time.
Since Trump took office on 20 January 2017, the S&P 500 index is up almost 50%. This is despite the sell-off this week, and the fact that in March this year the index plummeted back almost to where it was at the beginning of his tenure. Much as Trump will try and take credit for the market gains, a longer view reveals that the last few years have been the continuation of a period of excellent performance for US equities that dates back at least a decade and arguably further, to the trough of the financial crisis.
Source AIC/Morningstar
This world-leading performance, according to F&C Investment Trust’s Paul Niven, has been driven by superior profitability and earnings growth, which investors have been prepared to pay for. In some respects the pandemic has only accelerated trends that have been helpful to the growth of the US’s leading companies, including the tech giants. With Apple’s valuation recently surpassing that of the entire FTSE 100, the resilience of big tech during COVID-19 has perhaps finally laid to rest the ghosts of the dotcom bubble and the idea that this is a fragile, frothy sector that suffers particularly badly in downturns.
As Jonathan Simon, Manager of JPMorgan American Investment Trust, puts it: “Tech has rallied in the US because it is at the heart of everything we do, and this has only been increased by COVID-19.” There are many more comments from US managers on the election, stock market valuations and the tech sector in this month’s Spotlight.
That stat about Apple and the FTSE 100 seems to dramatise the way in which the London market, once the mainstay of UK investors’ portfolios, is becoming just another slice of the global equity allocation pie, and not a particularly generous one at that. We’ve seen it in the investment company industry, as the big global generalists have moved away from benchmarks and asset mixes with a pronounced UK overweight. However, the time will surely come for our domestic market to shine, and Jean Roche, Co-Manager of Schroder UK Mid Cap, thinks it might be sooner rather than later. She gives her thoughts on opportunities within the ‘homebody economy’ in this issue.
Finally, two bits of good news. You may have heard that Seneca Global Income & Growth has become the first investment company to be risk-profiled by Dynamic Planner. We hope more will follow, helping advisers to put the risks of multi-asset investment companies in a familiar context and measure them against open-ended options.
Meanwhile, we’ve been working hard over the summer on our brand-new Investment Company Screener. I say ‘we’ but I haven’t done much except look over the virtual shoulders of our excellent website team and make encouraging noises from time to time.
Built with Morningstar technology but adapted to the needs of advisers who want to research investment companies, the Screener complements other tools on the AIC website, such as Find and compare investment companies. Needless to say, it’s completely free to use and it enables you to do some things you couldn’t do (easily or quickly) before. You can read more about how it works in this month’s Spotlight or just try it right away. Let us know what you think!
Nick Britton, Head of Intermediary Communications, AIC