Active Funds Battered As Investors Take Passive Route – Calastone – Forbes Advisor UK


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5 October: UK Stocks Spurned Despite Attractive Valuations

UK investors ditched ‘actively-managed’ equity funds last month in favour of ‘passive’ investments run by computers rather than human stock-pickers, writes Andrew Michael.

According to global funds network Calastone’s latest Fund Flow Index, investors dumped £206 million of actively-managed equity funds in September 2023, preferring passively managed portfolios including index tracker funds.

Calastone said that algorithmic-based investments, such as global index funds, attracted £1.1 billion in investor inflows last month “as the summer’s volatile bond markets forced a reappraisal of stock valuations”.

In recent days, in response to concerns about borrowing costs remaining higher for longer globally, a sustained sell-off in sovereign debt – including in UK gilts and US treasuries – has seen the yields rise on some of these investments to levels not witnessed since before the 2008 financial crisis.

Over the year to date, inflows to passive funds stand at £5.35 billion, in stark comparison to the £7 billion overall that has disappeared from equity funds.

Across geographical sectors, equity funds that invest in the UK were the worst performers in terms of the largest outflows, according to the network. Last month, investors offloaded UK funds worth £448 million, the 28th consecutive occasion that portfolios invested in domestic stocks and shares suffered from net redemptions.

Environmental, social, and governance (ESG) funds have also suffered at the hands of investors in recent months. September witnessed the fifth consecutive month of outflows in what Calastone described as a “clearly emerging trend”.

On a brighter note, global funds remain investors’ favourite sector, attracting £981 million last month. In addition, emerging markets funds, which focus on investing in up and coming economies, continued their best run since Calastone’s records began nine years ago.

Edward Glyn, head of global markets at Calastone, said: “The distaste for UK equities is a structural trend that domestic and international investors are unwilling to break, despite attractive valuations. Meanwhile, inflows to emerging markets in 2023 reflect attractive prices after very steep falls from their 2021 peak.”



5 September: Equity, ESG Funds Hit As Investors Seek Safety

UK investors ditched funds exposed to stocks and shares last month at their greatest rate since last autumn, choosing to divert money instead towards investments with cash-like characteristics, Andrew Michael writes.

According to global funds network Calastone’s latest Fund Flow Index, investors dumped equity funds to the tune of £1.19 billion in August this year, as the flight to lower-risk investments such as money market funds accelerated.

Calastone said that August’s outflow from equity funds was the seventh worst month it had recorded in nine years of record-keeping. To fill the void, the network said that cash was instead finding its way into so-called safe-haven funds.

These included money market investments, with the sector enjoying an inflow worth £673 million last month, the largest amount recorded since March 2020 which coincided with the start of the coronavirus pandemic.

Money market funds invest in portfolios of short-term cash deposits and high-quality bonds due to reach maturity within one or two years. They are promoted as a haven for investors to park their cash in times of market uncertainty.

Although they are not risk-free, money market funds are designed to provide a high level of stability and liquidity – making them relatively easy to sell – while also delivering a return that is likely to be greater than that from a short-term cash deposit available from a bank or building society.

Calastone reported that UK equity funds bore the brunt of withdrawals last month with investors pulling out £811 million, the largest amount since February this year. It added that August 2023 was the 27th consecutive month in which investors have pulled their cash from UK-focused funds.

Outflows from environmental, social and governance, or ESG, funds also cranked up to a net £953 million, the fourth consecutive month of exits and taking the overall outflow figure from May this year to £1.96 billion. Putting this sector in context, before 2023 only one month had experienced outflows since the so-called ESG boom began in early 2019.

Edward Glyn, head of global markets at Calastone, said: “Fear was a big motivator in August. Discouraging economic data in the UK showed core inflation has proven resistant to interest rate hikes. 

“This had investors running for the safety of cash and money-market funds. With savings interest rates and yields on safe-haven money market funds at their highest level since 2007, it doesn’t take much to cause a rout.

“The move out of ESG funds has gathered pace in a remarkable reversal after the boom in recent years. Four months of outflows signals a new trend emerging that fund houses will have to work hard to counteract.”



31 August: Marks & Spencer Returns To FTSE 100 After 4 Years

Marks & Spencer (M&S) is returning to the UK’s leading stock market index of blue-chip companies four years after it was demoted, following a surge in the share price of the high street retailer, Andrew Michael writes.

FTSE Russell, the global stock index provider, confirmed yesterday (Wednesday 30 August) that M&S, whose shares have soared by more than 70% this year, would be one of four companies promoted to the FTSE 100 index as a result of the compiler’s latest quarterly review.

Following the re-shuffle, which adjusts index constituents according to their size as measured by stock market capitalisation, M&S will be joined by Dechra Pharmaceuticals, Hikma Pharmaceuticals, and technical products supplier Diploma.

As part of the rebalancing, four companies leaving the FTSE 100, to join the second-tier FTSE 250 index, are the house builder Persimmon, fund management firm Abrdn, insurer Hiscox, and chemicals company Johnson Matthey.

The revamp comes into force when the stock market closes on Friday 15 September. From that point, so-called passive investment funds designed to track the performance of the ‘Footsie’ will withdraw their holdings in relegated companies’ shares and reposition portfolios when the new additions officially take their place on Monday 18 September.

Originally dropped from the FTSE 100 in September 2019, M&S is enjoying a new lease of life following a recent transformation of the company. Boosted by its traditionally strong food business, in recent months the signs have also been positive for its revitalised clothing and home division.

Victoria Scholar, head of investment at interactive investor, said: “Despite the cost-of-living crisis with consumers feeling the squeeze, M&S has been the star performer across UK retail this year, outshining rivals with a stellar share price gain of over 75% so far in 2023, compared to Next, for example, which is up around 17%.

“The company has successfully embarked on a considerable turnaround under the leadership of Stuart Machin involving revamping its store estate and investing in technology and e-commerce.”

M&S’s return to the top flight is in contrasting fortune to that of the property firm Persimmon which drops out of the FTSE 100 after 10 years.

Having previously been relegated from the Footsie at the height of the financial crisis in 2008, the company returned to the blue-chip index in 2013. More recently, however, Persimmon has found itself in the eye of the storm.

Richard Hunter, head of markets at interactive investor, said: “The housebuilding sector as a whole is currently on shaky foundations, with Persimmon’s particular exposure to first-time buyers an additional strain. The company’s shares have fallen by 19% in 2023, by 39% over the past year, and by 70% from the pre-pandemic peak of £32.30 it achieved in February 2020.”



30 August: UK Dividend Payments Slip As Tougher Economic Conditions Loom Large

UK-listed companies paid out dividends worth just over £26 billion ($31 billion) in the second quarter of this year, a drop of about 12% compared with the same period in 2022, according to the latest figures from investment firm Janus Henderson, Andrew Michael writes.

Dividends are payments to shareholders usually made twice-yearly by companies out of their profits. They provide an important source of income for investors, often as part of a retirement planning strategy to supplement state pension entitlements.

Despite a fall in payouts from UK businesses, Janus Henderson’s latest Global Dividend Index reported that global overall dividends rose to a record £490 billion ($568 billion) between April and June this year,  a 4.9% increase on a headline basis compared with the second quarter in 2022.

Taking into consideration one-off special dividends and other factors, the investment firm said that underlying growth stood at 6.3%, adding that the majority of companies (88%) either increased payments, or held them steady, in the second quarter of this year. (Read more here about why companies pay dividends).

Helped by record payouts from businesses based in France, Germany and Switzerland, dividends from European companies rose overall by about a tenth in quarter two of this year, reflecting strong profitability from the financial year covering 2022.

The most important driver for this region came from the higher dividends contributed by the banking sector, followed by those paid out by vehicle makers.

Contributing to the figures, the UK banking giant HSBC restored its quarterly dividend for the first time since the start of the coronavirus pandemic in 2020 and at a higher level than many commentators had expected.

According to Janus Henderson, the bank is currently ranked second in terms of the largest dividend payers worldwide, one place ahead of Mercedes-Benz Group, but behind Nestlé, the Swiss-based food producer.

Looking ahead, and against an anticipated slowdown in global economic growth for the rest of this year, the investment firm forecasts that pay outs will reach $1.64 trillion over the course of 2023.

Ben Lofthouse, head of global equity income at Janus Henderson, said: “Most regions and sectors are delivering dividends in line with our expectations. Markets now expect global profits to be flat this year, after soaring to record highs in 2022. When we speak to companies around the world, they are now more cautious about the outlook.”


30 August: Bitcoin’s Price Surges On Back Of US Court Ruling

Bitcoin’s price has surged by more than 7% to nearly $28,000, after a US court ruled that the country’s financial regulator was wrong to reject an application by a digital fund manager to launch an exchange-traded fund (ETF) that tracks the price of the flagship cryptocurrency token, Andrew Michael writes.

Asset management firm Grayscale won a landmark court ruling yesterday (Tuesday) against the Securities and Exchange Commission (SEC) to turn its flagship vehicle, the Grayscale Bitcoin Trust, into an ETF.

ETFs have become increasingly popular among investors in recent years by combining the characteristics of buying directly into stocks and shares with the benefits of holding more widely diversified investment funds.

In Washington DC, a federal appeals court ruled that the SEC, the US equivalent of the UK’s Financial Conduct Authority, was wrong to turn down Grayscale’s application. 

A panel of judges in the Court of Appeals said the SEC’s rejection was arbitrary because it failed to explain the different treatment between Bitcoin futures ETFs and spot Bitcoin ETFs.

Futures are part of a wider range of sophisticated investment and trading products known collectively as derivatives. A spot Bitcoin ETF is an open-ended fund that can issue or redeem shares based on demand.

The court case has been scrutinised closely by both the cryptocurrency and asset management industries which have long tried to convince the SEC to approve a spot Bitcoin ETF.

Both argue that a fund of this type would allow investors to gain exposure to Bitcoin, but without having to own it. But the regulator has concerns that Bitcoin ETFs would be vulnerable to manipulation.

The latest ruling puts pressure on the SEC after it issued a series of enforcement actions against crypto providers this year, including Coinbase and Binance, the world’s largest crypto exchange.

The SEC said it was reviewing the court’s decision and now has 45 days to decide whether to accept the ruling, ask for a review, or take an appeal to the US Supreme Court.

Despite recent developments, if Grayscale chose to submit another application, lawyers said there is no guarantee of success as it’s possible the SEC could reject it on other grounds.


17 August: UK Investors Ditch Regional Portfolios And Pour £50 Billion Into Global Funds

British retail investors are increasingly turning their backs on regionally-focused funds in favour of global equity portfolios, writes Andrew Michael.

Investors have channelled more than £50 billion into funds whose remit allows them to invest anywhere in the world since 2015, while shunning portfolios over the same period that are limited to holding UK stocks and shares.

The latest data from Calastone, the global funds network, showed that over the past eight years, global funds have experienced a net inflow worth £51.3 billion.

In contrast, all other geographical fund sectors – including currently unloved UK-focused portfolios as well as those invested in Europe and Asia-Pacific – have attracted a total of just £909 million in new capital between them.

Calastone said that, since the beginning of 2015, the global funds sector had only experienced net outflows of cash on average once every 11 months. This compared with once every two months for funds identified by all other combined regional strategies.  

The trend in favour of global funds started to accelerate dramatically two years ago and, in part, has been fuelled by the popularity in ethically styled environmental, social and governance – or ESG – funds.

Since July 2021, global funds have experienced a net inflow of cash worth nearly £19 billion, while funds with a regional focus shed more than £21 billion over the same period.

With their remit to invest worldwide, rather than in one country or region, global funds also offer investors the benefit of potentially greater diversification.

In practice, however, global funds are often skewed to the US which has grown at roughly double the rate of the UK economy over the past 15 years, helped partly by the success of companies such as Apple, Microsoft, and Alphabet.

Calastone’s figures confirm recent trends that have seen domestic investors turn away from the UK in search of investment opportunities further afield.

Separate figures from the Investment Association (IA) show that, a decade ago, the value of funds investing in UK companies was double the amount being invested in global funds. By May this year the situation had switched, with £166 billion held in global funds, compared with £140 billion exposed to domestic portfolios.

Edward Glyn, Calastone’s head of global markets, said: “There is a clear logic in opting for global funds. Most of the world’s most successful companies operate globally, so where they are listed is immaterial. Global funds mean investors get exposure to these stocks.

“They also save investors the worry of trying to pick winning regions – retail investors typically lack the time and expertise to stay on top of which parts of the world are on the up and which are on their uppers.”


15 August: PayPal Presses Pause On Crypto Sales From October

Online payments company PayPal will pause the sale of cryptocurrencies on its platform for at least three months from 1 October, writes Mark Hooson.

In a message to customers today, 15 August, PayPal said it would not resume crypto sales until an unnamed date in “early 2024” as it takes steps to comply with new Financial Conduct Authority (FCA) rules.

In the meantime, says PayPal, customers will still be able to sell or hold their crypto on the platform while it introduces additional steps to the purchasing process to meet regulatory requirements.

The message references a package of FCA and Advertising Standards Authority measures due on 8 October, under which crypto firms must introduce clear risk warnings and give a 24-hour cooling-off period to give new customers time to consider their decision.

Just last week, PayPal announced the forthcoming launch of its own US dollar-pegged stablecoin, PayPal USD (PYUSD), which will allow US customers to send and transfer PYUSD to others, and pay for some online purchases.

PYUSD is a stablecoin, which means its value is pegged to a fiat currency – in this case, America’s dollar. The value of one PYUSD should therefore always be the same as the value of $1 USD.

The stablecoin is issued by Paxos Trust Company, a licensed limited purpose trust company. 

PayPal, which has allowed users to trade other cryptocurrencies like Bitcoin on its platform since 2020, says PayPal USD will be available in the coming weeks. There is no word on whether or when PYUSD might launch in the UK.

Today’s announcement from PayPal shows how the industry is responding to what’s been a year of increased scrutiny of and regulatory influence on cryptocurrency.

Several banks have this year imposed limits on how much their customers can spend each day on crypto exchanges. In some cases, payments have stopped altogether. For example, Nationwide will block payments to Binance.

HSBC, Nationwide, NatWest and First Direct are some of the banks that have introduced daily crypto limits in direct response to warnings issued by the FCA. The limits, however, can be as high as £5,000 per day.

Introducing its £1,000 daily limit in March, NatWest said £329 million was lost to crypto scams in 2022, with men over the age 35 most at risk.


12 August: More Funds In ‘Doghouse’ Despite Rising Markets

Investment funds worth nearly £50 billion have been named as consistently underperforming ‘dogs’ by online investing service Bestinvest, Andrew Michael writes.

The firm identified 56 underperforming funds worth a combined £46.2 billion, a significant increase from the 44 funds worth just under £20 billion that came to light from previous Bestinvest research six months ago.

The firm’s Spot the Dog analysis defines a ‘dog’ fund as one that fails to beat its investment benchmark over three consecutive 12-month periods, and which also underperforms its benchmark by 5% or more over a three-year period.

A benchmark is usually a stock market index such as the UK’s FTSE 100 or US S&P 500, against which the performance of a fund is compared.

Global stock markets have enjoyed a better start to 2023 than the dismal returns recorded last year. But Bestinvest said more funds have entered its ‘doghouse’ because most of the gains have come from a handful of very large companies benefiting from the burgeoning artificial intelligence sector rather than a more comprehensive resurgence in business performance.

The global funds sector recorded the highest number of dog funds overall, with 24 laggards up from 11 reported six months ago. These were funds that either have no exposure to the ‘mega cap’ success stories, or hold a lower weighting compared to the benchmarks with which they are being measured.

Bestinvest said: “While seasoned investors accept that short-term markets are impacted by current economic challenges, namely rising interest rates and high inflation, they will be less accommodating if they later discover their investments have performed even worse than the markets their funds invest in.”

Bestinvest identified Baillie Gifford’s Global Discovery fund as the worst-performing portfolio overall, having racked up a three-year underperformance record of -70%. St James’s Place was described as the worst-performing manager across an array of funds worth nearly £30 billion “with its paw prints on six measly mutts”.

Jason Hollands, Bestinvest managing director, said: “Every fund manager will go through weaker periods, whether that is a run of bad luck, or they are sticking to a style or process that may be temporarily out of fashion. Identifying whether these are short-term or structural factors is key and investors should ask some questions before deciding to stick with a fund or switch.

“Things to consider include whether a fund has become too big, which might constrain its agility, or if there have been subtle but important changes in the management team. Also, is the manager straying from a previously successful approach, or are they now too burdened with additional responsibilities?”


26 July: Tech Stocks Power Revival Of Equity Funds

Stocks and shares-based investment funds with a global remit have led a positive performance charge in the first six months of this year, with one portfolio benefitting notably from the current boom in artificial intelligence (AI), Andrew Michael writes.

According to latest figures from FE Fundinfo, the top five best-performing global equity funds each produced returns in excess of 28% between January and June this year, with L&G’s Artificial Intelligence fund coming out on top with a figure of 36.2% for the period.

The potential of AI – computer processes that mimic the actions of humans – has triggered a race among US technology giants to be at the forefront of this technological revolution.

Other global equity high-flyers were: PGIM Jennison Global Opportunities (31.7%); Xtrackers MSCI World Consumer Discretionary (28.7%); SSGA SPDR MSCI World Consumer Discretionary (28.7%); and MS INVF Global Opportunity (28.3%).

FE Fundinfo said that other fund sectors to perform well year-to-date included global emerging markets, where the top-performing fund was Artisan Emerging Markets with a six-month return of 14%, and UK All Companies, where the Liontrust UK Focus came out best with a return of 12.9%.

The data provider added that the best-performing sector was Technology & Technological Innovation, where funds produced an average return of 24.8% between January and June this year. It said: “This sector demonstrated remarkable growth and outperformed other sectors during this timeframe on the back of the AI revolution”.

Next came Latin America, where funds achieved an average return of 11.9%, followed by North America with 8.3%.Charles Younes, head of manager selection, FE Investments, said: Throughout the first half of 2023, the top-performing funds have consistently demonstrated their expertise in their respective investment categories. These funds have delivered impressive returns, showcasing their strong performance, robust strategies, and ability to generate substantial growth for our investors.”


18 July: Regulator Clamps Down On Social Media ‘Finfluencers’

The Financial Conduct Authority (FCA) is tightening regulations governing the promotion of financial products and services on social media, including a crackdown on ‘finfluencers’, writes Andrew Michael.

The FCA says social media has become an increasingly important channel for companies looking to promote their products and communicate with their customers more speedily and effectively.

But it warned that the complicated nature of financial services meant poor quality, wide-reaching promotions on social media, particularly in relation to investment and credit products, can lead to “significant consumer harm”.

To counter this, it has launched an eight-week consultation to determine tougher guidance, saying that Brits searching social platforms for financial advice are likely to have found “unfair, unclear, or misleading marketing”.

Finfluencers – individuals or accounts with large audiences – have become increasingly popular as households battle the cost-of-living challenge. Top finfluencers have sizeable fan bases, often hundreds of thousands strong, on platforms such as TikTok and YouTube.

The FCA said: “Often, these influencers have little knowledge of what they’re promoting. This lack of expertise is reflected in the large number of promotions that are either illegal or non-compliant, making it likely that consumers will see poor quality information on social media.”

Last year, the regulator ordered businesses to amend or remove almost 10,000 promotions, nearly 15 times the number compared with 2021. Over the same period, it also published 1,900 alerts to consumers about potential scammers, up more than a third on the previous 12 months.

The regulator has also highlighted examples of misleading or unclear adverts failing to communicate the risks of a product. This included the use of TikTok to promote debt counselling and a buy-now-pay-later Instagram advert that failed to explain the risks associated with unregulated credit.

According to the FCA, nearly 60% of under-40s who invested in high-risk products in 2021 said they had based their decisions on social media posts. Research from consultancy MRM shows that almost three-quarters of young people say they trust information provided by social media influencers.

Lucy Castledine at the FCA, said: “We’ve seen a growing number of ads falling short of the guidance we have in place to stop consumer harm. We want people to stay on the right side of our rules, so we’re updating our guidance to clarify what we expect of firms when marketing financial products online.

“And for those touting products illegally, we will be taking action against you.”

Myron Jobson of interactive investor said: “The advent of finfluencers is a headache for the regulator. The credentials of many finfluencers are weak at best, if they exist at all. But there are also a number of well-versed and highly qualified financial professionals on social media offering solid guidance.”

The regulator’s latest initiative aimed at shoring up protection for consumers comes in the wake of a multi-pronged strategy touching all aspects of the financial services market.

From 31 July this year, the FCA is introducing wide-ranging ‘Consumer Duty’ requirements on the UK’s financial services providers in a bid to help consumers make “good financial decisions”.

Venetia Jackson, financial services lawyer at Pinsent Masons, says: “Consumer Duty puts consumers at the heart of a firm’s thinking. Implemented effectively, it should mean that consumers have the same confidence in buying their financial products as they do in making purchases for their homes.”

Later in 2023, the watchdog is also putting in place a new set of advertising rules aimed at cryptocurrency firms marketing to UK consumers.

From 8 October, this will involve the ban on incentives to invest in crypto assets such as ‘refer a friend’ bonuses. Crypto firms must also introduce clear risk warnings and a 24-hour cooling off period to give investors time to consider their decision.

The FCA regularly describes crypto assets as “risky”, warning would-be investors that they could lose all their money when speculating in this sector.



14 July: Regulator Probes Platforms On Client Cash Interest

The UK’s financial regulator, the Financial Conduct Authority (FCA), has written to dozens of investment platforms to find out how much of the interest they receive from cash and bank deposits is actually passed on to their customers, Andrew Michael writes.

The FCA’s letter to “approximately 40” investment platforms and self-invested pension providers was described by the regulator as a “specific data request”. The correspondence included asking providers for details on ‘client interest turn’.

This is the difference between the interest that providers pay their clients who have deposited cash with them and the amount that providers make having invested these sums on the money markets.

Platforms typically pay interest between 1% and 2% on clients’ cash balances in general investment accounts. But with the Bank of England’s Bank Rate currently standing at 5%, analysts say that providers in this sector can retain hundreds of millions of pounds for themselves from the practice over the course of a year.

The regulator’s decision to contact investment platforms follows a wider recent initiative which recently saw leading high street banks summoned by the watchdog to justify the low rates of interest being paid by their easy-access savings accounts.

The regulator said that consumers are feeling the squeeze from rising prices and regular increases to the cost of borrowing. It added that customers should be treated fairly when it comes to the interest they receive from financial products and that this applied as much to cash being held on investment platforms as it did to bank accounts.

An FCA spokesperson said: “We’re currently in a climate of rising interest rates. What we’re trying to do here is put in place a series of measures to ensure that customers receive both value for money from providers and a fair amount on their cash – whether that’s held in bank deposits or via investing and pension accounts.”

The spokesperson added that the FCA would analyse the data it received from platform providers and “could use a number of metrics to determine whether the amounts being passed on to consumers are fair and offer value for money”.

In recent years, the number of do-it-yourself investors in the UK who manage their investments and pensions via online investing platforms and mobile trading apps has increased significantly. The figure now stands at approximately nine million users.

Later this month, on 31 July, the FCA is introducing wide-ranging ‘Consumer Duty’ requirements on the UK’s financial services providers that will “focus on supporting and empowering their customers to make good financial decisions”.

The regulator has asked platforms how they will deal with retained interest in light of these new rules. It is thought that providers have been given until 27 July this year to respond to the data request.

Given the proximity of the new Consumer Duty regime to this date, the FCA rejected the claim it had been slow to tackle the issue of investment platforms and the amount of interest they pay to clients. 



11 July: Treasury Seeks Views On Securities ‘Sandbox’

The Treasury is consulting on plans for a testing environment that would pave the way for digital securities, such as the long-mooted central bank digital currency (CBDC).

The Digital Securities Sandbox (DSS) would allow developers to test new infrastructure for digital assets under temporary modifications to existing legislation, and with the power to change legislative frameworks as the tests proceed.

The sandbox would be the UK’s first Financial Market Infrastructure (FMI) sandbox, made possible by the recently passed Financial Services and Markets Act.

A CBDC is a state-issued digital currency that doesn’t use coins or notes, with transactions recorded on an encrypted ledger. As state-backed currency, a CBDC would be worth exactly the same as the equivalent physical money. So, 10 pounds in CBDC form would be worth the same as a £10 note.

According to a Bank of International Settlements (BIS) survey, 93% of central banks are working on a CBDC.

The Treasury is inviting opinions on the DSS consultation (located here) over the next month.

Meanwhile, UK multinational bank Standard Chartered has revised its outlook for Bitcoin. In April the bank predicted BTC would reach $100,000 (£77,000) by the end of 2024, but it now predicts the top cryptocurrency will hit $120,000 (£93,000) at that point.

According to Reuters, a Standard Chartered bank report this week said that bitcoin miners who currently mint the 900 new bitcoins produced each day would soon need to sell fewer to cover their energy and computing costs.

One of its top FX analysts Geoff Kendrick estimated that while miners are selling 100% of their new coins, they could start holding on to 70-80% of the coins if the price were to hit $50,000.

Bitcoin is currently trading at $30,418 (£23,556), down from a peak of $31,395 (£24,313) last week.

Speculation over the future of Bitcoin’s value has increased as the clock ticks down to next year’s ‘halving’. From April 2024, the amount of BTC awarded to miners for successfully adding a block to the blockchain will be halved from 6.25BTC to 3.125BTC.

The effective squeeze on the rate of Bitcoin’s supply is expected to push prices up until that point.



5 July: Investors Flee Equity Funds In Search Of Safe Haven

UK investors ditched funds exposed to stocks and shares last month at their greatest rate since last year’s controversial mini-budget, replacing them instead with fixed income investments and those with cash-like characteristics, Andrew Michael writes.

According to global funds network Calastone’s latest Fund Flow Index, investors dumped equity funds to the tune of £662 million in June this year, as the flight to lower-risk investments such as bond and money market funds accelerated.

Calastone said last month’s outflow from equity funds was one of the worst it had ever recorded. It added that the cash raised found its way “straight into fixed income funds, which saw net inflows of £880 million, and money markets, which enjoyed net inflows of £503 million”.

Fixed income investments tend to have a lower risk profile than traditional equity funds and include assets such as bonds – loans made by investors to governments and businesses in return for interest payments and, eventually, the return of capital.

Money market funds, which invest in portfolios of short-term cash deposits and high-quality bonds due to reach maturity within one or two years, are also promoted as low-risk investments and are regarded as a haven for investors to park their cash in times of market uncertainty. 

Calastone reported that UK equities bore the brunt of withdrawals last month with investors pulling out £612 million, the 25th consecutive month of net-selling. Outflows from environmental, social and governance, or ESG-themed funds, also cranked up to a net £369 million – the worst month on record for the sector, and only the third month of outflows.

Edward Glyn, head of global markets at Calastone, said: “Fixed income funds and their money market cousins have not looked so attractive since before the global financial crisis. At the same time, recession fears are stalking equity and property markets. Investors are nervous and the result is a flight to safety.

“Money markets currently enable investors to earn an income of 5% or more at very low risk, while fixed income funds, which invest in longer-dated bonds than money market ones, offer the chance to lock into the highest yields in years.”


3 July: Litecoin Rallies Ahead Of August Halving

Litecoin (LTC), one of the world’s biggest cryptocurrency altcoins, reached a 12-month valuation high in recent days ahead of big changes to the way its miners are rewarded.

Altcoins are coins other than Bitcoin, the major cryptocurrency. Miners earn coins in return for validating transactions in the respective blockchain.

LTC reached £87.50 yesterday, 2 July, up more than 122% on the same date last year and beating its previous peak of £85.39 in February.

The altcoin, which has a market cap of £6 billion, began surging in mid-June when it traded at £57.74. In the two weeks since, LTC has jumped by around 51%.

The reason for the recent rally is that we’re roughly a month away from Litecoin’s next ‘halving’ – an event that only happens once every four years. 

Like many cryptocurrencies, Litecoin miners who take part in validating transactions and adding them to the blockchain are in with a chance of earning a reward for their time and effort.

Litecoin miners are currently rewarded 12.5 LTC for every block of transactions they add to the blockchain. However, this will change between 4 and 8 August (depending on network conditions). From that point onwards, the reward will be halved to 6.25 LTC.

Since next month’s halving effectively decreases the rate of Litecoin’s supply by half, this is expected to upset the balance between supply and demand for the altcoin, and put upwards pressure on its price.

A similar trend emerged ahead of Litecoin’s previous halving, in August 2019. In the seven months prior to that halving, the altcoin went from trading at around £25 to around £107 in July of that year. However, LTC had fallen back down to around £30 by the following January.


14 June: Prices Slump As UK Govt Debt Falls Out Of Favour

Yields on UK government bonds jumped to their highest levels since 2008 earlier this week as investors bet that UK interest rates would keep on rising, writes Andrew Michael.

UK government bonds, known as gilts, are loans issued by the government when it wants to borrow money. The nominal interest rate is fixed when the bond is issued, but because the price of the bond itself can fluctuate, the actual yield varies.

For example, a £100 gilt might have an interest rate – known as a coupon – of 5%, meaning the bondholder receives £5 a year. If the holder pays less than £100 to obtain the bond, the yield is effectively higher than 5%.

This applies in reverse if prices to buy a £100 gilt rise – so yields can be said to move in the opposite direction to the price.

Yields have increased steadily in recent weeks as prices have slumped. On Tuesday, yields broke through a level most recently achieved in the wake of last September’s controversial mini-Budget called by the then Prime Minister, Liz Truss.

At the time, the Bank of England was forced into taking emergency action on the bond markets amid market turmoil that saw the cost of government borrowing rise sharply.

On Tuesday, the yield on two-year gilts increased by 19 basis points to 4.83% as the price of government debt fell. Last autumn, the yield on two-year gilts peaked at 4.64%.

The rise in yields came after ONS data showed that annual growth in wages, excluding bonuses, rose by 7.2% in the year to April, up from 6.8% a month previously.

Strong wages data compounds the UK’s high inflation reading of 8.7% recorded in April, which suggests that rising prices in the UK are decelerating to normal levels more slowly than the Bank of England has predicted.

The figures also showed that employment grew by 250,000 against a forecast of 162,000 confirming a view that the UK economy is not slowing down sufficiently for the Bank of England to pause the pace of monetary tightening.

Susannah Streeter, head of markets at Hargreaves Lansdown, said the wage boost “risks adding to inflationary fires and shores up expectations that the Bank of England will have to keep raising interest rates.”

Yael Safin, chief economist at KPMG said: “If there was still any doubt about the direction of monetary policy, these data should solidify another interest rate increase from the Bank of England next week and probably more in the coming months.”

The Bank’s next rate-setting decision is announced on Thursday 22 June.

Shilen Shah, head of fixed income at Investec Wealth & Investment, said: “The rise in gilt yields is not unexpected given recent data prints that indicate underlying inflationary pressures remain relatively high. We continue to see value in short-dated gilts given the historically high yields available.”

James Lynch, fixed income manager at Aegon Asset Management, said: “The circumstances as to why two-year gilt yields are roughly in the same ballpark as September last year are totally different. [In 2022] sterling collapsed below £1.07 to the US dollar as investors lost faith in the UK having a sense of fiscal responsibility.

“The reason why two-year gilt yields have been rising has been data and the market interpretation of the Bank of England’s response [to inflation], not fiscal responsibility. The data have been stronger on measures which the Bank cares most about: inflation and wages. The ONS wage data was quite startling, with private sector wages running at an almost 10% annualised rate over the last three months.”


12 June: Index Enjoys 20% Rise Over 9 Months

The S&P 500, the US stock index, ended the trading day in bull market territory last week (Thursday), having surged by 20% since hitting its most recent low last autumn, Andrew Michael writes.

Boosted by gains in major technology stocks, the index – a bellwether reflecting the wider US stock market – closed up 0.6% at 4,293.93. The tech-heavy Nasdaq 100 index also enjoyed a good day, with a rise of 1.3%

The recent performance of the S&P 500 has been in stark contrast to the two-year closing low of 3,577.03 to which the index sank on 12 October last year, when the country, along with other major economies, was gripped in a period of stubbornly high inflation and challenging trading conditions.

Yesterday, the S&P 500 crossed the widely accepted investing boundary that separates a bear market, defined as when prices fall for a sustained period, from a bull market, which is characterised by rising prices and increasing optimism on the part of investors.

Markets have remained buoyant in recent months, with investing sectors such as tech and media having rebounded from a disastrous 2022 on the hope that the worst is over.

Russ Mould, investment director at AJ Bell, said: “After a miserable 2022 for US shares in general, investors are happy that they’ve returned to their previous form. After all, this part of the market made a lot of people rich in the 10-plus years after the global financial crisis, so many portfolios across the UK are likely to have large US exposure.”

In recent months, a boom in artificial intelligence (AI) has given extra impetus to the tech stocks that dominate the S&P 500.

From self-driving cars to surgery-performing robots, AI is helping to transform major areas of people’s lives. The potential opportunity created by this high-growth, multi-billion pound market has prompted a wave of corporate investment and interest in companies that operate in this sphere.

Investment funds specialising in AI are also attracting increasing interest from investors.

Russ Mould, investment director at AJ Bell, said: “The US index has now risen 20% from its most recent low, driven by the likes of Nvidia which is seen as the ultimate play on artificial intelligence and Meta Platforms which has stripped out costs through job cuts and enjoyed stronger than expected earnings.

“The key question is what happens next. With plenty of signals suggesting we might see a recession soon, investors will be asking themselves if they should bank recent gains in US stocks or stay put and hope any economic downturn is only shallow and quick to pass.”

Matt Britzman, equity analyst at Hargreaves Lansdown, said: “If you look at where the market sits now in absolute terms, it’s not too hard to make a case that it’s justified at current levels. The worry is how fast it’s risen and the concentration within a select few names.”

Mr Britzman added that this week’s interest rate-setting announcement from the US Federal Reserve, coupled with the latest inflation data, will be influential: “Markets are pricing in a rate pause with scope for further hikes down the line.”


8 June: Cooling-Off Period Among Crypto Protection Measures

First-time cryptocurrency traders will benefit from a 24-hour cooling-off period in which they can change their minds about their transaction, under new rules issued by the UK financial watchdog, writes Mark Hooson.

The Financial Conduct Authority (FCA) today outlined strict new marketing rules for crypto firms that will take effect from 8 October. The FCA’s crackdown, which stops short of full regulation of the cryptocurrency industry, aims to ensure buyers understand the risks involved.

The watchdog wants people to have “the appropriate knowledge and experience to invest in crypto” and expects those promoting crypto assets to put in place risk warnings, and to ensure their advertisements are clear, fair and not misleading.

Another regulator, the Advertising Standards Authority (ASA), has previously banned several crypto advertisements for being irresponsible or misleading. This included crypto exchange Luno’s billboards, which told consumers in 2021 it was “time to buy Bitcoin” without clear risk warnings.

From October, the FCA says marketing material must include risk warnings to the effect of: “Don’t invest unless you’re prepared to lose all the money you invest. This is a high-risk investment and you should not expect to be protected if something goes wrong. Take 2 mins to learn more.”

Under the new rules, crypto marketplaces will also no longer be able to offer financial incentives to customers for referring them to a friend.

The new cooling-off period will mean consumers will have to wait for 24 hours after registering with an exchange before being able to make their first trade.

Sheldon Mills at the FCA said: “It is up to people to decide whether they buy crypto. But research shows many regret making a hasty decision. Our rules give people the time and the right risk warnings to make an informed choice.  

“Consumers should still be aware that crypto remains largely unregulated and high risk. Those who invest should be prepared to lose all their money.”

Dan Moczulski, UK head of trading platform eToro,,said regulation of the crypto sector needs to strike the right balance: “We must ensure that efforts to provide consumer protection do not have the unintended consequence of making offshore businesses more accessible and attractive. This would not safeguard UK consumers.”

The FCA announcement keeps the regulatory spotlight on the crypto market, after a Treasury select committee of MPs last month recommended the industry be regulated in the same way as gambling, saying it has “no intrinsic value” and serves “no useful social purpose”.

David Ostojitsch, spokesperson for the Personal Investment Management & Financial Advice Association, said there is a danger that the new rules will create a ‘halo effect’ that benefits the crypto market: “There is clearly a future role for crypto assets, but only if they are marketed appropriately and to the right people. 

“Crypto-assets are not regulated, are highly volatile and therefore high risk and should only be invested in by sophisticated investors that understand the risk they are taking, not mass market investors. There is a significant danger here that consumers will assume crypto-assets are safe because they are being marketed by an FCA-regulated person or firm. Again we would stress this is not the case.”



6 June: Coinbase, Binance Pursued Over Alleged Rule Breaches

The US Securities and Exchange Commission (SEC) has filed a lawsuit against crypto exchange Coinbase for violating securities laws, a day after launching legal proceedings against its rival Binance, writes Mark Hooson.

Today’s filing in the Southern District of New York alleges Coinbase has never officially registered as a broker, national securities exchange or clearing agency, and offered customers unregistered securities via its staking-as-a-service program.

The filing reads: “Since at least 2019, Coinbase has made billions of dollars unlawfully facilitating the buying and selling of crypto asset securities. 

“The SEC alleges that Coinbase intertwines the traditional services of an exchange, broker, and clearing agency without having registered any of those functions with the Commission as required by law.”

Gurbir S. Grewal, director of the SEC’s Division of Enforcement, said: “You simply can’t ignore the rules because you don’t like them or because you’d prefer different ones: the consequences for the investing public are far too great.”

The SEC’s complaint seeks “injunctive relief, disgorgement of ill-gotten gains plus interest, penalties, and other equitable relief”.

In response, Paul Grewal, Coinbase chief legal officer and general counsel said: “The SEC’s reliance on an enforcement-only approach in the absence of clear rules for the digital asset industry is hurting America’s economic competitiveness and companies like Coinbase that have a demonstrated commitment to compliance. 

“The solution is legislation that allows fair rules for the road to be developed transparently and applied equally, not litigation. In the meantime, we’ll continue to operate our business as usual”

Binance, one of the world’s biggest crypto exchanges, is being sued over claims it mishandled customer deposits and lied to investors.

The United States Securities and Exchange Commission is accusing Binance of commingling billions of dollars of customers’ money with company revenue, in violation of US financial rules. 

The Commission also says Binance, which has around 100 million users worldwide, secretly sent customer funds to a separate organisation, Merit Peak Limited, controlled by Binance founder Changpeng Zhao. 

The 136-page filing additionally claims the exchange misled both investors and regulators about its ability to detect manipulative trading, and did not do enough to restrict US investors from accessing Binance’s unregulated, international platform.

US customers are supposed to use its regulated, native platform, Binance.us

The lawsuit, filed in Federal District Court in Washington, says the exchange and Mr Zhao “enriched themselves by billions of US dollars while placing investors’ assets at significant risk.”

The 13 charges in the filing seek restitution and a ban on Zhao serving as an officer or director of any registered entity that issues securities.

Binance responded to the filing in a blog post, writing: “We are disappointed that the US Securities and Exchange Commission chose to file a complaint today against Binance seeking, among other remedies, purported emergency relief.  

“From the start, we have actively cooperated with the SEC’s investigations and have worked hard to answer their questions and address their concerns.”

Arguing that the allegations did not warrant enforcement action, Binance accused the Commission of undermining the US’ role as a global hub for financial innovation.

It’s been a tumultuous year for Binance. In March, The US Commodity Futures Trading Commission (CFTC) said Binance had failed to properly register with relevant authorities and had broken rules designed to tackle money laundering.

The legal filing said Binance operated using an “intentionally opaque” global corporate structure to minimise regulatory scrutiny and maximise profits.

Laith Khalaf, head of investment analysis at AJ Bell, said: “The robust language used by the SEC, along with the lengthy list of charges, suggests this latest fiasco to engulf the crypto market is going to rumble on for some time. The price of Bitcoin took a tumble on the back of the news, and at the moment it feels like the crypto bubble is suffering death by a thousand punctures.

“Crypto is a highly volatile asset in a market which is lightly regulated, so investors must be willing to swallow a whole load of risk before diving in. Crypto poses multiple risks to consumers. Fraud and scams are rife, but even if you buy legitimate crypto, the most obvious risk is the potential for large losses.

“The UK Financial Conduct Authority suggests it’s seeing increasing evidence of addictive behaviour from some crypto traders, and there may be some lessons that can be learned from the gambling industry in terms of how to manage this, for instance identifying such behaviour and potentially putting transactional limits on some accounts. 

“But the golden rule for crypto buyers remains not to invest any money you aren’t willing to lose in its entirety.”


1 June: Soda Ash Giant Plumps For £7Bn London Listing

IMI, the Birmingham-based engineering company formerly known as Imperial Metal Industries, is joining the FTSE 100’s roster of largest, publicly-quoted UK businesses, writes Andrew Michael.

Moving in the opposite direction is property company British Land, which has lost its place in the UK’s stock market index of leading blue-chip shares.

The latest quarterly re-shuffle, announced by index compiler FTSE Russell, will come into force from the close of stock exchange business on Friday 16 June and take effect from the start of trading on Monday 19 June.


WE Soda, the world’s largest producer of natural washing soda, is set to float on the London stock exchange in a boost for the market’s reputation for attracting major businesses.

London’s largest initial public offering is due to take place later this year. If the move goes ahead, the likely £5 billion to £7 billion valuation would rank the company in the top 80 or so largest UK publicly-listed businesses and propel it straight into the FTSE 100.


Changes to major stock indices, such as the FTSE 100 in London and the S&P 500 in the US, have become increasingly important as the money following them in so-called passive investments – such as index tracking and exchange-traded funds (ETFs) – has surged in recent years.

From mid-June, index trackers and ETFs – both designed to mimic the performance of the ‘Footsie’ – will withdraw their positions in the relegated company’s stock and adjust their holdings to accommodate the new incumbent.

Each quarter, FTSE Russell reviews each of the indices it compiles to see if any of the companies should be relegated or promoted.

For a company to join the FTSE 100, it has to have a market capitalisation – the number of its shares multiplied by share price – that would place it in the top 90 by size.

To fall out of the FTSE 100, a company’s market cap would need to be below that of the 110th largest company on the UK stock market.

These extended boundaries prevent companies from continually bouncing between the FTSE 100 and the FTSE 250, which accounts for the UK’s 250 next largest companies.

Susannah Streeter, head of money and markets at Hargreaves Lansdown, said: “IMI has seen its share price surge by more than 23% year-to-date and it’s lifted its full year earnings guidance following a strong performance in the first quarter of 2023.”



24 May: FCA Wants Long-Term Thinking And Less Social Media

The Financial Conduct Authority is urging young people to apply the same approach to investing as they do to dating, writes Andrew Michael.

FCA research among 1,000 investors aged between 18 and 40 who also use online dating services found that, when it comes to dating, they think longer-term and are less influenced by social media than when it comes to investing.

Nearly half (48%) of those surveyed said they are dating to find a potential life partner. But the same cohort said their outlook when it came to investing was considerably shorter.

According to the FCA, only 2% of respondents said they worked to an investing timeframe of more than five years while one-in-seven (14%) said they didn’t invest with any time period in mind at all.

The FCA also found that people were 18% more likely to be influenced by social media when making investment decisions compared with their dating choices.

The research, carried out to support the FCA’s InvestSmart campaign, also looked at how young investors would react to a ‘red flag’ on both a date and when investing.

Potential red flags include someone on a date either arriving late or being rude to waiting staff, while in the context of investing, this applied to having difficulty withdrawing money from an investment, or where an investment opportunity was only available for a short time.

The FCA said that men would be more likely to continue with a date despite spotting a red flag – 49% compared with 39% of women – and would also be more likely to push on with an investment, even after identifying a warning sign (39% of men compared with 28% of women).

Scrolling through a potential date’s social media was found to be the most popular way to prepare for going out with a person (57%), although a third (33%) said they were able to ignore hype on a potential match’s social profile. In contrast, only a fifth of respondents (20%) said they were able to ignore hype about investments.

The findings come a week before the FCA teams up with Anna Williamson of Celebs Go Dating fame to host an event for young investors called Swipe Left, Invest Right: How the Principles of Dating Can Be Applied to Investing, to encourage them to adopt the same principles as they do when dating.

Lucy Castledine, director, consumer investments at the FCA, said: “We have seen the temptation of high-risk investments increase as consumers balance stretched household finances against the immediate thrill of a quick return. But this may mean investors are ignoring the red flags.

“We want to help investors rethink their approach by spotting the similarities to their own dating lives and applying the same mindset, thinking of the long-term, doing their research and prioritising values that match theirs.”

Vanessa Eve, investment manager at Quilter Cheviot, said: “The advance of technology and the fact everything is now just a touch of a button away means we interact with our love life in a very similar way to our investments.

“What is quite stark from this data is the fact that only 2% of young investors have a time horizon of more than five years when investing, while 14% have none at all. Investing is for the long-term and is not a get-rich-quick-scheme. The returns can be genuinely life changing if someone is willing to sit it out for a minimum of five years, but ideally far longer in order to see the true effects of compounding.”


23 May: Watchdog Wants ‘Guardrails’ For Crypto Investors

The International Organization of Securities Commissions (IOSCO), the international financial markets watchdog, is aiming to protect investors with a global approach to the regulation of crypto asset and digital markets, writes Andrew Michael.

Its consultation process includes proposals for an 18-point plan that would place guardrails around the crypto investing sector. The UK regulator, the Financial Conduct Authority, is a member of IOSCO.

Today’s announcement comes in the wake of last year’s collapse of FTX, the high-profile cryptocurrency exchange. In March this year, FTX’s founder, Sam Bankman-Fried, was charged with bribing Chinese government officials to the tune of $40 million.

The bribery charge came on top of a dozen counts already faced by the former FTX boss, whose company failed last November after it was unable to meet a wave of withdrawal demands from customers.

FTX’s demise sent shockwaves not just through the crypto industry but also the wider financial system as the large number of diverse firms owed money by the exchange became apparent.

At the moment, the crypto industry worldwide operates within a patchwork of regulations where different jurisdictions impose their own rules.

In the UK, for example – where 1 in 10 adults is estimated to hold crypto assets – the Financial Conduct Authority takes a dim view of the sector, issuing regular warnings to consumers about the potential for total loss in connection with any investments they make.

Last week, MPs on the Treasury Select Committee said cryptocurrency trading served “no useful social purpose”, adding that the asset class contained “no intrinsic value”. The committee called on the sector to be regulated in the same way as gambling.

Jean-Paul Servais, IOSCO chair, said: “The time has come to put an end to the regulatory uncertainty that characterises crypto activities. It is time for regulators to work together across borders and various jurisdictions to ensure that investor protection and market integrity are upheld in crypto-asset markets.”

Susannah Streeter, head of money and markets, at Hargreaves Lansdown said: ‘’This move by IOSCO is aimed at protecting investors, but it will also propel crypto further into the mainstream. Bitcoin seems to have been bolstered by the news of this concerted effort to regulate the industry, rising by more than 2%.”

Bitcoin, the most high-profile of all the many thousands of cryptocurrencies, has gained 64% since the start of the year, largely recovering from the sharp falls it suffered in the back half of 2022. 

The consultation process ends on 31 July 2023 with IOSCO looking to finalise recommendations by the end of this year.



18 May: US Debt Default Would Spark International Chaos

Unless Congress can reach a deal to raise the country’s borrowing limit, the US government is on the cusp of running out of money, potentially sparking global financial chaos because the world’s largest economy would be unable to pay its debts, Andrew Michael writes.

US politicians have been locked in debate for weeks about whether to lift or suspend the country’s so-called ‘debt ceiling’ – which dictates how much money the US government can borrow.

Also known as the debt limit, this is effectively a fiscal line in the sand that restricts the total amount of money the US government can borrow to meet its bills. These cover everything from federal workers’ pay cheques, the military, Social Security and Medicare, to meeting interest obligations on existing national debt, to tax refunds.

The ceiling has parallels with the fiscal rules set out in the UK by the Chancellor of the Exchequer. In the US, however, the limit is set externally and is made independently from decisions on how much the government should spend and at what level taxes should be set.

The cap currently stands at just over $31 trillion. That figure was breached earlier this year when the US Treasury Department deployed ‘extraordinary measures’ to provide the government with extra cash and buy time to figure out a solution.

Treasury Secretary Janet Yellen has now warned that, if intensive negotiations between Democrats and Republicans are not resolved soon, the US administration will not have enough money to pay its debts as early as 1 June.

Political wrangling came to a head this week when the US president, Joe Biden, met with Republican House Speaker, Kevin McCarthy, to continue the high-stakes budget negotiations.

But if the so-called ‘x-date’ – the point at which the Treasury runs out of funds – passes without the debt ceiling being raised, the financial implications would be enormous.

On the one hand, the US would not be able to pay its federal employees and military personnel, while companies and organisations that rely on state funding would also be put in financial peril.

At the same time, the country would technically go into default and potentially be unable to meet coupon payments and redemptions of Treasury securities – the US equivalent of government-issued UK gilts.

Commentators describe a true default as an unprecedented event with far-reaching ramifications. In theory, should the US default on its debts for the first time in history, this would send the value of its government-backed debt plummeting.

US debt is widely considered to be the single safest asset within the global financial system. The bulk, just over two-thirds, is held domestically via institutions such as the Federal Reserve and in retirement and mutual funds.

About a third is foreign-owned, however, with Japan being the largest holder at around $1.1 trillion. In addition, China owns nearly $900 billion in US debt while the figure for the UK is about $650 billion.

If the US were to default this could prompt a large spike in borrowing costs in the country which, in turn, would likely have ramifications for borrowing costs around the world.

Ryan Brandham, head of global capital markets, North America, at Validus Risk Management, said: “Many of the current issues facing the US today, such as widening wealth gaps, social unrest, inflation problems, printed money, bulging government debt and a weakening ability to pay internal and external obligations, have been associated with the fall of powerful empires all through history going back to at least the Roman Empire. So the risk is real.”

The Organisation for Economic Co-operation and Development said: “Failure to reach an agreement at all would bring more severe macroeconomic dislocation given the current scale of the Federal budget deficit and the actions needed to close this quickly.”

According to Schroders: “The x-date would mark the point at which the Treasury runs out of funds. After disappointing tax receipts for 2022, much now hinges on how revenue shapes up through May. If this can sustain the government into mid-June, when quarterly tax payments are due, the Treasury is likely to be able to make it through much of July and perhaps even to August.”

Against this backdrop, Schroders adds that its message for investors is to hope for success, but plan for failure: “Where possible, portfolios ought to be liquid and diversified to ensure capital can be redeployed quickly given the volatility seen during prior episodes of debt ceiling brinkmanship.”



17 May: Crypto Trading Like ‘Wild West’ – Treasury Committee

MPs on the Treasury Select Committee say cryptocurrency trading has “no intrinsic value and serve no useful social purpose” and should be regulated in the same way as gambling.

The cross-party group of MPs today said the crypto market poses significant risks to consumers, given price volatility and the risk of losses, and more closely resembles gambling than a financial service.

They are concerned that regulating crypto as a typical financial service would unduly legitimise the market, giving consumers the impression that crypto is safe and protected which, the committee believes, it is not.

HMRC estimates that one in 10 UK adults now holds or has held crypto assets.

Committee chair Harriett Baldwin MP, said: “The events of 2022 have highlighted the risks posed to consumers by the cryptoasset industry, large parts of which remain a wild west. 

“With no intrinsic value, huge price volatility and no discernible social good, consumer trading of cryptocurrencies like Bitcoin more closely resembles gambling than a financial service, and should be regulated as such.”

The report stresses that the committee recognises the potential importance of the technology that enables cryptocurrencies to the financial services industry. It has also called on the government and regulators to keep pace with future developments.

Ivan Ivanchenko, CEO of crypto options trading platform Phinom Digital, slammed the report, saying: “Treating cryptocurrency trading as gambling would be a backward step for the UK’s digital currency aspirations and another demonstration that the country is fast becoming a sea of red-tape.”

Mike Stimpson at financial advisor Saltus said: “Our research shows that interest in digital assets continues to rise at pace, particularly with young investors.

“Almost half (47%) of respondents in our latest Wealth Index survey reported that they hold at least some digital assets, up from a third six months ago, while among those aged under 24, the number is almost two thirds (65%).

“But the crypto sector is extremely volatile – both the upside and downside – due to the fact it is very difficult to work out a fair value for crypto currencies. This, combined with the immaturity of the sector and the lack of regulation, means there is significant risk for investors.

“As with any investment, crypto investors need to take advice. A professional adviser will be able to help them build a financial plan which invests in a diversified portfolio to generate the returns necessary to deliver that plan.”

Last month the European Parliament gave the green light to its Markets in Crypto Assets (MiCA) bill, which will bring crypto assets into regulation alongside traditional financial services. 

Expected to become law next year, EU lawmakers hope MiCA will protect investors and safeguard against financial crime and market manipulation.



3 May: City Grandees Criticise Proposed Overhaul Of Listing Rules

The UK’s financial regulator, the Financial Conduct Authority (FCA), has called for an overhaul of UK stock market share listing rules after several high-profile companies shunned the City of London in favour of Wall Street flotations, Andrew Michael writes.

In recent months, London’s appeal as a location for companies looking to float their shares has come into question after several firms, including the chip designer ARM Holdings, favoured New York over a domestic listing.

Data from the UK Listing Review shows that the number of UK listings has fallen by 40% since 2008. In recent years, continental European exchanges have also attracted increased attention from companies looking to float.

In a consultation document, the FCA says it wants to reform and streamline the rules to “help attract a wider range of companies, encourage competition and improve choice for investors”.

In practice, this would mean bringing the current rulebook more into line with that of the US, while removing a series of investor protections – a decision which, if implemented, has been described as concerning by commentators.

The regulator has proposed replacing London’s current ‘premium’ and ‘standard’ listings framework with a single system that contains less onerous rules.

Premium listing imposes higher compliance and disclosure requirements than the EU minimum requirement for a standard listed company.

As things stand, only those companies with a premium listing are eligible for inclusion in FTSE indices, the market barometers that are tracked by so-called ‘passive’ investments such as index trackers and exchange-traded funds.

According to the FCA, a single equity category would “remove eligibility requirements that can deter early-stage companies, be more permissive on dual class share structures, and remove mandatory shareholder votes on transactions such as acquisitions to reduce frictions to companies pursuing their business strategies”.

The proposals also include concessions to allow founders of newly floated companies to retain more power by allowing different share classes with differing voting arrangements.

There would also be a removal of the rules that require so-called ‘related party transactions’ to be put to the vote of all shareholders – a restriction thought to have prompted Arm’s owner, SoftBank, to choose a New York listing.

There would also be the scrapping of the need for companies to demonstrate a three-year track record before listing, and the requirement for listed companies making acquisitions larger than 25% of their own market value to put the deal to a shareholder vote would also be removed.

Scrapping the present listing regime would represent one of the largest overhauls of UK stock market rules since the so-called Big Bang in the 1980s, which revolutionised the way London operated and cemented its position as a leading global hub in areas such as investment management.

Although broadly in favour of the need for change, commentators raised concerns that the proposals, if implemented, could harm investor protection.

Richard Wilson, head of investing platform interactive investor, said: “We strongly support the principles behind listing rule reform to make the UK more competitive, but eroding shareholder rights risks undermining market standards, and this is not the right answer.

“Dual-class structures, which come with differential voting rights, erode shareholder rights. Distorted rights distort governance and accountability. One share, one vote is a bedrock of shareholder democracy and we are concerned to see that the spectre of dual share classes, which we have actively lobbied against, still looms large.

“Reference to removing mandatory shareholder votes on transactions such as acquisitions is another major red flag.”

Kevin Doran, managing director at investing platform AJ Bell, said: “The loss of ARM Holdings to the US market has clearly stung the government and FCA hard. 

“As the crown jewel of the domestic tech sector, the fact that the company chose the US as its new home when returning to public markets is a sign of how far the UK has fallen since the company de-listed in 2016.”

The FCA consultation closes on 28 June 2023.

Talking Point – Does London Need To Get ‘Scrappy & Hungry’?

Despite understandable concerns, especially around investor protection, the FCA’s proposals aimed at preventing a stream of corporate exits from the London market from turning into a flood have, broadly speaking, been welcomed by the City of London and beyond, writes Andrew Michael.

The FCA’s intention is sound: to make the UK in general, and London in particular, a more attractive and competitive environment where publicly quoted companies are able to flourish. For that it is to be applauded.

But whether the changes ultimately achieve their desired effect and reinvigorate the domestic market probably requires more than a shift in the UK’s listing rulebook, despite its widely regarded status as the gold-plated blueprint for corporate behaviour.

The proposed reforms come in the wake of a turbulent period for the City amid suggestions that it has lost its appeal, with the US gaining the upper hand, especially with regard to companies planning a flotation.

As Julia Hoggett, chief executive of the London Stock Exchange, has suggested, London arguably became complacent about its role as Europe’s dominant financial centre and now needs to become “scrappy and hungry” to compete.

Roger Clarke, head of IPSX, the real estate stock exchange, says: “The FCA is beginning to recognise that a culture that seeks to eliminate risk completely will succeed in eliminating returns completely, hampering UK investment appetite. That is in nobody’s interests and will lead to a disastrous future for pensioners and savers.

“An unintended consequence of years of creeping regulation to remove risk for investors has been the removal of entrepreneurial and innovative spirits in the financial markets that established London’s global dominant position.

“Investors can and should be trusted to take responsibility for their investment decisions. Regulated markets are essential, risk-free markets are an illusion.”



25 April: ‘Shocking’ Findings Highlight Lack Of Knowledge

People under the age of 40 are more familiar with cryptocurrency as a potential means of making money than stocks and shares, investment funds, or Premium Bonds, according to the Association of Investment Companies (AIC), writes Andrew Michael.

The trade body carried out research among people aged between 20 and 40 who said they did not currently invest.

The AIC found that 70% are aware of cryptocurrencies such as bitcoin, significantly more than those familiar with conventional savings and investment options such as stocks and shares (59%), Premium Bonds (46%), investment funds (23%) and investment trusts (18%).

Exchange-traded funds (ETFs), a relatively low-cost way for retail investors to access a spread of shares, fare even worse, registering 12%.

The Financial Conduct Authority, the UK regulator, regularly warns consumers about the unregulated nature of cryptocurrencies, reminding them that crypto assets have the potential to fail with a complete loss of capital.

The investment industry will be dismayed that funds, trusts and ETFs – which are promoted as ways for retail investors to gain a foothold in investing – lack the awareness associated with crypto assets in the eyes of younger potential investors.  

Respondents told the AIC that the main barrier to investing (57%) is a lack of understanding and knowledge. They also blame the cost-of-living crisis (53%) and not having enough money in general (45%) as other stumbling blocks.

Being concerned about markets and the state of the economy, as well as the idea that investing was too risky in general, also crop up as concerns.

Annabel Brodie-Smith, AIC communications director, said: “Some of us may find it shocking that young people are most aware of cryptocurrency as an investment option. But this demonstrates that the investment industry needs to do more to help young people understand the range of investment options, the risks involved and how investing can help them save for the future.”



20 April: Compensation Takes Amount Recovered To 77p In Pound

Over 300,000 Investors in the collapsed equity income fund run by Neil Woodford are set to receive up to £235 million in compensation following a Financial Conduct Authority investigation, writes Jo Thornhill.

The city regulator found Link Fund Solutions (LFS), the administrator and authorised corporate director of the Woodford Equity Income Fund, made “critical mistakes and errors” in the management of the liquidity of the fund from September 2018 onwards. 

It meant investors taking their money out of the fund benefited disproportionately from access to the most liquid – or accessible – assets, while those who continued to hold assets in the fund were treated unfairly and ultimately suffered financial losses. The fund was finally frozen in June 2019.

Link Group has agreed to the redress package, which will benefit those investors who had money in the fund at the time it was suspended, subject to the sale of LFS and its other assets.

It is also dependent on the approval by those investors entitled to redress and other creditors of LFS, and the redress scheme itself will need court approval.  

If the proposed compensation of £235 million is paid out then investors will have recovered approximately 77p in the pound. The redress offered in the Scheme does not cover investment losses but covers losses that arose due to the conduct of LFS.

A total of £2.56 billion has already been paid to investors since the suspension of the fund from the distribution of proceeds from the sale of investments.

Therese Chambers, executive director of enforcement and market oversight at the FCA, said: “The FCA’s investigation raised serious concerns about Link Fund Solutions’ management of the liquidity of the Woodford Equity Income Fund. 

“LFS’s actions appear to have caused significant losses for those investors who remained in the fund when it was suspended.”

Mr Woodford set up the Equity Income Fund in 2014, trading on the back of 26 years of fund management success at Invesco. He was a popular and high-profile choice for investors and by mid 2017 the fund held more than £10 billion of investors’ money. 

But a series of bad investment choices and an increasing number of unquoted assets in the fund meant it suffered big losses. Investors started to worry and withdrawals from the fund snowballed. The fund had to be suspended on 3 June 2019, leaving investors unable to access their cash. There was £3.7 billion in the fund at this time.

Woodford was sacked by Link Fund Group later that year and the fund was closed. Some money has been returned to investors through the winding up of the fund and sale of assets. 

The FCA says more information on the LFS Scheme will be provided in July 2023 and the Scheme documentation, including full details of the FCA findings, will be available as early as possible in the fourth quarter of 2023. 

The FCA said that if approved, the redress Scheme offers investors substantially more than is otherwise available from LFS alone and more than would be achieved by any other means, given the contribution by Link Group.


18 April: Improving Economic Outlook Buoys Bid Activity

Private equity investment firms are circling companies listed on the London stock market with renewed vigour, encouraged by an improving economic outlook that has improved prospects for potential merger and acquisition (M&A) activity, Andrew Michael writes.

Such firms use pooled money from investors to buy into companies where they believe they can make money by boosting growth strategies and acquisitions, or other means of financial engineering.

In the second half of 2022, M&A activity all but dried up after surging inflation, rising interest rates and market uncertainty combined to produce a rise in the cost of debt, plus a growing gap in corporate valuations.

This year, however, the City of London has seen a return to dealmaking as recessionary prospects begin to fade and signs emerge of economic stability.

Apollo Global Management, the US private equity giant, has cranked up its London efforts with two significant moves.

The first was a fifth bid – now raised to 240p a share – for Wood Group, the FTSE 250 company oilfield services and engineering firm, that values the business at around £1.7 billion. Wood Group said it had decided to engage with Apollo to see if a firm offer can finally be made.  

The second announcement saw Apollo take aim at THG, formerly known as The Hut Group, the beleaguered online retailer. THG, the owner of Cult Beauty and other cosmetics brands, acknowledged it had received a non-binding, “highly preliminary” proposal from Apollo, although the latter has not confirmed the approach.

Victoria Scholar, head of investment at interactive investor, said: “THG shareholders have had an extremely tough time with this stock, which is down around 90% since floating on the London Stock Exchange in September 2020.

“Investors are hoping that a private equity buyout could put an end to this bad chapter. The company behind numerous brands including LookFantastic and MyProtein has struggled recently with high raw material costs, particularly for whey protein, which have squeezed its margins”.

In a separate announcement, the payment products and services company, Network International, confirmed it had received a non-binding proposal from CVC Advisers Limited and Francisco Partners Management. It indicated that it would be supporting the £2 billion bid from this consortium of private equity firms.

Elsewhere, Dechra Pharmaceuticals said last week that it was in talks over a potential £4.6 billion cash bid from Swedish firm, EQT.

Hyve, the exhibitions firm, has been subject to a £480 million takeover approach from Providence Equity Partners, while nearly a third of shareholders in Industrials REIT have backed Blackstone’s £511 million cash offer for the multi-let business park owner.


13 April: Elon Musk Advances Plan For One-Stop ‘Super App’

Twitter, the microblogging website bought last year by Elon Musk for $44 billion, has teamed up with investing website eToro to enable Twitter users to see real-time prices instantly for stocks and shares, cryptocurrencies and other assets such as exchange-traded funds (ETFs) and commodities, writes Andrew Michael.

Starting today (Thursday), a new ‘$Cashtag’ feature will be introduced on the Twitter app that will enable users to view market charts on a range of financial instruments, and to click through to eToro to see more information about the asset in question and have the option to invest.

A $Cashtag is a stock market ticker symbol preceded by a dollar sign. The $Cashtag for another Musk-owned company, Tesla, for example, is $TSLA.

Elon Musk recently told a financial conference that he wants Twitter to become “the biggest financial institution in the world”. 

Twitter added pricing data for $Cashtags in December 2022. Since then, according to the company, the feature has seen widespread adoption with more than 420 million searches for the term since the start of 2023.

Twitter said that search activity increases around prominent earnings announcements. For example, when the technology giant Apple made public its earnings figures for the final quarter of 2022 – on 2 February this year – searches for $Cashtags jumped to eight million.

Twitter added that the most commonly used $Cashtag was $TSLA (Tesla), with $SPY (SPDR S&P 500 ETF) and $BTC (Bitcoin) also ranking in the top five.`

An eToro spokesperson said that the move would eventually cover more than just US stocks. “The partnership will hopefully see thousands of tickers working as ‘cashtags’ with a route to the eToro platform to learn more. These are being added in a gradual process.”

The spokesperson also acknowledged that today’s announcement had not gone quite to plan. “There have been a couple of teething issues including crypto cashtags not being live, which we’re working on resolving with Twitter.”

Chris Riedy, vice president, global sales & marketing, at Twitter, said: “Twitter is what’s happening and what people are talking about right now. We believe real change starts with conversation, and finance and investing is a growing part of that conversation.

“We are pleased to partner with eToro to provide Twitter users with additional market insights and greater access to investment capabilities. Twitter will continue to invest in growing the #FinTwitter community.”

Yoni Assia, chief executive and co-founder of eToro, said: “Financial content on social media has provided education to many who have felt excluded by more traditional channels. Twitter has become a crucial part of the retail investing community – it’s where millions of ordinary investors go every day to access financial news, share knowledge and converse.”

“As the social investing network, eToro was built on these very principles – community, knowledge-sharing and better access to financial markets. There is power in shared knowledge and by transforming investing into a group endeavour, we can yield better results and become more successful, together.”

Zoe Gillespie, investment manager at RBC Brewin Dolphin, said: “While eToro is not directly integrated into the social media platform, the tie-in could potentially benefit Twitter financially through referrals to the platform.”

Ms Gillespie added: “We’d always advise to exercise caution where social media and investing become inter-twined. We would also encourage investors to check their sources, making sure anything they invest in is regulated, and that they understand the risks associated with unregulated schemes such as cryptocurrencies.”


6 April: Love Island Star Joins Battle Against Bad ‘Advice’

The Financial Conduct Authority (FCA) and the Advertising Standards Authority (ASA) have teamed-up with reality TV star Sharon Geffka to teach financial influencers – ‘finfluencers’ – about the risks involved in promoting products, writes Andrew Michael.

Finfluencers use platforms such as Instagram and TikTok to provide financial information and suggestions – from the basics of being a shares day trader, to how to buy a property – via social media channels, often to hundreds of thousands and sometimes millions of followers.

Strict rules govern the provision of financial advice, with requirements for authorisation, qualifications and continuing professional development before a financial advisor of any kind is allowed to extend his or her knowledge to members of the public. 

There are also strict rules about what companies can and cannot say in the sphere of financial promotions and advertising.

Earlier this year, the FCA warned of finfluencers providing unauthorised investment advice after it saw the number of misleading ads balloon 14-fold in 2022.

Many of these were from social media finfluencers who, according to the FCA, are a growing concern.

Today’s announcement from the FCA and the ASA sees the pair partnering with Ms Geffka, a former contestant on Love Island, and a self-styled social media influencer.

The FCA and ASA say they will engage with influencers and their agents, providing them with clear information about what could constitute an illegal financial promotion. 

Part of the initiative includes an infographic aimed at finfluencers which sets out what they should check before accepting brand deals for financial products and services.

The FCA said it would also be inviting finfluencer agents and the Influencer Marketing Trade Body to a roundtable discussion on illegal financial promotions.

Sarah Pritchard at the FCA said: “We’ve seen more cases of influencers touting products that they shouldn’t be. They are often doing this without knowledge of the rules and without understanding of the harm they could cause their followers.

“We want to work with influencers so they keep on the right side of the law, as this will also help protect people from being shown scams or investments that are too risky.”

Sharon Gaffka said: “When you leave a show like Love Island, you are bombarded with opportunities to promote products and work with brands. If, like me, you’re new to this kind of work, it can be a little bit overwhelming.

“This campaign with the FCA and ASA will hopefully make sure other influencers stay on the right side of the law and prevent them from unknowingly introducing their followers to scams or high-risk investments.”

Tom Selby at investment platform AJ Bell said: “One of the big challenges facing UK regulators is that, when it comes to social media, finfluencers are often unregulated individuals pushing unregulated products in a world which is incredibly hard to track and monitor. In the worst-case scenario, finfluencers could encourage followers to invest in scam schemes and end up losing everything.

“The fact a lot of this activity happens outside of the regulated space is likely why the FCA is focusing on educating those pushing out messages to their followers.”

* The FCA has ordered discretionary fund manager WealthTek to stop operations and arrested a man linked to the case. 

In an announcement today, the regulator said it had taken “urgent steps” with the High Court to appoint three representatives from BDO LLP to take control of WealthTek, which also trades under the name Vertem Asset Management and Malloch Melville. 

The appointment of BDO LLP is on an interim basis and pending a further court hearing.



5 April: UK Investors Favouring International Fund Offerings

Equity funds – those focused on shares – returned to favour with UK investors last month, even though turmoil in the banking sector threatened to drag down global stock markets, writes Andrew Michael .

Investors added a net £960 million to their equity fund holdings in March, the highest inflow since December 2021, according to Calastone’s latest Fund Flow Index.

Equities proved popular with investors despite concerns over bank failures in the US and Switzerland, notably the collapse of Silicon Valley Bank and UBS’s takeover of the beleaguered banking giant, Credit Suisse.

Calastone described this as a “significant turnaround” on both January and February, when investors sold more equity-based funds than they bought. Global funds, which invest in a basket of international shares, were the main beneficiaries of improving investor confidence, attracting £1.69 billion.

However, Calastone said UK-focused equity funds continued to haemorrhage cash, with investors pulling a net £747 million out of UK funds last month, the 22nd consecutive month where the sector suffered from a net outflow of money.

Edward Glyn, head of global markets at Calastone, said: “The relatively strong performance of UK equities since the bear market began just over a year ago has not improved sentiment. If anything, we have seen outflows accelerate.”

While investors continue to shun domestic equities, other sectors proved more attractive in March, including index tracking funds, which recorded net inflows of £909 million, and emerging markets funds, which were bolstered to the tune of £393 million.

Another sector to perform comparatively poorly in March included funds invested in line with environmental, social and governance (ESG) principles.

Although ESG funds continue to attract cash, they did so at a much-reduced rate last month: £218 million, which is about two-thirds less than the average monthly figure for the sector going back three years.

Calastone’s Mr Glyn said: “The ESG gold rush has seemingly passed its peak. A host of factors are at play, including the high weighting of poorly performing technology stocks in ESG portfolios, a ‘greenwashing’ backlash, and a refocusing of marketing activity by fund managers.”


4 April: Virgin ISA And Non-ISAs Available From £25

Virgin Money has entered the burgeoning DIY market for investing platforms and trading apps with the launch of a service offering a pared-down range of investment options based on three risk profiles, Andrew Michael writes.

Would-be investors can open a stocks and shares individual savings account (ISA) or a non-ISA investment account. Each has a minimum contribution of £25.

Investors can choose from three options: cautious growth, balanced growth or adventurous growth.

Virgin says each option, incorporating funds managed by Virgin Money Unit Trust Managers, offers customers a diversified portfolio invested in companies with “good environmental, social and governance (ESG) credentials”.

The provider says these include companies that adopt sustainable investing policies and objectives, have positive shareholder engagement policies, or provide products and services that support the transition to a low carbon economy.

In terms of cost, the same charges apply to the stocks and shares ISA and the non-ISA account, split into an annual account charge of 0.3% based on the value of the investment combined with a yearly asset management charge of 0.45%.

A lump sum contribution of £1,000 investment would therefore cost an investor £7.50 assuming no growth.

Virgin Money confirmed that investors wishing to swap from, say, a balanced growth option to cautious growth can do so penalty-free.

Customers who open a new Virgin Money stocks and shares ISA or non-ISA account to the value of at least £5,000 by 30 June 2023 will also be granted 8,000 points to be spent with Virgin Red, the firm’s rewards club subsidiary.

To qualify, investors have to keep the money invested until the end of July this year. Customers will also receive the points if they transfer from an existing investment by 29 September 2023.

Jonathan Byrne, chief executive officer at Virgin Money Investments, said: “The world of investments can be complex and daunting. That’s why we’ve designed our new investment service to make it easy and understandable for everyone.”

  • In January this year, M&G Investments launched &me, a digital service developed in conjunction with Moneyfarm, the online advisor. In the same month, Bestinvest unveiled a free mobile app to accompany its investment platform, which was revamped in 2022 (see stories below).

4 April: Merger Creates £100 Billion Wealth Manager

Wealth manager Rathbones is to buy rival firm Investec Wealth & Investment UK for £839 million, creating a merged business with combined assets under management worth £100 billion, Andrew Michael writes.

With the decision subject to shareholder approval, the companies will continue to operate independently of each other for the time being.

Assuming the deal goes ahead, however, financial advisers predict that a corporate restructure of this size would result in a certain amount of administrative upheaval for clients as the new business meshes together.

There has been no word as yet on the possible impact of the deal on staff at either firm.

The UK’s wealth management sector has become increasingly competitive in recent years, with firms striving to achieve scale to survive while fighting to retain clients attracted by relatively cheap so-called passive investments, which rely on computer algorithms rather than human managers.

The combined entity will be known as the Enlarged Rathbones Group and operate under the ‘Rathbones’ brand.

Rathbones will issue new shares in exchange for 100% of Investec W&I UK’s share capital. Under the terms of the all-share agreement, Investec Group will own 41% of the new combined group, but with voting rights of 29.9%.

The deal provides Investec with an implied equity value – a measure of its worth – of £839 million.

It includes its wealth and investment operations in the UK and Channel Islands but omits Investec Bank’s Swiss-based business and the company’s international wealth operation, both of which remain wholly-owned subsidiaries of Investec Group.

Clive Bannister, Rathbones chair, said: “This transaction not only presents a compelling strategic and financial rationale, but also accelerates Rathbones’ growth strategy. Operating at scale allows the group to offer an even more attractive proposition to clients and colleagues, supporting future growth and creating significant value for Rathbones’ shareholders.”

Fani Titi, Investec Group chief executive, said: “The strategic fit of the two businesses is compelling with complementary strengths and capabilities to enhance the overall proposition for clients.”

Laith Khalaf, head of investment analysis at AJ Bell, said: “Bulking up will allow the companies to cut costs. The rationale for the merger lies mainly in the two firms’ overlapping interest in financial planning and discretionary wealth management services for high-net worth clients. A corporate merger of this size will bring with it changes for all parts of both businesses.”

Ben Yearsley, investment director at Shore Financial Planning, said: “It probably makes sense for shareholders to combine the two businesses, but there will inevitably be fallout and a period of uncertainty for both clients and staff.”



3 April: Govt Holds Fire On NatWest Stock Sale

The government is pushing back plans to sell its stake in NatWest by two years, with volatility currently blighting the banking sector following UBS’s takeover of Credit Suisse and the collapse of Silicon Valley Bank, Andrew Michael writes.

The Treasury still owns 41.5% of NatWest, having spent nearly £46 billion in a bail-out of the group – then known as Royal Bank of Scotland – following the 2008 financial crisis.

With an original shareholding worth 84%, the government has been reducing its stake since 2015 through a combination of deals including large-scale ‘directed buybacks’, where NatWest was told to buy its own shares via the stock market, plus a plan to drip-feed NatWest stock into the market.

The re-introduction of shares to the market, which began in July 2021, has been responsible for stock sales worth about £3.7 billion.

Originally, the government’s plan to transfer NatWest back into private ownership was due to end this August. But the government also said it would only dispose of its shareholding “when it represents value for money to do so and market conditions allow”.

Against a turbulent backdrop for the global banking sector, UK Government Investments Limited (UKGI), the body that manages the taxpayers’ stake in the bank, announced today that the scheme will run for a further two years.

NatWest shares, which began the year at 265p, reached a high of 310p in February before sinking back as part of a wider sell-off in banking shares as investors became concerned about developments in the sector, notably in the US and Switzerland.

Earlier today, the bank’s shares were trading at 267p.

Andrew Griffith, economic secretary to the Treasury, said: “We are determined to return NatWest to full private ownership. Today’s extension marks another significant milestone in delivering this, ensuring we achieve best value for the taxpayer as we sell down the shareholding.”

Victoria Scholar, head of investment at interactive investor said:If the banking sector crisis fades over the coming weeks, we could see opportunistic buyers return to the market, picking up shares in NatWest and others at a discounted price. However, if further cracks in the system are revealed, banks could come under renewed selling pressure.”


30 March: ESG Under Spotlight Amid Calls For Consistency

The government has launched a consultation on the purpose and scope of regulation for environmental, social and governance (ESG) ethical ratings as part of a range of measures in its updated Green Finance Strategy, Andrew Michael writes.

ESG investing, which applies filters to the potential stock choices made by a fund manager, has become a familiar strategy within the investment management landscape.

With other credentials being equal, companies that actively support change across a number of measures – as determined by ESG research and the ratings applied by advisory organisations – will find themselves nearer to the top of a fund manager’s ‘buy list’ than their rivals.

But with numerous measures and ratings available, a longstanding concern with ESG has been a lack of standardised criteria for what classifies an investment as ethical, green, or sustainable.

Ultimately, this can lead to confusion among both retail and institutional clients of investment managers, the risk being they allocate their money to an investment of dubious credentials which has either been falsely promoted or marketed incorrectly.

Earlier this week, the Financial Times reported that hundreds of funds are about to be stripped of their ESG ratings, with thousands more to be downgraded, in a review being pushed through by MSCI, the stock index provider.

According to the Treasury, ESG ratings have become increasingly influential, with 65% of institutional investors to using ESG ratings at least once a week: “With projections that $33.9 trillion of global assets under management will consider ESG factors within three years, the importance of reliable ESG information is critical and growing.

“ESG ratings, which assess firms’ management of ESG risks, opportunities, and impacts, are a key element of this. It is right for them to play their part in providing valuable insight to market participants.

“Providers of ESG ratings should be supported and encouraged to promote transparency and deliver strong outcomes for the benefit of UK markets and ultimately consumers. Developing the market for credible ESG ratings is a real opportunity to be seized by the UK, building on its strengths as an open, innovative, and sustainable global financial centre.”

The Treasury says its consultation sets out a proposed policy approach to bringing ESG ratings providers into the UK regulatory perimeter and will cover ratings provided by both UK and overseas firms to UK users.

The consultation closes on 30 June 2023. You can submit your thoughts via [email protected]


28 March: Treasury Puts UK NFT Plans On Ice

The Treasury has shelved plans for the Royal Mint to launch its own non-fungible token (NFT), less than a year after it was set the task as part of the UK’s forward-looking approach to cryptocurrency, Andrew Michael writes.

NFTs are digital assets – ie, they have no physical presence – that represent real-world objects, such as unique works of art or mementoes of memorable sporting moments.

Along with cryptocurrencies, such as Bitcoin, NFTs make use of blockchain technology – a multi-point computer ledger designed to safely store digital data.

Among the best-known NFTs is a series known as the Bored Ape Yacht Club, which provides the bearer with ownership of a unique picture of a cartoon ape.

In April 2022, the current Prime Minister, Rishi Sunak, in his former role as the Chancellor of the Exchequer, asked the Royal Mint to release an NFT later that summer.

No details were given about what image or object the NFT might represent, nor whether the entity would eventually end up being used to generate funds for the UK exchequer.

Commenting at the time, the government described the request as one of a series of measures to make the UK “a global hub for cryptoasset technology and investment”.

But the decision appeared to be at odds with the position of the regulator, the Financial Conduct Authority, which issues regular warnings to consumers about the crypto industry, reminding them that cryptoassets are unregulated and high-risk.

According to the Royal Mint, the Treasury’s NFT proposal will be kept “under review”.

Andrew Griffiths MP, economic secretary, shared the announcement with Parliament yesterday (Monday) in response to a written question from Harriet Baldwin, the Conservative MP for West Worcestershire and chair of the House of Commons Treasury Select Committee, who asked if creating NFTs remained a Treasury policy.

Commenting on the announcement, Ms Baldwin said: “We have not yet seen a lot of evidence that our constituents should be putting their money in these speculative tokens unless they are prepared to lose all their money. So perhaps that is why the Royal Mint has made this decision in conjunction with the Treasury.”

In recent months, the crypto industry worldwide has been rocked by a series of setbacks including the collapse of the FTX crypto exchange at the end of 2022 plus, earlier this month, the failure of three crypto or crypto-related banks in the US: Silicon Valley Bank, Silvergate and Signature.

At the time of writing, it is also possible that Binance, the world’s largest crypto exchange, could be banned from operating in the US after falling foul of the country’s financial regulator (see story here).

Prices of NFTs, which had reached levels worth millions of pounds in some cases, collapsed last year in the wake of FTX’s demise.



14 March: Recent Turmoil Puts Focus On Weakened Stocks

The spotlight has fallen on global banks in recent weeks, with the collapse of Silicon Valley Bank followed by the emergency rescue of Credit Suisse by its long-time rival UBS, Jo Groves writes.

Fears of a widespread banking crisis have prompted a sharp fall in banking stocks on both sides of the Atlantic. The Dow Jones US Banks Index has dropped by 9% in the last week with the FTSE 350 Banks Index decreasing by a similar amount before clawing back most of its losses.

According to investment platform Freetrade, investors looking to ‘buy on the dip’ have triggered a record level of trading in financial stocks over the last fortnight. Top of the ‘buy’ list was specialist buy-to-let bank Paragon, with a near 1,900% increase in purchases, followed by FTSE 100 giants Prudential and HSBC.

Alex Campbell, head of communications at Freetrade, said: “For many of these shares, this looks like an ideal opportunity to start a new position or add to an existing one. 

“With UK banks trading well below a three-year average price-earnings ratio of about 15 times, now could be a good time for investors to lock in an attractive entry point and start claiming some healthy dividends.”

What’s the outlook for the financial sector?

Looking at the broader picture, David Dowsett, global head of investments at GAM Investments, said: “We do not think what has happened to Credit Suisse should derail the investment case for European financials. It is a painful and historic situation, however, it is largely being seen as a one-off.

“On the banking sector as a whole globally, it is important to stress that this is not a bad asset problem. The [2008/09] global financial crisis was such a problem, where banks had significant assets on their balance sheets that were not worth anything or worth very little. This is not the case this time.”

However, investor confidence in this sector remains fragile, with particular concerns over the knock-on impact on smaller regional banks in the US, which are more lightly regulated.

Danni Hewson, head of financial analysis at AJ Bell, said: “The shotgun wedding between UBS and Credit Suisse does seem to have diffused some of the tension from the global banking sector today, but investor confidence has been badly shaken and, despite liberal applications of monetary putty, there are still a few visible cracks.

“Trust is crucial when you’re asking depositors to stick with you, and many of those depositors still feel safer switching to bigger banks which have been subject to greater regulatory scrutiny, though the outflow of cash has been slowing following last week’s interventions.”

Why might the cost of bank debt rise?

The write-off of £14 billion of Credit Suisse’s AT1 bonds has also sent a shock-wave through the banking sector. These bonds are designed to convert into equity if a lender has financial difficulties and were therefore seen as a relative safe haven.

While Switzerland is the only jurisdiction where bondholders can take the hit ahead of shareholders, the write-off has spooked holders of AT1 debt in other banks. This may lead to a rise in the cost of capital and stricter lending criteria for the wider banking sector.

What are the options for investing in the sector?

There are a number of funds covering the broader financial sector for investors looking for a more diversified portfolio of banking stocks. 

These include the Xtrackers MSCI USA Financials Exchange-Traded Fund, which tracks the MSCI USA Financials Index. Alternatively, the actively-managed Janus Henderson Global Financials fund invests in a basket of UK and international financial services companies.

Looking ahead, it remains to be seen whether the recent interventions by the authorities restore calm to the banking sector or whether there are further challenges to come.



14 March: Systemic Failure Unlikely As Govts Step In

The collapse of Silicon Valley Bank (SVB) late last week in the US continues to have ramifications for banking stocks worldwide as investors fret over the financial health of lenders, Andrew Michael writes.

Shares in several regional US banks, including the Phoenix-based Western Alliance and San-Francisco headquartered First Republic, closed markedly lower on Monday despite comments from the US president, Joe Biden, that his administration would do “whatever is needed” to protect depositors.

Shares in the UK’s largest banks also plunged in London on Monday with Barclays and Standard Chartered falling by more than 6%.

Rob Burgeman, investment manager at RBC Brewin Dolphin, said: “Sentiment has hit share prices, but, based on the current picture, we do not believe that UK banks should be classified in the same way as their regional US counterparts.

“The regulatory regime in the UK and Europe is far tougher and unlikely to slacken any time soon. This may well, then, be a buying opportunity.”

Earlier today (Tuesday), shares of Japan’s largest banks dropped sharply as global markets responded to Monday’s overnight US banking sector sell-off amid growing uncertainty over interest rates in the wake of SVB’s failure.

Last Friday (10 March), SVB – a bank that mainly catered for tech start-ups – was taken over by the US Federal Deposit Insurance Corporation (FDIC), which focuses on maintaining financial stability. 

The decision was taken amid growing concerns about the bank – the 16th largest in the US by assets – posing a systemic risk to the US and global financial system.

Daniel Cassali, chief investment strategist at Evelyn Partners, said: “SVB’s problems came about because of inadequate risk management: “To earn a higher return, SVB invested customer deposits in long-dated bonds, but as interest rates rose over the last 12 months, the value of these bonds fell. Crucially, SVB failed to hedge this risk, leaving the bank with a large unrealised loss.”

With concerns mounting about SVB’s financial position, customers started to withdraw their money last Thursday (9 March). SVB sold its most liquid bond holdings to meet deposit demands, causing the bank’s earnings to take a hit and the value of its capital on its balance sheet to fall.

The collapse of SVB led investors to sell US bank stocks last Thursday, with the action spreading across Europe last Friday. Investors have continued to remain bearish on banks this week as the consequences of SVB’s failure are better understood.

Yesterday, following government and the Bank of England intervention, HSBC bought SVB’s UK subsidiary for £1, bringing relief to hundreds of tech firms that had warned they faced bankruptcy without help.

Janet Mui, head of market analysis at RBC Brewin Dolphin, said: “Despite the backstop put in place by the Fed in the US and the Treasury in the UK, markets remain nervous about the wider impact from the fallout of SVB. Bank stocks are tanking and investors are flocking to safety.”

Will Howlett, equity research analyst at Quilter Cheviot, said: “Despite the UK government having to broker a deal for the UK arm, the SVB incident is a real outlier in the US banking industry.

“SVB failed to appropriately hedge its risks, exemplified by the high proportion of ‘long duration’ fixed-rate assets it held and which were purchased through the period of very low interest rates post Covid, as well as the short-term deposits from venture capital-backed technology companies almost entirely above the government insurance threshold.

“As such, we do not see systemic issues for banks and this is unlikely to trigger a ‘new’ financial crisis.”

Jack Byerley, deputy CIO at wealth manager WH Ireland, said: “We have cautioned that excesses in non-profitable and speculative parts of the technology markets would be vulnerable in a world where money is no longer ‘free’. We have seen that unfold in stock markets over the last 18 months and it is now happening in the broader financial system.”

Quilter Cheviot’s Mr Howlett said: “This does not mean there will be no volatility for investors – bank shares have sold off in recent days as a result of the SVB failure. The knock-on could be that interest rates are not raised by central banks to the level some had expected.

“This will likely result in a squeeze on profits for banks as the net interest margin – the amount it charges for credit, compared to the rate given on deposits – lessens. However, it will not result in a balance sheet issue for these banks and if anything, the largest US banks are seeing accelerated inflows of deposits as a result of the fallout.”

Commentators acknowledge that this is a challenging period for banks in the US. But they add that it is likely bank share prices across the globe will stabilise once it becomes clearer that this was an isolated incident and that the lessons of the 2008 crisis were learned.

Impact on technology sector

The fall-out from the collapse of SVB has taken its toll on the valuations of technology companies, with the Nasdaq 100 technology index falling by 4% this week. 

Baillie Gifford’s Scottish Mortgage Investment Trust suffered an even larger fall of 6%, with its technology holdings including SVB customers Wise and Roblox.

SVB provided banking services to around half of all venture capital-backed technology companies in the US. The UK arm of SVB reportedly had over 4,000 clients, including consumer review site Trustpilot and software provider Zephyr.

There’s also been a knock-on impact on the larger tech firms, with Meta and Alphabet among the beneficiaries of advertising spend by technology start-ups. 

Alex Campbell, head of communications at Freetrade, comments: “In the wake of this collapse, all eyes are now going to be on the Fed and other central banks. This is especially true for technology firms that have seen their valuations slashed as rates have quickly risen to combat inflation and investors have been forced to rein in growth expectations.” 

However, there may be respite ahead for the tech sector, with the possibility of the Fed pausing interest rates hikes, or even cutting rates to restore stability. 

Dr Campbell adds: “Such actions would be perceived as a significant pivot and those tech stocks promising future profits further out in the future might enjoy a rally off the back of such dovish acquiescence.”

Impact on cryptocurrency

Major cryptocurrencies have rallied in the days since the collapse of Silicon Valley Bank, the 16th-largest US bank with close ties to the technology start-up sector, at the end of last week.

While bank stocks traded lower on global markets, Bitcoin (BTC) went from around £17,000 on 10 March to around £20,000 today, up 17%. Ethereum (ETH) went from around £1,200 to £1,378, up 14%.

Both SVB and Signature, another US bank that failed at the weekend, were used by crypto companies like Avalanche and Ripple for payments between cryptocurrencies and fiat currencies. 

The intervention by US authorities to protect SVB deposits appears to have inspired confidence in the market.

Stableocoins, which are pegged to fiat currencies such as the dollar and meant to maintain parity with their fiat counterparts, were initially hit by the run on SVB. 

USDC fell to as low as 88 cents over the weekend – its lowest value in three years. The stablecoin has since recovered to a price of $0.99.



13 March: Competition Sees Charges Removed And Reduced

Hargreaves Lansdown is no longer charging fees to hold investments and trade online in its Junior Stocks & Shares ISA (JISA). It has also reduced its platform fee for Lifetime ISAs (LISAs).

It is the latest provider to trim its fees against a backdrop of fierce competition among investment platforms to attract DIY investors.

Existing and new JISA customers will no longer pay platform fees for investments (previously 0.45% per year, capped at £45 for shares, investment trusts and exchange-traded funds). 

There will also be no dealing fee (saving customers £5.95 per trade) and no foreign exchange fees on trades in overseas investments.

The firm has also reduced its annual platform fee on LISAs from 0.45% to 0.25% (up to £1 million, capped at £45 for equities). 

The trading fee remains unchanged at between £5.95 to £11.95 (depending on the frequency of trading). LISAs were introduced to help the under 40s to save towards their first home.

Customers will still pay fees charged by the underlying investment provider, for example, annual fees charged by fund managers. 

Ruchir Rodrigues at Hargreaves Lansdown, comments: “We believe saving and investing is for the whole family – across multiple generations. We can see parents and grandparents are withdrawing cash to support their children and grandchildren during these challenging times.

“We also recognise the need to encourage younger generations to save and invest to improve their financial resilience. We believe this to be the most important tax year-end not only in a generation, but also for generations.

“Our changes to our Junior ISA and Lifetime ISAs are the start of creating legacies that will last generations for our children and their children.”


6 March: CRH, Arm Eschew LSE ‘Badge Of Honour’

These are unsettling times for the London Stock Exchange, Andrew Michael writes.

CRH, Europe’s largest building materials company, announced last week it would be moving its primary stock market listing from London to New York.

And SoftBank, owner of Arm, the Cambridge-based semiconductor designer whose products can be found in Apple iPhones, has rejected a domestic listing despite intensive lobbying by politicians ahead of Arm’s initial public offering (IPO).

Russ Mould, investment director at AJ Bell, said: “It should be a badge of honour to list in the UK, but that honour is dwindling fast”

CRH said its decision to swap to the other side of the Atlantic later this year is because the company had “come to the conclusion that a US primary listing would bring increased commercial, operational and acquisition opportunities”.

It says the move will further accelerate its “successful integrated solutions strategy” adding this will lead to “even higher levels of profitability, returns, and cash for our shareholders”.

As the Dublin-based, FTSE 100 listed company pointed out, it expects the US to be a key driver of future growth, while North America is responsible for three-quarters of the business’s group earnings.

Several other companies are thought to be reviewing the merits of using London for a primary listing.

But Victoria Scholar, head of investment at trading platform interactive investor, said it’s not all gloom and doom: “Although there has been considerable media attention on Arm’s decision not to pursue a London listing and CRH’s shift to New York, we are far from seeing a mass exodus from the London market.

“There was considerable concern post-Brexit about London’s ability to preserve its position as Europe’s leading financial hub. But, so far, the City appears to be holding up.”

That said, Ms Scholar acknowledges that making London a destination for technology companies has been problematic: “One of the biggest challenges for the UK market has been the difficulty in attracting tech giants to undertake IPOs on the London Stock Exchange. New York continues to be the go-to destination for tech behemoths, with the Nasdaq exchange boasting giants like Apple, Amazon and Microsoft.

“While the FTSE 100 enjoyed relative resilience last year in part thanks to its shortage of tech stocks, this has long been a criticism and meant that the UK large-cap index missed out on the gains enjoyed State-side from the tech boom prior to 2022.”

“There have also been some high-profile tech disasters in London including Deliveroo’s calamitous IPO and THG’s share price slide, adding to the sense of caution towards the UK among tech businesses deciding where to list.”

In February, it emerged that the oil giant Shell had considered moving the Anglo-Dutch energy group from London to the US, while those who have already taken the plunge include  plumbing group Ferguson and the formerly AIM-listed biotech company Abcam.

In recent weeks, Flutter Entertainment, the Dublin-based, Footsie-listed company behind high-profile bookmaking firms Sky Bet and Paddy Power, said it was considering an additional US listing following the success of its US-based sports betting company Fan Duel.

Elsewhere Ascential, the FTSE 250 information and events group, said it would hive off its digital commerce operation and list it in New York.

The main reason why companies are increasingly looking to the US market instead of London is the wider investor base and larger pool of potential investment capital. 

However, David Schwimmer, London Stock Exchange Group chief executive, is shrugging off recent departures: “We are the most international financial centre in the world by far, and we continue to attract both capital and companies that have that kind of international perspective.”

Interactive investor’s Victoria Scholar added: “There is no doubt that, in the post-Brexit environment, investors have been nervous about the outlook for the UK market. But weakness for the pound has seen investors look back towards London, particularly for potential M&A targets that are priced more attractively in sterling.

But what are the implications for shareholders if a company they are invested in decides to swap exchanges?

Ms Scholar said: “In terms of the practicalities for UK investors, companies can voluntarily delist. This would mean that investors would need to sell their shares either before, or after, the delisting. It does not necessarily affect the value of these shares, depending on the reason behind the decision.”


2 March: January Sees Bonds Bounce As Equities Suffer

UK investors channelled £1.4 billion into investment funds in January 2023, with bond portfolios the big winners as equity funds continued to leak cash, Andrew Michael writes.

Latest figures from the Investment Association (IA) show that, overall, money flowed into the investment sector in the first month of this year, stemming a 10-month run of net withdrawals.

Against the backdrop of a challenging economic environment and with turbulent markets, UK investors withdrew a record £26 billion from funds during 2022, the first time a net outflow has been reported.

At £1.6 billion, the IA said that bond funds experienced the highest inflows during January 2023, up from the figure of £392 million recorded a month earlier.  

UK gilts, corporate and other government bonds dominated the association’s best-selling sectors last month, as investors gravitated to secure and high-grade fixed interest assets whose performance was shaken last autumn in the wake of the government’s controversial September mini-Budget under Liz Truss and Kwasi Kwarteng.

In sharp contrast, investors continued to bail out of equity funds, which racked up withdrawals worth £913 million overall in January.

Inflows into North American and Asian equity funds, worth £363 million and £133 million respectively, were dwarfed by an outflow worth £1.4 billion from UK equity funds and a further £155 million from European portfolios.

Investors who withdrew their money from funds exposed to UK stocks and shares earlier this year may come to rue their decision.

The FTSE 100 stock index of leading company shares is up by just over 5% in the year to date and the general consensus from a panel of investment experts that spoke to Forbes Advisor UK last month suggested that UK shares were likely to continue rising throughout the course of 2023.

Chris Cummings, IA chief executive, said: “We can expect to see a stronger year ahead for bond investors, with higher fixed interest rates available as we transition out of a low interest rate environment.

“On the other hand, UK equities saw the worst outflow since January 2022. The negative news cycle on the health of the UK economy may be impacting investor sentiment towards the UK.”


28 February: Bullish Overseas Buyers Circle UK Firms

Bosses at some of the UK’s largest businesses are braced for a wave of takeovers this year, as foreign buyers line up to pounce on attractively priced London-listed companies, Andrew Michael writes.

According to research from investment bank Numis Securities, the prospects for merger and acquisition (M&A) activity are likely to strengthen during 2023.

Findings from the bank’s annual M&A survey pointed to an increased bullishness for UK deals and an expectation of outperformance to come from domestically traded stocks and shares.

Last week, it emerged that two UK-listed companies – energy services company Wood Group and events business Hyve – were takeover targets for US private equity firms. 

Last month, Numis surveyed 80 board directors from FTSE 250 companies, including chief executive and chief financial officers, along with 200 institutional investors, including UK pension funds.

It found that, despite the challenging economic and financial environment for takeover activity, characterised by high inflation, rising interest rates and market volatility, nearly nine-in-10 FTSE 250 directors (88%) viewed UK companies as being vulnerable to takeovers.

An even greater proportion of company bosses – 94% – said they expect to undertake deals themselves this year, an eight percentage point rise compared with this time last year.

Numis said: “The largest proportion of FTSE 250 directors think that domestic corporate buyers will be the source of increased competition, but private equity is seen as a significant secondary source of competition and much more likely than overseas corporates.”

Despite the brighter outlook, Numis said barriers to M&A remain: “Investors were clear on the challenges facing dealmaking this year – the financial environment, regulatory change and the economic outlook were the top three.”

In terms of regulation, businesses pointed to anti-trust and national security hurdles as being the biggest barriers to completing a deal.

The survey highlights the importance of M&A returns on the total performance of an investment portfolio, with only 10% of institutional investors describing M&A returns as “immaterial to their portfolio”.


22 February: Prospects Brighten As Performance Improves

Investors pulled £53.9 billion from UK funds in stocks and shares, bonds and alternative investments in 2022, writes Andrew Michael.

Taking into account an inflow of £12.7 billion into cash-based money market investments, net withdrawals amounted to a record £41.1 billion for the year.

UK funds were worth about £2 trillion in total by the end of 2022, down from £2.27 trillion the year before. This was the first decline since 2018.

The figures come from Refinitiv, data provider to the London Stock Exchange. The analyst blamed several factors for the exodus, including the war in Ukraine, soaring inflation and rising interest rates.

It added that money market funds were themselves seeing net withdrawals for the first three quarters of 2022 when “Q4 saw the tables turn with a vengeance”.

According to the company, money “flooded into these vehicles” following September’s controversial Liz Truss/Kwasi Kwarteng mini-Budget, with pension funds seeking liquidity during a period of market turbulence.

Share funds experienced last year’s largest outflows to the tune of nearly £35 billion. Within this figure, UK funds suffered the most, with investors pulling more than £23 billion from UK equity, UK income and small and mid-cap funds.

In contrast, even during the depths of the financial crisis of 2007/08, investors only pulled out a relatively modest £8 billion.

Whether last year’s trend for unloved UK shares will continue remains to be seen. The UK stock market has enjoyed reasonable performance since the start of 2023, with the FTSE 100 index of blue-chip companies breaking through the 8,000 mark for the first time (see story below).

Year-to-date, the index is up nearly 5%, while the FTSE 250 – representing the UK’s 250 next-largest businesses – is up around 3%.


20 February: Asset Management Overhaul In Prospect

The Financial Conduct Authority (FCA) today launched a consultation on the future of the UK asset management sector to ensure it can innovate and remain competitive following Brexit – with advisers hoping reform will lead to lower charges, writes Jo Thornhill.

The industry, which has more than £11 trillion of assets under management, is still covered by EU law. The FCA is keen to bring in reforms to improve consumer experience and help the sector remain competitive on the international stage.

It is expected to publish its findings and proposals later in the year.

Kevin Doran, managing director of AJ Bell Investments, said: “Today’s release from the FCA is one of those rare birds in the industry of a genuine consultation. 

“With no cemented new proposals put forward, the next three months should give the industry the time to fly a kite on some Brexit dividend proposals. Any opportunity to progress some of the more archaic practices within the industry should be seized with both hands.

“Hopefully, we can take this opportunity to make investing easier for customers, reducing costs, improving transparency and allowing people to feel good about investing.”

Among the questions in the FCA’s discussion paper is whether rules should be relaxed around investment in ‘tokenised’ assets, such as stablecoin and other cryptocurrencies.

The government is working on the next phase of its plans for regulating crypto assets in the UK, and is considering whether there is a case for regulation of the activity of portfolio management of crypto assets.

The Treasury and the Bank of England are also working on the development of a UK central bank digital currency.

Camille Blackburn at the FCA, said: “The UK has an opportunity to update and improve the regime for asset management. We want to hear from a wide range of voices about how we can enhance the existing standards and what we should prioritise to bring the most benefits to consumers, firms and the wider global economy.”
Comments in response to the consultation should be submitted by 22 May 2023 by emailing [email protected] or you can use the online response form on the FCA website.


15 February: Energy Firms And Banks Lead Buoyant Market

The UK’s stock market index of leading company shares has broken through the 8,000 level for the first time in its 39-year history, writes Andrew Michael.

The FTSE 100 breached the psychologically significant figure during intra-day trading today when it hit a level of 8,003 before easing back.

UK share prices have continued to edge up since the start of 2023, buoyed by a strong performance from energy companies – including BP and Shell – and on the back of renewed takeover talk in the banking sector.

The FTSE 100 is the UK’s best known stock index and one of the leading indicators of company performance. Created in 1984, the index is made up of the hundred largest companies listed on the main market of the London Stock Exchange by market capitalisation – calculated by multiplying a company’s share price with the number of shares in issue.

The oil major, Shell, is the Footsie’s largest company valued at around £167 billion. Frasers Group, the retailer, is the smallest component worth about £4 billion.

Despite a cocktail of economic headwinds, the Footsie’s performance held up during 2022 – eking out a modest return for investors of around 4%. This contrasted with other major stock indices, such as the US S&P 500, which suffered double-digit losses over the year.

The divergence in performances came about because of the composition of each index, with the FTSE 100 continuing to include a high proportion of so-called ‘old economy’ dividend-paying stocks including those from the oil & gas, commodity and financial sectors.

Businesses operating in these spheres performed well on the back of a number of factors including soaring energy prices and rising interest rates.

John Moore, senior investment manager at RBC Brewin Dolphin, commented: “The FTSE 100’s rise from being an out-of-favour index to new record highs shows how quickly the investment world can change. During the Covid-19 pandemic, tech companies and growth stocks were massively in fashion – precious few of which are included on London’s main index.

“Now, with inflation persistently high, elevated oil prices and interest rates rising, the consumer staples giants, oil and gas explorers, mining groups, and financials that make up the FTSE 100 are looking at a much more supportive near-term environment.

“It is a salutary lesson that every dog has its day. While the story of the past decade was very much about the rise of the tech sector, the perennially forward-looking stock market sees a very different 10 years in front of us with cash generation, resilience and self-funded growth likely to offer options to businesses and investors looking to navigate the challenges ahead and maximise opportunities.”



11 February: Investors Urged To Monitor Health Of Portfolios

Investment funds worth nearly £20 billion have been named as consistently underperforming ‘dogs’ by online investing service Bestinvest, writes Andrew Michael.

The firm identified 44 underperforming funds, worth a combined £19.1 billion. This is an 42% increase in the number of funds in the category compared with the company’s last analysis six months ago. 

However, the figure remains below the 150 funds identified at the beginning of 2021.

Bestinvest’s Spot the Dog analysis defines a ‘dog’ fund as one that fails to beat its investment benchmark over three consecutive 12-month periods, and which also underperforms its benchmark by 5% or more over a three-year period.

A benchmark is usually a stock market index such as the UK’s FTSE 100 or US S&P 500, against which the performance of a fund is compared.

Bestinvest said the sectors with the most ‘dogs’ were those investing in UK stocks and shares: “Assets in dog funds rose to £8.4 billion from £5.5 billion for the UK All Companies sector, and to £3.1 billion from £2.1 billion for the UK Equity Income sector.”

It acknowledged that this appears counter-intuitive given that 2022 was far from disastrous for blue-chip businesses found in the FTSE 100 index that are tilted to mining, resources and finance.

Explaining the discrepancy, Bestinvest said: “Look beyond the large end of the UK market and it was a tough year for small and mid-cap companies, parts of the market that tend to have greater exposure to the UK domestic economy.”

Bestinvest highlighted the poor showing of three large (£1 billion-plus) funds in particular: Halifax UK Growth; Invesco UK Equity High Income; and St James’s Place International Equity, worth a combined £8.2 billion. 

It described their collective performance as “representing a lot of investors’ savings in funds that should be doing better”.

Other funds singled out for criticism include Hargreaves Lansdown’s £1.8 billion Multi-Manager Special Situations Trust, Scottish Widows UK Growth (£1.8 billion) and Halifax UK Equity Income (£1.7 billion). 

Bestinvest described these funds as “repeat offenders” adding that “if the companies won’t act [to improve performance], investors should.”

Bestinvest also highlighted Schroders as being “the leader of the pack” in terms of fund groups that “earned the most dog tags”.

It said that, while it has only three relatively small funds under its own name, Schroders also acts as the underlying managers of the Scottish Widows-branded and HBOS funds: “That adds another seven funds to its tally and a further £7.3 billion in assets.

“These funds were performing badly long before Schroders got its hands on them, but investors might have reasonably expected a turnaround by now.”

Another fund group that fell foul of the analysis was abrdn, with three funds on the list, and Invesco with two.

Jason Hollands, managing director of Bestinvest, said: “The aim of the guide is to encourage investors to regularly check how their investments are performing and to assess whether action is required. 

“Every fund manager will have moments of weakness during their careers: they may have a run of bad luck, or their style and process may be temporarily out of fashion.

“It is vital to identify whether these factors are short-term or structural, which is why asking some key questions when taking stock of a particular fund in your portfolio is so important.”



3 February: Energy & Mining Stocks Support Robust Performance

The FTSE 100, the UK’s stock market index of leading blue-chip shares, hit an all-time record of 7,906.58 earlier today, writes Andrew Michael.

The ‘Footsie’ surged 84 points, or 1.1%, overtaking the previous high-water mark of 7,903.50 recorded in May 2018. It eased back to close at 7,901.

According to Marcus Brookes, chief investment officer at Quilter Investors, today’s high is down to a combination of factors: “One of the key drivers is the FTSE 100 partly being made up of legacy energy providers and mining companies that benefited greatly from the spike in inflation and the energy crisis that hit following the outbreak of the war in Ukraine.

“This sheltered the index far more than some of its technology biased peers, such as the S&P 500 in the US, and saw it hold up in the face of tough economic conditions.”

Mr Brookes said another major factor in the FTSE 100’s recent performance has been the re-opening of China following its relaxation of its ‘zero Covid’ strategy: “This has led to increased demand for several component stocks, which has helped to push the index higher.”

Danni Hewson, financial analyst at AJ Bell said: “London’s blue-chip index is home to some of the world’s biggest companies, and those companies don’t just make their money in the UK. They are considered well established, well-funded and well-positioned to deal with any lingering volatility.

“Generally, the global economy is looking brighter and, with the re-opening of China, there are expected to be huge opportunities for energy companies, miners, luxury goods makers and pretty much any company selling stuff overseas.

“Shell, Reckitt Benckiser, AstraZeneca and Glencore are among the names making the biggest gains today.”

Richard Hunter, head of markets at interactive investor, said: “Another reason for the more recent appeal of the FTSE 100 is the relatively high level of dividends.

“The average yield of the index is currently 3.5%, nearer to its longer-term level after the ravages of the pandemic dissipated. Over a period of time, this has a significant effect on returns.”

The UK’s leading basket of company shares is not the only eye-catching performer this week. The UK gold price in pounds per troy ounce peaked yesterday (Thursday) at an all-time high of £1,592, more than £10 above previous spikes induced by the Covid-19 pandemic, last September’s controversial mini-budget and the war in Ukraine.



3 February: US Tech Stocks Lose Lustre, Meta Bucks Trend

This week has seen 2022 Q4 results from US tech firms Meta (owner of Facebook), Apple, Amazon, and Google’s parent company, Alphabet, Andrew Michael writes.

Their financials played against the backdrop of interest rate announcements from the Bank of England (Bank rate up from 3.5% to 4%) and the US Federal Reserve (a 25 basis point rise taking the funds rate to 4.5%-4.75%), so there has been plenty for investors to digest.

UK markets ticked higher on Thursday, with investors betting that the end is in sight for the Bank of England’s approach to tightening monetary policy in its bid to stem soaring inflation.

US markets also rallied hard on the news, with the Fed itself indicating there may only be two more rate hikes to come in the current cycle. However, the excitement was short-lived, with results from the leading tech companies taking the edge off the good news.

Russ Mould, investment director at AJ Bell, said: “Three big tech firms – Apple, Alphabet and Amazon – issued worrying news of various degrees, with their respective share price falls seemingly an accurate reaction to the severity of the situation.”

Amazon’s shares fell most – by 5.2% – in after-hours trading on Thursday, as its results contained an indication that demand for cloud computing, which has been a growth driver for profits in the business, may be softening.

Shares in Alphabet, Google’s parent company, dipped by 4.6% after the close. The company makes its money from digital advertising and search and is perceived to be vulnerable heading into an economic downturn as businesses scale back promotional spending.

Mr Mould said: “While many do not believe we’ll see that serious a recession, weaker sentiment among corporates has been enough to already feed into lower spending on digital advertising.”

Gerrit Smit, manager of the Stonehage Fleming Global Best Ideas Equity Fund, said: “While Alphabet’s sales have trodden water over the fourth quarter of 2022, it is comforting to see they are standing their ground and outgrowing Meta, their main rival, by over 5%. 

“A main feature is Alphabet’s cloud sales growing at 32%, exceeding the growth levels of both Amazon Web Services and Azure [from Microsoft], and halving its losses from last year. Overall, lower group profitability is currently taking its toll on earnings but is in process of being addressed and should be in process of bottoming out.”

Regarding Apple, the world’s largest company by stock market capitalisation, Mr Mould said: “The fact Apple has suffered production issues for the iPhone is old news, which might explain why its share price fell by the least amount, down 3.2%, of this trio of tech firms.”

While earnings disappointed, there are plenty of positives for the business. Production issues have been sorted out and Apple has a potentially large tailwind in the coming months thanks to China’s economic reopening.

With regard to Meta, Mr Mould said: “This was the big positive surprise, as few people thought it would be the bearer of good news. Concerns over online advertising demand, regulatory pressures, and growing fears that it is wasting big money on the metaverse have weighed on Meta’s share price for the past year or so.”

Meta’s shares soared after it announced better than expected sales, cost saving measures, and a $40 billion share buyback.


2 February: Funds Market Hopes 2023 Will See Inflows Return

UK investors withdrew a record £25.7 billion from funds during 2022, the first time an annual net outflow has been reported, according to figures from the Investment Association (IA), Andrew Michael writes.

The figure includes £282 million that investors removed overall during December alone, the 10th consecutive month where money flowed out of, rather than into, the funds industry.

Bucking the trend in December were funds from the North American, Global, and UK gilts sectors, which attracted investor cash to the tune of £358 million, £237 million and £127 million respectively.

Prior to 2022’s dismal overall performance, the previous worst year was 2008 when, despite the global financial crisis, investors channelled a net amount of cash into the funds market.

The IA said that total funds under management across all investment sectors stood at £1.4 trillion at the end of December last year, compared with £1.6 trillion in December 2021.

Two of the worst performing areas of last year came from funds in the UK All Companies and European Ex-UK sectors which, between them, witnessed outflows of around £13 billion.

The tracker and responsible investment sectors managed to buck the trend by attracting £11 billion and £5.4 billion respectively.

Dzmitry Lipski at interactive investor, said: “There were few places for investors to hide last year, with bonds falling along with shares and an all-round difficult year book-ended with major political and economic turbulence.

“A new year bounce [in stock market returns] has shown how quickly sentiment can change, and some of last year’s outflows may already be working their way back into markets. There are no guarantees, but history shows us that the best years can often follow the worst.”

Chris Cummings, IA chief executive, said: “With markets rebounding at the start of 2023 and the outlook for bond investing improving, there are glimmers of hope that investor confidence will increase in the first quarter of 2023.”



31 January: DIY Investors Targeted By M&G And Bestinvest

The booming market for investing platforms and trading apps aimed at do-it-yourself investors has become increasingly crowded with two services launched in less than a week, writes Andrew Michael.

M&G Wealth has revealed details of &me, a new digital investment service developed in conjunction with online advisor Moneyfarm. Last week, investing service Bestinvest launched a free mobile app to enhance its existing trading platform, which it revamped last year.

According to M&G Wealth, &me is an investing app that enables clients to call, chat or book a video meeting with a dedicated consultant. The company claims the app can help customers identify how they feel about investing, their attitude to risk, and their financial goals.

The app then matches clients with one of six portfolios and an appropriate investing account, including a stocks and shares individual savings account (ISA), general investment account or pension.

Investment options include a range of ‘classic’ or ‘targeted’ portfolios featuring a mix of product types, from exchange-traded funds (ETFs) to an array of so-called active and passively managed funds.

Passively managed funds, such as ETFs and index trackers, are computer-driven and backed by algorithms to mimic an investing benchmark. Active funds rely on investment professionals putting together a basket of securities to outperform a specific stock index.

The minimum investment for &me is £500. Management fees are staggered on a sliding scale, from 0.75% on amounts invested up to £10,000 to 0.35% for sums greater than £500,000. In addition, there is also an investment fund fee ranging from 0.19% of the amount invested in the classic range, to 0.42% for targeted.

M&G Wealth says that a client investing £20,000 into a classic portfolio would pay around £14.67 a month, rising to £17.63 for the targeted range (around £174 and £210 a year).

In terms of cost, this pitches &me’s rates halfway between two large, existing platform providers.

For the same level of investment, figures from Forbes Advisor UK’s recent survey on investment trading platforms, show that AJ Bell would typically charge £112 a year for its managed portfolio offering, while the fee for a similar service from Hargreaves Lansdown is £288.

David Montgomery, managing director of M&G Wealth, said: “This is an easy-to-use app that guides people through the process of investing, but more importantly, has real people to help answer real questions. Not everyone wants, or can afford, to take full advice and we want to enable more people to save and invest for the financial future they want and dream of.”

Bestinvest’s free mobile app enables its customers to manage their investments on the go, using it to log in or open an account using FaceID or TouchID technology as well as make transfers into an array of ISAs, check their investments, and either add cash or set up regular contributions.

The app groups multiple accounts in one place to help clients monitor the value and performance of their holdings. Users can also link their account with family and friends to help manage and plan financial futures together.  

The app is available from the Apple App Store for iOS and Google Play Store for Android.

Elsewhere, investment trading platform interactive investor has introduced an entry-level addition to its subscription service.

Investor Essentials allows customers to invest up to £30,000 for £4.99 a month, plus trading fees of £5.99 for funds, investment trusts and UK/US shares. Once customers reach this limit, they are switched to the service’s ‘Investor’ price plan which charges £9.99 a month.


30 January: Economic Woes Likely To Trigger Fall In Payouts

UK companies paid share dividends worth £94.3 billion in 2022, up from £87.3 billion a year earlier, according to Link Group, the fund administration service, Andrew Michael writes.

Link Group says total dividends – covering both regular payments along with those from special, or one-off distributions – rose by 8% year-on-year. Underlying payouts, that strip out special dividends, rose by 16.5% to £84.8 billion.

Except for domestic utilities and consumer basics, dividend payouts grew in almost every industrial sector over the course of last year. The weakness of the pound for much of 2022 provided an additional boost to those payments that were declared in dollars and then converted to sterling at favourable exchange rates.

Link says resurgent banking dividends were the year’s most significant driver, accounting for a quarter of the increase in underlying payouts. There were also major contributions from the mining and oil sectors on the back of booming energy prices.

But Link adds that mining stocks reached an ‘inflexion point’ in 2022: “By the second half, lower prices for a number of major commodities had begun to have an impact on dividends, pushing them down by a fifth.”

Link is predicting that dividends will rise more slowly this year as higher interest rates on debt take a larger bite out of corporate profits.

It estimates that headline payouts will fall by 2.8% in 2023, equating to a year-end figure of £91.7 billion. Factoring in one-off payments as well as regular dividend payouts, Link estimates that listed UK companies will yield 3.7% for the next 12 months.

Link Group’s Ian Stokes said: “The economic skies are decidedly gloomier both in the UK and around the world than this time last year. 

“Company margins in most sectors are already under pressure from higher inflation and squeezed household budgets. Soaring interest rates are now crimping profits by raising debt-service costs too. This will leave less money for dividends and share buybacks in many sectors.”



26 January: Venture Capital Trusts Expect 2022 Surge To Continue

UK investors poured a record amount into venture capital trusts (VCTs) last year, according to government figures, Andrew Michael writes.

VCTs, which invest in private companies, raised £1.122 billion in the tax year 2021-2022, which was 68% more than the previous year.

Introduced in 1995, VCTs are a government-backed scheme designed to boost entrepreneurial activity by encouraging investment into small businesses in need of next-stage funding.

Alex Davies, ceo and founder of VCT broker Wealth Club, said: “VCTs are really edging into the mainstream. Despite economic uncertainty, demand for VCTs in the current tax year is also holding up and we expect it to be another bumper year.”

VCTs raise funds, usually annually, through new and/or top-up share issues. As they invest in early-stage, high-risk companies, investors receive tax breaks to compensate for the increased risk they take on.

Tax benefits include up to 30% up-front tax relief if shares in the trusts are held for five years, no capital gains tax on growth, and tax-free dividends.

In last November’s Autumn Statement, Jeremy Hunt MP, Chancellor of the Exchequer, said he would honour a pledge made by his predecessor, Kwasi Kwarteng, in his September mini-Budget, to extend the VCT regime beyond 2025.

Individual investors are currently allowed to invest up to £200,000 annually into a VCT. According to official figures, the average amount invested by individuals for the tax year 2020-2021 – the latest figure available – was about £33,000.

The government said the amount of funds raised by VCTs has been on a rising trend in recent years and has more than doubled since the tax year 2009-2010. The number of VCTs raising funds during the last tax year rose to 46 compared with 40 for the period 2020-21.


19 January: Bitcoin’s Decade Of Growth Survives 2022 Plunge

The 10-year return on bitcoin to the end of last year was 40 times greater than the next best-performing investment, even though the cryptocurrency plunged by nearly two-thirds in value during 2022, writes Andrew Michael.

AJ Bell’s Investor Strategy League calculated the returns across 27 different types of investment going back over a decade, from stock market indices to property and commodities. See table below.

Despite dropping in price by 60% last year, the investment platform said bitcoin, the world’s most famous cryptocurrency, still managed to rise in value by 162,981% over the past decade to the end of 2022.

In cash terms, a £1,000 investment struck and held on Bitcoin from the beginning of 2012 to the end of last year would have been worth just over £1.6 million.

AJ Bell said that the next best performer was the global technology fund sector, which achieved a return of 466% over the same period.

At the other end of the scale, AJ Bell said that investing in UK gilts, part of a wider asset class also known as bonds or fixed income, produced a return of just 3.1% over the entire decade. The second-worst performer over the past 10 years was that from cash-based individual savings accounts (ISAs), with a return of 12%.

In terms of short-term performance, last year saw so-called ‘bargain hunter’ strategies emerge on top having achieved a return of 16% on the year. A bargain hunter strategy invests in the worst-performing sector from the previous 12 months, switching into the new sector from the start of each year.

Laith Khalaf, head of investment analysis at AJ Bell, said: “There was a big sell off in riskier areas of the market in 2022, but that hasn’t knocked risk-hungry strategies off their perch when looking at performance over the last decade.

“Low-risk safe havens have not served investors particularly well over a 10-year horizon. A typical cash ISA has returned just 12%, and an investment in UK government bonds has returned just 3%, compared with consumer price inflation over the same period of 30%.”

Investor Strategy League 2012 – 2022

  Total % return/ 10 year Rank out of 27 Total % return/ 1 year Rank out of 27
Bitcoin 1,629,982 1 -60 27
Global technology fund 466 2 -28 26
Warren Buffett/ Berkshire Hathaway 370 3 16 2
MSCI World Momentum Index 301 4 -7.4 12
MSCI World Quality Index 291 5 -12 20
Performance chasers 290 6 -1.6 9
MSCI World Growth Index 253 7 -20 22
Global passive fund 198 8 -8.8 13
Global active fund 176 9 -12 19
MSCI World Value Index 172 10 5.3 6
Global ESG fund 166 11 -14 21
Vice fund 155 12 16 3
Global investment trust 142 13 -21 23
Landlords* 135 14 6.8 5
UK Small Cap investors 131 15 -25 25
Egg spreaders 127 16 -9.6 14
Contrarians 108 17 -1.7 10
60/40 portfolios 89 18 -11 17
Income investors 85 19 -1.7 11
Balanced managed pension fund 72 20 -10 15
Herd investors 68 21 -11 16
Random fund selector 68 22 -1.6 8
Gold ETF 43 23 12 4
Institutional fund investors 35 24 -12 18
Bargain hunters 33 25 16 1
Cash ISA savers 12 26 0.8 7
Bond investors (UK gilts) 3.1 27 -24 24
Total returns in £ to 31 December 2022. Sources: AJ Bell, FE, Morningstar, Nationwide House Price Index, Refinitiv, Investment Association, Bank of England, Cointelegraph

* theoretical total return for comparability, based on actual UK house price growth, assumed 4% net rental yield and assumed rental growth in line with prices


13 January: Sports Retailer Sparkles In Brewin Dolphin Reckoning

Sportswear retailer JD Sports has been named the market analysts’ best-loved FTSE 100 stock of 2022 based on the number of ‘buy, ‘sell’ and ‘hold’ notes issued to those monitoring its shares, Andrew Michael writes.  

Research from Brewin Dolphin shows that the firm attracted 14 ‘buy’ and 13 ‘hold’ notes from stock market analysts over the course of last year, with just one recommendation that its stock should be sold.

JD Sports’ share price plunged from 195p at the beginning of 2022 to 90p in mid-October before rallying to close the year at 138p. 

It topped Brewin Dolphin’s analysis for the second year running ahead of Prudential, the Asia-focused insurance group whose share price jumped by 50% from its low point in October 2022, with Smurfit Kappa, the corrugated packaging company, third.

Resource and energy groups Shell, Centrica, Glencore and Endeavour Mining also featured in the top 10 thanks to the continuing elevated levels of commodity prices.

Brewin Dolphin said that analysts’ least favoured FTSE 100 stocks included Rolls-Royce along with several retailers including Kingfisher, owner of the B&Q DIY chain, J Sainsbury and Burberry.

Bottom of the pile was abrdn, the investment group, which accrued nine ‘sell’ recommendations in 2022 and was temporarily demoted from the UK’s leading list of companies before re-entering before the year end.

Rob Burgeman, senior investment manager at RBC Brewin Dolphin, said: “The most and least loved FTSE 100 stocks have changed dramatically since the beginning of 2022, when the likes of Hikma Pharmaceuticals, housebuilder Taylor Wimpey, and Vodafone were among the highest rated. 

“In fact, Hikma was top and has since been relegated to the FTSE 250, which underlines the importance of taking professional financial advice before making any significant investment decisions.

“JD Sports’ continued status among analysts is curious, with consumer spending expected to take a sharp downturn. That said, this is largely already built into the share price and there is a much more optimistic view of JD Sports’ long-term prospects.”



11 January: Six-Month Run Of Outflows Staunched As Optimism Returns

UK investors added £389 million to investment funds in November 2022, the first time since the preceding April that money flowed into collective vehicles such as OEICs and unit trusts, rather than exiting the sector, writes Andrew Michael.

Despite the change in fortune for funds overall, the Investment Association (IA) warned that the outlook remains challenging.

As recently as September last year, investors withdrew a record £7.5 billion from funds against a backdrop of turbulent markets and global economic uncertainty.

According to the IA, the best-selling fund sectors from November were North America, which experienced net retail sales of £1.3 billion, followed by Corporate Bond (£720 million), Sterling Corporate Bond (£238 million), Global Inflation Linked Bond (£205 million) and Volatility Managed (£149 million).

The IA said: “Positive inflation data from the US buoyed market expectations that, across the Atlantic, the green shoots of recovery are emerging”.

The presence of several fixed income sectors on the latest most popular buy list also suggests that investors rediscovered an appetite for bonds last autumn as interest rate rises, both at home and abroad, started to take effect in helping to damp down inflation, especially in the US.

Increasing inflation can hurt bondholders by eroding the buying power of the fixed payments that investors receive from their holdings, and also by reducing bond values. The reverse is true when inflation falls.

An uptick in money flowing into both the North American and fixed income sectors last November stood in marked contrast to funds invested in UK and European equities, which experienced a combined net outflow of nearly £2 billion.


5 January: Investors Abandon UK And Passives In Favour Of Global Funds

Investors in funds exposed to stocks and shares dumped holdings worth more than £6 billion last year, according to the latest buying and selling data from global funds network Calastone, Andrew Michael writes.

The company’s Fund Flow Index showed that, overall, equity funds leaked £6.29 billion during 2022, the worst figure in eight years. Three-quarters of the money that flowed out from the sector did so during the third quarter, a period that coincided with extreme market turbulence.

Calastone reported that investors took particularly evasive action in relation to UK-focused funds. Net sales of holdings – that is, outflows of money – were recorded in the sector during every month of 2022, with the overall amount, including non-equity funds, totalling nearly £8.4 billion for the year.

Elsewhere, investors also sold out of European funds to the tune of £2.6 billion during 2022, the fourth consecutive year of net sales in this sphere. Other sectors experiencing net losses over the period included North America (£1.2 billion) and Asia-Pacific (£1 billion).

The Fund Flow Index showed that last year was also a bad one for so-called ‘passive’ index tracker funds, with the sector experiencing net sales of £4.5 billion.

In contrast, global funds – whose portfolios are invested across a range of geographical regions – continued to attract money.

Calastone said investors added nearly £5 billion to the sector last year, thanks mainly to the appeal of global funds that incorporated an environmental, social and governance – or ESG – investment mandate.

Emerging market funds also enjoyed net inflows of cash worth £650 million.

Despite a seismic year on the bond markets, the fixed income sector was another to experience net inflows of cash worth £2.9 billion, well under half the £7 billion in investors’ cash that found its way into bond funds during 2021.

Edward Glyn, head of global markets at Calastone, said: “2022 was momentous. The sudden flip by central banks from floods of liquidity and cheap money to a barrage of rate hikes aimed at taming rampant inflation turned asset markets upside down.

“Such large outflows from equity funds in 2022 without a corresponding increase in other asset classes is a very large vote of no-confidence. Fund management groups were hit with a double whammy. The supply of capital shrank as bond and equity markets fell, and the replenishment rate either reduced or went into reverse as investors either slowed their buying or fled for the safety of cash.”



4 January: Forbes Advisor Analysis Reveals Preferred Fund Choices

Investors went far and wide in their quest to make money in 2022, according to the most-bought funds data from three leading investment platforms, writes Jo Groves.

Topping the buy lists were global funds, funds of funds and precious metal funds. Cautious funds were also a popular option as investors sought a safe harbour from falling stock markets. 

We’ve compiled a list of the top 10 funds bought in 2022 by customers of investment platforms AJ Bell, Bestinvest and Hargreaves Lansdown below:

AJ Bell Bestinvest Hargreaves Lansdown
Scottish Mortgage Investment Trust Fundsmith Equity Artemis Global Income
VT AJ Bell Adventurous* Evelyn Growth Portfolio* BlackRock Consensus 85
VT AJ Bell Global Growth* Evelyn Adventurous Portfolio* Fidelity Index World
VT AJ Bell Mod Adventurous* Scottish Mortgage Investment Trust Legal & General Future World ESG Developed Index
Fundsmith Equity IFSL Marlborough US Multi-Cap Income Legal & General International Index Trust
VT AJ Bell Balanced* SVS Sanlam Global Gold & Resources Legal & General US Index
iShares Core FTSE 100 ETF Evelyn Maximum Growth Portfolio* Troy Trojan
Vanguard LifeStrategy (100% Equity) HSBC American Index Fund UBS S&P 500 Index
VT AJ Bell Responsible Growth* Jupiter Gold & Silver Fund Vanguard FTSE Global All Cap Index
Vanguard S&P 500 ETF  Charteris Gold & Precious Metals Vanguard LifeStrategy 100% Equity
*Ready-made portfolios/funds of funds offered to customers

What were the investing themes of 2022?

So where are investors putting their money amid economic uncertainty and stock market volatility? Let’s look at some of the key investing themes from 2022.

First up are funds of funds which offer ready-made portfolios for investors wanting a more hands-off approach. These funds are split by risk (from cautious to adventurous) and are typically invested in a mix of funds across different asset classes such as equities, bonds and commodities.

After delivering some impressive gains over the previous three years, the global fund sector hit the buffers last year, falling by 11% (according to Trustnet). As a result, investors were able to buy global funds at depressed prices in 2022, hoping for longer-term upside when stock markets recover.

Precious metal funds were also a popular option. Gold, in particular, is seen as a hedge against high inflation and a potential sanctuary in a stock market downturn. Gold investors have enjoyed a 15% increase in its price over the last year, while the price of silver is up by 17%. 

The battle between active and passive funds also looks set to continue. Investors are backing US stock markets to recover, with S&P 500 tracker funds a popular choice. But there’s also a number of actively-managed funds in the top 10, which may offer the potential to limit losses in falling markets, which tracker funds are not set up to do.

Most popular funds of 2022

Finally, which funds were the most-bought across the platforms? 

Top of the list was Scottish Mortgage Investment Trust, which made the top four on two of the investing platforms. Managed by Baillie Gifford, it focuses on entrepreneurial growth companies and over 50% of the fund is invested in the US.

The fund is likely to appeal to investors willing to tolerate volatility in pursuit of higher returns. 

The fund had a stellar 2020, achieving a 110% return, before losing over 45% of its value in 2022. 

Fundsmith Equity, managed by veteran manager Terry Smith, was also popular with investors. It invests in a fairly concentrated portfolio of global equities, with a bias towards the US and the consumer, healthcare and technology sectors. 

However, its performance has also been a mixed bag, delivering a top-quartile return of 62% over five years, but a third-quartile loss of 14% in 2022, according to Trustnet.



3 January: Home REIT Misses Regulatory Deadline

Home REIT, the £1.2 billion real estate investment trust, has been forced to suspend its shares temporarily having missed a deadline to publish its annual report in accordance with UK financial rules, Andrew Michael writes.

The investment trust, which funds the acquisition and creation of properties aimed at providing accommodation to homeless people, has been in dispute for the past two months with short seller Viceroy Research, which published a report last November that included a number of claims against the company.

These included allegations, which Home REIT denies, of inflated property values and conflicts of interest with developers. But the report prompted a share price slide – from over 80 pence in November 2022 to approaching 37 pence now – that has seen the trust drop out of the FTSE 250 index.

In addition, the claims have led to BDO, Home REIT’s auditor, redoing its work on the company’s accounts and subsequently delaying the publication of its annual report.

This put the investment trust in breach of the Financial Conduct Authority’s disclosure and transparency rules, requiring trading in its shares to be suspended. 

The rules say that a company has to publish its annual report within four months from the end of its financial year. Home REIT’s financial year ended on 31 August, giving it a deadline of new year’s eve to complete the task, or fall foul of the regulations.

In a statement to the London Stock Exchange, Home REIT said: “The company intends to request a restoration of the listing of its ordinary shares upon publication of the 2022 results, which the company expects to be published by as soon as is practicable.

“While the company awaits the completion of BDO’s enhanced audit procedures, the company will continue with the previously announced steps to maintain and enhance shareholder confidence, while maintaining its ordinary course operations to provide high-quality housing for some of the most vulnerable people in society.”

Oli Creasey, equity research analyst at Quilter Cheviot, said: “In principle, this is a technical breach of rules, and one that should be able to be remedied fairly quickly. We would expect that the results will be published in January 2023, and trading in the shares to resume promptly after that.

“The reaction to the full year results, when it comes, is going to be highly dependent on the auditor’s statement, as well as the REIT management’s response to the allegations. For once, analysts will not be focusing on the financial data. Home REIT has already offered a rebuttal to the report but will likely need to provide investors with further detail to shore up confidence in the company.”


19 December: Move Would Free Up Owner’s Time For Tesla, SpaceX

Twitter users have decreed that Elon Musk, the company’s chief executive, should step down from his role after he held a vote to decide his corporate fate at the social microblogging platform, writes Andrew Michael.

The billionaire entrepreneur, who also heads up the electric car maker, Tesla, and space transportation and aerospace manufacturer, SpaceX, bought Twitter for £36 billion ($44 billion) in October, taking the company private.

Yesterday (Sunday), shortly after attending the World Cup final in Qatar, Mr Musk set up a ‘yes’ or ‘no’ Twitter poll asking his 122 million followers whether he should step down as head of the company. 

“I will abide by the results of the poll,” he tweeted.

Out of the 17.5 Twitter million accounts that cast votes, over half (57.5%) called for Mr Musk to step down, while the balance (42.5%) said he should remain.

It remains unclear whether Mr Musk will honour his decision. An hour after the result of the poll appeared on Twitter, he tweeted: “As the saying goes, be careful what you wish for”. 

Either way, he would remain as the company’s owner.

Responding to the poll, Changpeng Zhao, boss of cryptocurrency platform Binance (who has eight million Twitter followers), tweeted Mr Musk not to step down, urging him to “stay the course”.

Last month, Mr Musk told a Delaware judge that he planned to reduce his time at Twitter and, over time, find somebody else to run the business.

There has been a string of controversial decisions since Mr Musk took over the company in October. About half the company’s staff have been fired, while an attempted roll-out of Twitter’s paid-for verification feature was paused before being kickstarted again last week.

Mr Musk has also come under fire for his business’s approach to content moderation and has been condemned by both the United Nations and the European Union over suspensions that the company has imposed on journalists about the way they cover the company.

Tesla’s share price has fallen sharply in value over the course of 2022 – down 60% year-to-date to trade at just over $148 currently – with critics of Mr Musk saying his pre-occupation with Twitter is damaging the electric car maker’s brand. 

Russ Mould, investment director at AJ Bell, said: “Given how much of a distraction Mr Musk’s tenure at Twitter has become, shareholders in the electric vehicle manufacturer will be breathing a big sigh of relief if he steps back from Twitter and gets back to the day job at Tesla.

“For someone who sets so much store by work ethic, Mr Musk sure seems to spend a lot of time on social media. With Tesla shares having more than halved year-to-date, he needs to roll up his sleeves and get his main business back on the road.” 



8 December: Energy, IT And Healthcare Tipped As Sectors To Watch In 2023

Private investors believe that the threat of recession both at home and overseas will be the most significant threat to stock markets in 2023, according to the investment trading platform interactive investor (ii), Andrew Michael writes.

The view is shared by professional investment company managers, many of whom believe both a slowing down of corporate earnings and recessionary threats are greater concerns than inflation over the coming year.

The past 12 months have been turbulent for stocks and shares investors, with markets stuttering against a backdrop of stiff economic headwinds compounded by soaring inflation, rising interest rates and gathering recessionary clouds.

Stock market performance has also been affected by global supply chain bottlenecks and Russia’s invasion of Ukraine.

The majority of private investors (54%) told ii that uncertainty over the economic outlook meant they would stay on the investing sidelines in the coming months, either because they were unsure how best to re-jig their portfolios, or because they weren’t planning on making any changes.

Investors also said they were torn between the need to achieve investment growth or focusing on strategies that preserved existing capital over the coming year.

One-in-10 investors said they were pre-occupied with the issue of investing tax-efficiently. A likely factor for this were the decisions, revealed in last month’s Autumn Statement, to slash capital gains tax and dividend allowances from the new tax year in April.

According to ii, of those investors who are currently taking the plunge, half (50%) are choosing to invest in the UK followed by the US (20%). The company says domestic stocks are typically favoured by investors thanks to a concept known as ‘home bias’ which makes companies closer to home easier to research and understand.

From a professional investing perspective, a poll carried out by the Association of Investment Companies (AIC) found that over half (61%) of its member investment company managers thought that inflation has already peaked. A quarter (25%) told the AIC they believed there was still scope for prices to rise further.

Managers told the AIC that their greatest fears going forward involve a slowdown in corporate earnings and the prospect of recession.

Over a quarter (28%) of managers tipped energy to be the top-performing sector in 2023, followed by IT (21%) and healthcare (11%).

Lee Wild, head of equity strategy at ii, said: “While we don’t know exactly what will happen next year, we do know that the UK economy will likely spend at least some of it in recession. And that’s by far the biggest worry.

“A fifth of investors are investing more money in the US where exposure is primarily to growth stocks like the technology sector. Tech has had a torrid time in 2022 but has reacted positively to any hint that the US rate hike cycle is slowing. If rates peak soon or even begin to ease later in the year, growth stocks are back in play.”

Evy Hambro, co-manager of BlackRock World Mining Trust, said: “This year, we have seen a growing acceptance that the low carbon transition simply can’t happen without mining companies supplying the materials required for technologies such as wind turbines, solar panels and electric vehicles.

“The need to build out these technologies has only increased over the past 12 months, with governments, particularly in Europe, committed to reducing their dependence on energy imports from Russia.”



7 December: Investors Should Seek Managers With Proven Track Records – AJ Bell  

Fund managers that actively invest in UK equities have had “a real stinker of a year” in 2022, according to research from AJ Bell, writes Andrew Michael.

The investing platform’s Manager versus Machine report calls this year an “annus horribilis” for so-called ‘actively-managed’ funds – those made up of shares that are chosen by investment managers according to region, asset class or sector, with the aim of outperforming a specific benchmark such as a stock market index.

In contrast to active funds, so-called ‘passive’ investments such as index tracker or exchange-traded funds – are only designed to copy the performance of stock market indices and other benchmarks, not outperform them.

AJ Bell said that only a quarter (27%) of active funds were able to beat a passive alternative this year. Almost a third of active funds achieved the feat in 2021.

The company added that active fund performance improved over the longer term, with well over a third of portfolios (39%) outperforming passives over a 10-year period, although it said: “That’s still considerably less than half and this figure will be flattered by ‘survivorship bias’, as underperforming funds tend to be closed down or merged into others over time.”

The report looked at active funds in seven equity sectors and compared their performance to the average passive fund in the same sector. The company said this approach provided a “real world comparison, reflecting the choice that retail investors face between active and passive funds”.

The proportion of active funds outperforming the average passive fund was as follows:

Sector Year-to-date 2022/% 5 years/% 10 years/% 2021/%
Asia Pacific Ex-Japan 12 19 47 26
Europe Ex-UK 43 40 51 53
Global 30 21 20 25
Global Emerging Markets 21 36 44 50
Japan 36 37 49 47
North America 40 17 17 19
UK All Companies 13 27 60 41
Total 27 26 39 34
Source: AJ Bell, Morningstar, total return £ to 30/11/22. 2021 data to 1/12/21

Laith Khalaf, AJ Bell’s head of investment analysis, said: “2022 has been a terrible year for active equity funds, especially those plying their trade in UK shares.

“In a year when stock markets have faltered, active managers might have expected to nudge ahead of the tracker funds that simply passively follow the index. But our latest report shows any such hopes have been dashed.

“Where they do select active managers, investors need to tilt the performance odds in their favour, by conducting research to pick out managers with a proven track record of outperformance. That’s no guarantee going forward, but if an individual active manager has delivered outperformance over a long period, that suggests they are skilful and not just lucky.” 



6 December: Tech Firms Figure Highly On Investing Map Of UK

From London to Aberdeen and Cardiff to Manchester, the electric car maker Tesla has topped the table of most popular share purchases among UK’s retail investors, according to the latest figures from Freetrade, Jo Groves writes.

The trading platform’s Retail Investing Map of Britain crunched over six million ‘buy’ orders worth nearly £2 billion to see which shares its investors were buying. 

Top 10 lists of share purchases from traders based in 10 UK cities showed that the electric car giant, whose boss Elon Musk recently paid $44 billion for the social media network Twitter, was the most popular trade in eight locations and second in the other pair. 

Freetrade’s analysis showed that Londoners, Mancunians, Liverpudlians and Glaswegians were the most avid investors in technology companies, with Alphabet, Apple, Amazon and Meta accounting for half of their share purchases. 

Elsewhere, the results showed that inhabitants of Cardiff, Brighton, and Northern Ireland were keen to add AMC and Gamestop to their buy-lists. 

AMC and Gamestop made the news in 2021 when, as part of the so-called ‘meme stock’ revolution, private investors on social trading platforms coordinated their buying activity to push up the share price of companies heavily-shorted by institutional investors.

Other findings included:

  • Investors in Bath showing their support for fast-food delivery services, with Just Eat taking number two spot in the city’s top 10
  • Brightonians revealing their hip and healthy side by piling into Swedish oat-milk producer Oatly
  • Aberdonians confirming their city’s heritage for natural resources by buying into oil and gas producer BP, and metals miners Ferrexpo and Lithium Americas.

Despite their nationwide affection for Tesla, investors tended to be more regional in their biases towards other companies. 

Dan Lane, senior analyst at Freetrade, said: “Greggs cracked the top 50 in Newcastle, but didn’t even make the top 300 in London.
“Dispelling the popular footballing myth that there are more Manchester United fans in London than in Manchester, shares in the club were four times as popular in Manchester than they were in the capital. The company also accounted for a whopping 1% of all cash invested in shares by Mancunians in 2022.”


30 November: FCA Wants To Open Investment Doors To Heavy Cash Savers

Major reforms aimed at reducing the cost of financial advice for millions of people with “straightforward needs” have been proposed by the UK regulator. 

The Financial Conduct Authority (FCA) says its proposals would create a separate, simplified advice regime, making it easier and cheaper for firms to advise consumers about investments within stocks and shares individual savings accounts (ISAs).

According to FCA research, 4.2 million people in the UK have over £10,000 in cash and say they are open to investing some of their savings.

Analysis by Paragon Bank shows that deposits in savings accounts hit £1 trillion for the first time in September, up £25 billion compared with the same month in 2021.

Paragon said that more than £428 billion is held in ‘easy access’ savings accounts paying less than 0.5% interest, with £142 billion held in accounts paying 0.25% or less.

The FCA says: “While keeping a cash buffer is a sensible way of dealing with unexpected expenses, consumers who hold significant amounts of excess cash may be damaging their financial position, as inflation reduces the value of their savings.

“Altering the current framework could help the advice market support mass-market customers with simpler needs”.

The FCA wants to prevent in-person financial advice from being too costly for potential investors “as this can stop them from investing when it may be in their interest to do so”.

Its plans include reducing the level of qualifications required for firms to advise on products such as stocks and shares ISAs. It also wants fees to be payable in instalments so that customers do not face large upfront bills.

Chris Hill, head of investing platform Hargreaves Lansdown, said: “We support the FCA’s move to make investing simpler and it’s great that the FCA recognises that today’s all-or-nothing approach to advice doesn’t suit everyone, especially those with sufficient savings who are started out on their investment journey. The proposal should help narrow down options for those who want to invest but aren’t sure where to start.”

Richard Wilson at interactive investor said: “This is a watershed moment in the UK. It will determine whether we can begin to change the narrative around long-term financial wellbeing.”


22 November: Twice As Many Men Hold Stocks & Shares ISAs As Women

Men are far likelier than women to invest in stocks and shares but are more prone to bailing out earlier from their investments when market turbulence strikes, according to Alliance Trust, writes Andrew Michael.

Research carried out for the investment company showed that nearly one-in-three UK men (30%) have a stocks and shares individual savings account (ISA) compared with one-in-six women (16%).

The trend continues into other investment products, with one-in-six men (17%) saying they have a general investment account compared with one-in-10 (10%) women.

A stocks and shares ISA is a tax-efficient savings plan that allows the holder to invest up to £20,000 in shares each tax year, while shielding them from income tax, capital gains tax (CGT) and dividend tax.

A general investment account is a product that allows the holder to make investments outside of tax wrappers such as ISAs.

According to the research, women are far more likely than men to hold their nerve amid market volatility.

Alliance Trust found that nearly half of male investors (48%) said they had sold investments when they went down in value in a bid to avoid losing more money. This compared with just over a third of women (38%) who were less likely to have ‘crystallised’ a loss during a market dip.

Mark Atkinson, head of marketing at Alliance Trust, said: “Despite being less likely to invest, women are proving to be better investors. Their behaviour implies a steady long-term investment strategy, without knee-jerk reactions or impatient decisions. This is likely to result in much better financial performance.

“The last few weeks have seen even more chaos in the markets, and dramatic headlines may well prompt a crisis of confidence for investors. Holding your nerve is key. The best investment is one which is left alone for as long as possible. Patience will pay-off.”


21 November: Regulator Issues Trading App Warning

The Financial Conduct Authority (FCA) is warning providers of share trading apps to review “game-like” elements within their offerings because of fears they might mislead investors or encourage them to take risks and lose money, Andrew Michael writes.

Such apps – available via both smartphone and tablet – have become increasingly popular, especially among those aged under 40.

In the first four months of 2021, the FCA said 1.15 million accounts were opened with four trading apps, around double the number opened with all other retail investment services combined.

The regulator says the ‘gamification’ of trading apps – such as peppering users with frequent notifications and sending celebratory messages on the completion of a trade – can lead to poor consumer outcomes.

It said that “consumers using apps with these kinds of features were more likely to invest in products beyond their risk appetite”.

The FCA has produced research raising concerns that customers using trading apps are exposed to high-risk investments, with some demonstrating behaviour more commonly found with problem gamblers.

To ensure customers are being treated fairly, the regulator says all firms should be reviewing their products to ensure they are fit for purpose.

Next year will see the introduction by the FCA of the Consumer Duty, which tells firms to design services enabling consumers to make “effective, timely and properly informed decisions about financial products and services”.

Sarah Pritchard, the FCA’s executive director of markets, said: “Some product design features could be contributing to problematic, even gambling-like, investor behaviour. We expect all firms that offer stock trading to consumers to review and, where appropriate, make improvements to their products.

“They should also ensure they are providing support to their customers, particularly those in vulnerable circumstances or those showing signs of problem gambling behaviour.”



17 November: Chancellor Unveils Hefty Cuts To Allowances

Jeremy Hunt, Chancellor of the Exchequer, has announced significant changes to both capital gains tax (CGT) and dividend tax as part of today’s Autumn Statement, writes Andrew Michael.

The move is likely to increase interest in individual savings accounts, which can be used to shelter savings and investments from tax.

CGT is applied on the sale of shares, second homes and other assets. For basic rate taxpayers, the CGT rate is determined by the size of the gain, taxable income levels and whether the gain is from residential property or other assets.

Higher and additional rate income tax payers are charged CGT at a rate of 28% on gains made from the disposal of a residential property and 20% on gains made from other chargeable assets.

Mr Hunt said that the current CGT annual tax-free allowance of £12,300 will be cut to £6,000 from the start of the new tax year in April 2023. The amount will be halved again, to £3,000, in April 2024.

The majority of CGT that is paid to the government comes from a small number of tax payers who make large gains.

However, Chris Springett, tax partner at Evelyn Partners, said: “The halving of the allowance increases the burden on investors and property owners at the other end of the CGT spectrum – those who have made relatively modest gains but are nevertheless drawn across a much-reduced threshold.

“These taxpayers may need to file tax returns for the first time to report capital gains, causing a new admin headache.”

Today’s announcement by Mr Hunt strengthens the case for holding investments in wrappers such as individual savings accounts (ISAs) that are exempt from CGT.

Mr Springett said it was also a reminder to use allowances as effectively as possible: “In terms of reducing CGT exposure, married couples and those in civil partnerships can transfer assets to each other – known as an interspousal transfer – to make use of both sets of allowances, as well as shift a potential gain to whichever partner might be exposed to a lower tax band.”

Dividend tax

Dividend tax is a tax paid by shareholders on dividends they receive from companies. Dividends are payments made by companies, usually yearly or half-yearly, that come from profits they have generated.

The current annual dividend tax allowance, the amount a recipient can receive from dividends each year before paying tax, is £2,000. Mr Hunt said he would be halving this amount to £1,000 from the new tax year next April and then halving the allowance again, to £500, from April 2024.

The amount a shareholder pays in dividend tax depends on his or her income tax band. Basic rate tax payers are charged at a rate of 8.75%. The figure jumps to 33.75% for higher rate taxpayers and 39.35% for additional rate tax payers.

Evelyn Partners’ Chris Springett said: “The annual tax-free dividend allowance was slashed from £5,000 in 2017/18 to just £2,000 currently – and will from April be reduced to a quite limited £1,000, and then to a very restrictive £500 in 2023/24. Together with the 1.25% increase in dividend tax rates, which was introduced in April 2022, this constitutes a real crackdown on dividends.

“This is a blow to investors who hold assets outside of ISAs and to retirees who rely on dividend income to supplement their pensions. It’s yet another reminder to make use of ISAs allowances as a tax-free umbrella for owning investments.

“Business owners, many of whom pay themselves partially or primarily through dividends rather than salaries, will also be hit.”


15 November: Retail Investors Gain Voting Rights

Share trading platform eToro has struck a deal allowing millions of retail investors to have their say on how the companies they invest in are run, Andrew Michael writes.

The self-styled “social investing network” has partnered with Broadridge Financial Solutions to bring proxy voting to its 30 million customers worldwide. In the UK, eToro has more than three million registered users.

Proxy voting allows shareholders to have their say at a company’s annual general meeting (AGM) on key aspects of a business’s strategy or how an organisation is run.

eToro says that its customers will be able to participate in AGMs by casting proxy votes for free that are administered and supported by Broadridge, a specialist provider of services in this sphere.  

eToro adds that the option will extend to its investors who hold fractions of shares, enabling all its customers to vote “on issues such as mergers, executive pay and environmental, social and governance [ESG] proposals”.

Rival sharedealing platforms, including Hargreaves Lansdown, AJ Bell and interactive investor, already offer similar voting services for their users.

Once dismissed as a virtuous concept that potentially compromised portfolio returns, ESG investing has moved centre-stage within the global investing arena in recent years.

For younger investors in particular investing with a conscience has become an important consideration, often driven by major issues of the day – from climate change to general corporate behaviour.

eToro says that votes submitted by its investors will be aggregated and shared with the company concerned.

A global survey of 10,000 retail investors carried out by the platform found that nearly three-quarters (73%) wanted to vote in AGMs. According to the research, younger investors were the keenest to have their say with 80% of 18-34-year-olds saying they would vote in AGMs given the chance compared with 65% of over-55s.

When asked about the corporate issues they would most like to vote on, dividends – the annual distributions made by some companies to shareholders out of their profits – came out on top, followed by executive pay then climate strategy.

Proxy voting for stocks listed on US exchanges will go live on the eToro platform later this month, followed by voting for shares on other global exchanges.

Yoni Assia, ceo and co-founder of eToro, said: “Retail investors have not always been given the platform, the voice and the support that they deserve but this is rapidly changing. Retail investor access to proxy voting is a crucial step in this journey.

“There is clearly a huge appetite among retail investors to participate in AGMs and we look forward to seeing how clients engage with this new feature.”



8 November: Ethical Investing Receives Thumbs Up Despite Doubts Over Performance And Risk

The vast majority of financial professionals are unwilling to back completely the sustainability claims made by investment funds, according to research from the Association of Investment Companies (AIC), writes Andrew Michael.

Sustainable investing, also known as socially responsible investing, is a process that incorporates environmental, social and governance (ESG) factors into investment decisions.

Once dismissed as a virtuous concept that potentially compromised portfolio returns, ESG investing has moved centre-stage within the global investment arena in recent years. As a theme, it is especially popular among younger investors.

In theory, companies that actively support positive change via various ESG measures – such as how they run their business or treat their workers – will find themselves nearer to the top of a fund manager’s ‘buy’ list than their rivals.

The AIC asked wealth management firms and financial advisor businesses to rank, on a scale of 1 to 5, how much they trusted the sustainability of ESG claims made by various investment funds.

From a universe of 91 wealth managers and 109 financial advisors, just 1% responded by scoring a ‘5’ indicating they had complete trust in providers’ claims. The majority (56%) rated claims with a ‘3’ suggesting they had “limited trust” in the promises being made.

The findings coincide with the news that the UK’s financial watchdog, the Financial Conduct Authority, is proposing a new set of rules to prevent consumers from being misled by exaggerated claims from supposedly environmentally friendly investments (see story from 25 October below).

In a bid to clamp down on greenwashing – where unsubstantiated claims are made to trick consumers into thinking a company’s products are more environmentally sound than they really are – the FCA recently proposed a package of measures and restrictions.

These include investment product-sustainability labels and restrictions on how terms such as ‘ESG’, ‘sustainable’ and ‘green’ are used.

Despite scepticism around ESG claims, financial professionals told the AIC that they remain supportive of ESG investing in general. More than three-quarters of the businesses polled (79%) acknowledged that “investments should make a positive difference as well as financial return”.

Nick Britton, head of intermediary communications at the AIC, said: “Advisers and wealth managers are overwhelmingly on board with ESG and sustainable investing, but they’re also keenly aware of the risks of greenwashing with only 1 in 100 completely trusting ESG claims from funds.”

“ESG investing has faced a perfect storm this year and this has clearly affected expectations about performance and risk. Market falls, higher inflation and the war in Ukraine have made many advisers and wealth managers more wary of investing in sustainable funds in the short term, though they still expect demand for ESG investing in general to increase over the next 12 months.”



28 October: Completes Twitter Takeover, Begins Platform Overhaul

The months-long and acrimonious takeover of Twitter by Elon Musk is now complete, with the Tesla chief paying just over £38 billion ($44 billion) to acquire the micro-blogging social media site, writes Kevin Pratt.

Mr Musk posted a tweet simply saying “the bird is freed”, indicating that he now owns the platform.

Reports indicate that he has dismissed a number of senior executives, including Parag Agrawal, CEO. He is also expected to dismiss a significant proportion of Twitter’s 9,000 staff.

Mr Musk is also expected to change the way Twitter functions in his pursuit of what he has termed “absolute free speech”. This may include updating the site’s algorithm, reducing moderation activity, allowing users to edit their tweets, and lifting bans on controversial figures such as former US president, Donald Trump, who was banned from the site last year.

Further developments could see Twitter’s scope expanded so that the app could become a multi-purpose life management tool, enabling a range of administrative functions.

In a message to Twitter advertisers yesterday, Mr Musk said his pursuit of free speech would not mean the site became a “free-for-all hellscape where anything can be said with no consequences.”

Analysts believe Mr Musk will need ongoing support from advertisers because the price he paid for Twitter represents a significant premium over its true market value.

At the close of trading on Thursday, Twitter shares were priced at just over £46 ($53). The New York Stock Exchange, where the shares are listed, has issued a notice saying the suspension of trading in the shares is “Pending before the Open” of the market later today at 9.30am in the US (2.30pm in the UK).

What does this mean for Twitter shareholders?

According to financial commentators, it’s likely to be many days – and possibly weeks – before investors are credited once Mr Musk’s acquisition of Twitter has officially gone through.

What we do know is that shareholders will receive £46.70 ($54.20) for each share they held up to the time of acquisition.

Hargreaves Lansdown’s Susannah Streeter said: “For UK investors, the cash proceeds will be converted from US dollars into sterling, subject to the prevailing exchange rate at the time and any standard currency conversion fees. We have not yet heard from Twitter  indicating the takeover has gone through, so we don’t yet know what the prevailing exchange rate will be.”

The decision by Mr Musk to take Twitter private, means that the company will now de-list from the stock market leaving a gap for a new company to fill its place.

“The insurer, Arch Capital Group Ltd, is set to replace Twitter Inc. in the S&P 500 effective prior to the opening of trading on Tuesday, November 1,” says Ms Streeter. 

The news means that index funds that formerly held Twitter stock will also need to adjust their portfolios to take account of the move. Index, or tracker funds, are computer-driven investments that hold baskets of shares aiming to copy the performance of a particular stock index.


27 October: ‘Chief Twit’ Ready To Bring Takeover Saga To Close

Billionaire business magnate Elon Musk appears to have finalised his deal to buy social media giant Twitter, changing his profile on the platform to read ‘Chief Twit’, ahead of tomorrow’s (Friday 28 October) buyout deadline, writes Mark Hooson.

Negotiations between Mr Musk and Twitter over the £38 billion purchase have been drawn out since April, mired in litigation over the number of fake and spam user profiles Twitter might have had. 

The Tesla chief threatened to pull out of the £46.72-a-share deal in July and was sued by Twitter. The two parties were due to face off in court this month, with Musk potentially on the hook for an £860 million break clause for pulling out.

Earlier this month, however, the new ‘Chief Twit’ agreed to proceed with the deal. He is widely believed to want to prioritise eradicating spam and promoting free speech on the platform. 

Posting on Twitter yesterday, Mr Musk shared a video of himself visiting Twitter headquarters carrying a kitchen sink. The post caption read: “Entering Twitter HQ – let that sink in!”

He has also talked in general terms about transforming Twitter into an ‘everything app’ in the mould of China’s WeChat – an application for completing a wide range of tasks including booking taxis and medical appointments.

It is expected Mr Musk will reinstate former US President Donald Trump on the platform. Mr Trump was ‘permanently’ banned by Twitter over the ‘risk of further incitement of violence’ in January 2021, following a riot at the Capitol building in Washington DC involving his supporters.

Analysts say Twitter’s new owner is likely to cut jobs at the firm. Mr Musk is expected to address workers at Twitter tomorrow, Friday 28 October.


26 October: Shareholders In UK Companies Stand To Benefit From Sterling’s Slide 

Investors could receive an extra £5.7 billion in dividend payments from UK companies this year because of the pound’s fall against the value of the US dollar, writes Andrew Michael.

The boost is a reminder of how sterling weakness benefits many British companies because they earn a large share of their income in US dollars and gain from the exchange rate when repatriating their profits.

The findings were part of the latest Dividend Monitor from Link Group.

Dividends are payouts made by companies to shareholders from annual profits and are regarded by some investors, especially pension funds, as a vital source of income, especially for those approaching or in retirement.

According to Link, dividends dropped by 8.4% year-on-year to £31.4 billion for the third quarter of 2022.

The company said the figure was “impacted heavily” by the de-listing of mining company BHP from the London Stock Exchange. 

Over the past year, mining and energy companies have rewarded their investors with bumper payouts following the end of the pandemic which had forced businesses to hold on to their cash in the face of unprecedented economic conditions.  

Excluding BHP’s departure, dividends were 1% higher over the third quarter compared with a year earlier.

Link said: “Sharply lower special dividends and falling mining payouts, even after adjusting for BHP, were offset by strength among banks and other financials as well as oil companies.”

The company added that “the exceptional weakness of the pound also enormously flattered quarter three figures to the tune of £1.9 billion as many dividends are declared in dollars”. 

Without this boost caused by fluctuations in the exchange-rate, Link said that payouts were slightly weaker than anticipated.

For the full year, Link forecasted that the “extraordinary surge in the US dollar will add a record £5.7 billion to UK dividends and is the driver of an upgrade to our expectations for the fourth quarter of 2022”.

Headline dividends are expected to reach £97.4 billion for the whole of 2022, up 5.5% year-on-year. But Link said it expected reductions to both mining dividends as well as one-off payments.

Link Group managing director, Ian Stokes, said: “For 2023, we expect a further reduction in mining dividends and likely lower one-off special dividends, but outside the mining sector there is still room for payouts to rise, even with a weakening economy.”

“Our provisional 2023 forecast suggests a slight drop in headline dividends to £96 billion. This implies no change in our expectation that UK pay outs will only regain their pre-pandemic highs some time in 2025.”


25 October: Ethical Investments Urged To Drop ‘Lazy Labels’

The Financial Conduct Authority (FCA), the UK’s financial regulator, has proposed rules to prevent consumers from being misled by exaggerated claims from supposedly environmentally friendly investments, writes Andrew Michael.

Environmental, or ethical, investing covers a range of issues, from concerns about corporate behaviour to anxiety about climate change.

Within this sphere, the growth enjoyed in recent years by environmental, social and governance (ESG) investing means it has become a mainstay of the global financial landscape, with hundreds of billions of pounds invested worldwide in funds that purport to do good.

But according to the FCA, “exaggerated, misleading or unsubstantiated claims about ESG credentials damage confidence in these products.”

In a bid to clamp down on greenwashing – where unsubstantiated claims are made to trick consumers into thinking a company’s products are more environmentally sound than they really are – the FCA is proposing a package of measures and restrictions.

These include investment product-sustainability labels and restrictions on how terms like ‘ESG’, ‘green’ or ‘sustainable’ are used.

Sacha Sadan, FCA ESG director, said: “Consumers must be confident when products claim to be more sustainable than they actually are. Our proposed rules will help consumers and firms build trust in this sector.”

Beth Lloyd, head of responsible wealth management strategy at Quilter, said: “This is an important step forward to helping provide consumers with the necessary protections and boundaries when it comes to responsible investment. The lazy labelling of investment products as ‘ESG’ has not been helpful of late and has caused increasing confusion both to consumers and across the industry.

“Having clear definitions to adhere to and refer back to will not only help facilitate better understanding, but also result in better outcomes as expectations and reality are more likely to be aligned.”

Interactive Investor’s Becky O’Connor said: “Investors who want to make their money make a difference need to be able to trust that the investment they are buying actually does what it says on the tin.

“With so many different and often conflicting rating systems and definitions currently floating around, it can be hard to know what investments are truly helping the planet and easy to lose faith in the whole idea of sustainable investment.”



18 October: Watchdog Blocks One-In-Five Investment Firms From Market

The Financial Conduct Authority (FCA) curbed the activities of twice as many investment firms in the past year compared with the previous 12 months as part of a crackdown on poor financial advice and scams, Andrew Michael writes.

The FCA said that the overall number of restrictions it had placed on firms rose from 31 in the financial year 2020/21 to 61 in 2021/22. 

The regulator added it had prevented firms from promoting and selling specific services such as advice on final salary (defined benefit) company pension schemes.

Ill-informed or ill-advised decisions can prove financially costly to members of such schemes if they are taken close to, or at, retirement.

In addition, the regulator said it had stopped 17 firms and seven individuals from trying to obtain FCA authorisation in the investment market in the past year where ‘phoenixing’ or ‘lifeboating’ were suspected.

These terms apply where firms or individuals try to avoid the consequences of having provided unsuitable advice by moving to, or setting up, a new firm.

The FCA said it had also stopped the UK operations of 16 Contracts for Difference (CFD) providers, that had entered the UK’s temporary permissions regime in 2021, where suspected scam activity had been detected, or where consumers were encouraged to trade excessively to generate revenue.

CFDs are a financial product used to speculate on the direction of a market’s price. The FCA’s temporary permissions regime is aimed at firms that are looking to operate in the UK long-term and are readying themselves for full UK authorisation.

In recent years, the FCA has come under fire for its handling of several high-profile scandals. These include the collapse of the former star fund manager Neil Woodford’s eponymous investment firm and the London Capital & Finance mini-bond saga that cost 12,500 investors £236 million. 

The latter has been described as “one of the largest conduct regulatory failures in decades”.

Sarah Pritchard, FCA executive director of markets, said: “We want to see a consumer investment market where consumers can invest with confidence, understanding the level of risk they are taking, and where assertive action is taken when harm is identified.

“In the last year we have maintained our focus on acting assertively and innovatively to tackle harm. We prevented 1 in 5 firms from entering the consumer investments market and we have taken action against unauthorised firms, with a 40% increase in the number of consumer alerts issued.”

Tom Selby, head of retirement policy at AJ Bell, said: “Recent events have exposed some pretty fundamental and dangerous misunderstandings about the risks associated with different kinds of pensions. Problems with a specific type of investment held in defined benefit pensions have sparked fear and panic about entirely unrelated financial issues.

“Savers and investors are clearly crying out for help but, at the moment, lack of clarity over the advice/guidance boundary is holding firms back when communicating with customers.”


12 October: ‘Patience Pays’ For Long-Term Investors

Stocks and shares investors who cash in investments during a market downturn can end up paying a high price for their decisions over the long term, according to Alliance Trust, Andrew Michael writes.

The investment company carried out research and data modelling which showed an ‘impatience tax’ would have cost UK investors £1.3 billion over the past year.

Alliance Trust defines an ‘impatient investor’ as someone who sells a losing share – thereby fixing in or ‘crystalising’ a loss – when the market dips, only to buy back the investment at a higher rate when the market recovers.

According to the company, almost half (45%) of UK investors admitted to crystalising a loss in the past. More than one in 10 (12%) said they had done so in the past year.

Of those who have ever crystalised an investment loss, only two in five investors (41%) did so because they were confident it was the right decision.

Just under a quarter (23%) admitted that they had panicked and cut their losses. One in six investors (16%) said they fell foul to peer pressure when they saw other people selling up.

Alliance Trust also found that the majority of investors who ditched a stock that had fallen in price (52%) regretted doing so.

‘Buying the dip’ provides investors with the opportunity to gain exposure to an asset they perhaps already like, only at a cheaper price.

To back up its findings, the company used the example of two hypothetical market investors who both invested £10,000 in 1992 and also made monthly contributions equal to 10% of the national average salary for the next 30 years.

The patient investor was assumed to hold his/her nerve through any market dips, while the impatient investor sold a quarter of his/her shares if the market dipped by 5% or more in a single day. When the market recovered by 10% in a single day, the impatient investor was assumed to buy back in.

According to Alliance Trust, by 2022 the impatient investor would have accumulated £217,884, while the patient investor would have performed considerably better accruing £410,757. Neither calculation took into account capital gains or income tax, nor the fees associated with offloading investments.

Mark Atkinson, head of investor relations at Alliance Trust, said: “Investing is rarely turbulence free. As the cost-of-living crisis spirals, it is understandable that people want to avoid taking risks with their money.

“But for those in the market, selling at a loss to move into cash is not risk-free. With inflation nearing double digits, the real value of cash savings is falling by 7 or 8%. Even despite market dips, long-term investment in equities is proven to outperform cash over any 20-year period.”


12 October: UK Shareholder Payouts On Surest Footing In 14 Years

Dividends – payments made by companies out of their profits to shareholders – will reach a record £1.25 trillion worldwide this year, according to Henderson International Income Trust (HIIT), Andrew Michael writes.

The investment trust found that dividends from UK businesses will be on their most robust footing since 2008 after rising oil prices boosted revenues among certain FTSE 100 companies.

Dividends are a key component of the investing landscape, especially for investors looking to obtain a steady and reliable income stream, such as those in retirement.

HIIT said UK dividend cover – the ratio of a company’s income to its dividend payment and a key indicator of the sustainability of its dividend – will improve “markedly” this year, thanks mainly to profits generated by oil sector businesses.

Companies with a strong track record of paying dividends tend to be found in specific stock market sectors such as energy and commodities, where businesses have benefited from soaring oil and gas prices.

Unlike several of its rival stock market indices worldwide, the UK FTSE 100 is replete with so-called ‘old economy’ shares, including several energy and commodities companies.

HIIT said UK companies made significant cuts to their dividends during the pandemic, dragging down their average dividend cover figure to just 1.0 for the period between 2015 and 2020, less than half the global average.

However, UK dividend cover rebounded to 2.0 in 2021. This was still below the rest of the world but HIIT forecasts that the figure is on course to exceed the global average this year thanks to the rise in oil profits.

Ben Lofthouse, portfolio manager of HIIT, said: “During inflationary periods it is important to find companies with good dividend cover, pricing power, cash flow, and modest borrowing.

“If inflation and recession come at the same time, profits may fall, but history shows that dividend income is much less volatile than profits over time as companies flex the proportion of their profits they pay to shareholders. With dividend cover so high at this point in the cycle, we can have some significant confidence for 2023 that overall dividend payouts will prove resilient.”


10 October: Concerns Raised About Delay To Twitter Deal

In another twist to Elon Musk’s long-running saga over his deal for Twitter, court proceedings between the Tesla chief and the social media giant have been suspended until 28 October to allow Mr Musk time to complete the deal, Jo Groves writes.

However, Twitter has voiced its opposition to this delay, with continued concerns over Mr Musk’s ability to raise the debt financing given the deterioration in the value of technology stocks and wider economic conditions since the deal was announced in April.

While the Twitter share price rose from $43 to $52 on Mr Musk’s announcement last week, it has subsequently fallen back to around $49 per share, indicating the level of uncertainty around the deal finally managing to get over the finish line.


5 October: Funds Suffer Worst Month For Cash Outflow

Worldwide market turbulence was responsible for a record-breaking outflow of cash from funds that invest in stocks and shares last month, according to Calastone, Andrew Michael writes.

The global funds network said equity funds leaked £2.4 billion in September, the 16th consecutive month investment portfolios experienced net outflows of money. The latest figure beat the previous record, set a month earlier, by more than a fifth.

Calastone’s Fund Flow Index showed that a net figure of just over £6.6 billion has been removed from equity funds since the beginning of 2022. The amount of money that exited the sector in the third quarter of this year, £4.7 billion, was greater than the whole of 2016, previously the worst year for outflows in Calastone’s eight-year reporting history.

It said: “Investors continued to pummel funds focused on UK equities”. 

Portfolios investing in UK equities were hit the hardest, but every other geography saw significant outflows.

According to the index, US equity funds shed a net £497 million in capital during September. During the same month, Calastone blamed the strength of the US dollar and the economic slowdown in China for record net outflows experienced by emerging market and Asia-Pacific funds, at £116 million and £223 million respectively.

The company also reported a “sharp reversal in appetite” for so-called environmental, social and governance (ESG) funds, which shed £126 million during September. This was the first net outflow from this sector in nearly four years.

Edward Glyn, head of global markets at Calastone said: “The surge in global bond yields is driving a dramatic repricing of assets of all kinds. UK investors are voting with their feet and heading for the exits. The sensitivity to market interest rates of the big growth stocks that characterise the US market explains the record outflows there.

“For emerging markets, the support provided earlier in the year by high metals prices has been kicked away by the prospect of a global recession. The negative effects of the strong dollar for many emerging market economies are coming to the fore in its place.”


5 October: Elon Musk Reinstates Bid To Buy Twitter

After months of legal battles, Elon Musk has agreed to reinstate his original offer of $44 billion for social media giant Twitter, Jo Groves writes

Yesterday’s filing with the Securities and Exchange Commission (SEC) revealed that Mr Musk sent a letter to Twitter on Monday night offering to go ahead with the original deal, pending receipt of funds from the debt financing package.

However, Mr Musk’s offer was on the condition that there was an immediate stay of action and closure of the current legal proceedings in the Delaware Chancery Court.

The two parties were due in court later this month, with Twitter attempting to hold Mr Musk to his original offer to buy the company. The agreed $1 billion ‘break fee’ was also likely to have been a contentious issue had Mr Musk walked away from the deal.

Mr Musk offered $54.20 per share to buy Twitter in April, however, the deal foundered when he raised concerns over the number of fake and spam accounts. He claimed that Twitter had failed to provide sufficient information to prove that these accounts represented less than 5% of users.

The proposal may put an end to months of uncertainty about the deal, with Twitter shares rising from $42 to $52 on the news.

However, there could yet be one more twist in the long-running corporate saga. A handful of Wall Street banks had signed up to provide $12.5 billion of financing for the transaction, with the intention of selling the debt to institutional investors. 

The rise in interest rates and fears of a recession may make this a more challenging prospect, with the yields on corporate debt having soared in the last few months. 

In a tweet, Twitter confirmed: “We received the letter from the Musk parties which they have filed with the SEC. The intention of the Company is to close the transaction at $54.20 per share.”

Here’s more information on how to buy Twitter shares.


27 September: ‘Guidance’ Option Could Help Reduce Fees

Market regulator, the Financial Conduct Authority (FCA), is to review the regulations around the provision of advice to investment clients. 

In a speech today at the Future of UK Financial Services Regulation Summit in London, Sarah Pritchard, FCA executive director, said: “Because of the costs involved, only the relatively well-off can access advice on what to invest in. Mass market consumers are often left to navigate a bewilderingly large choice with little support.

“As part of the FCA’s Consumer Investments Strategy, we have said that we want to establish a simplified advice regime for mainstream stocks and shares ISAs where the risks to consumers are relatively low.”

The distinction between advice and guidance was made as part of the introduction of the Markets in Financial Instruments Directive (MiFID) in 2007. It requires firms to make a full suitability assessment of a customer’s personal financial situation before offering advice.

The FCA is seeking to reduce this regulatory burden with the aim of reducing the fees firms need to charge and making advice on mainstream investments more accessible. It will carry out a review of the regulatory boundary between advice and guidance, while continuing to provide protection for consumers.

Tom Selby, head of retirement policy at investment provider AJ Bell, comments: “A culture of fear has built around providing guidance that risks going anywhere near the blurred advice/guidance boundary, with firms and employers keeping a safe distance from the boundary and ordinary people receiving less help making decisions as a result.

“Those who do not take advice need better, more personal guidance so they can make financial decisions which are more likely to lead to ‘good outcomes’, in line with the FCA’s Consumer Duty.”

The timing of the review is not yet decided but Ms Pritchard said: “Once the FCA has greater rule-making powers under the future regulatory framework legislation next year, we will be able to do more.”


8 September: Payouts Forecast To Slow As UK Economy Moves Into Reverse

The UK’s smaller publicly listed companies paid dividends to investors worth £574 million in the first half of 2022, according to fund administration service Link Group, Andrew Michael writes.

Dividends are distributions to shareholders usually paid out in cash that are taken from a company’s annual profits.

Link Group said that the amount paid in dividends by companies listed on the Alternative Investment Market (AIM) section of the London Stock Exchange was a 7.4% increase compared with the same period last year.

The company’s annual AIM Dividend Monitor showed that the largest contribution to growth came from the building materials sector, one that has benefited from a revitalisation in construction activity in the wake of the Covid-19 pandemic.

An example of this is Breedon, the cement, aggregates and asphalt producer, which paid its first-ever dividend in the third quarter of last year. This was followed by a large final payment in May 2022. Link Group said that the food, drink and tobacco sectors each delivered strong growth as well.

AIM companies are generally less likely to pay dividends than larger, more mature companies that trade on the main London market.

Link Group said that, before the pandemic, a third of AIM-listed companies paid cash to shareholders compared with about three-quarters of companies traded on the main London market.

In 2020, the number of AIM companies paying dividends plunged to 22%. Link Group estimated that the figure would rise back up to around 29% this year. But it also warned of a slowdown in the pace of recovery in AIM dividends for the second part of 2022.

Ian Stokes, Link Group’s managing director for corporate markets UK and Europe, said: “AIM companies have really impressed with their ability to bounce back from the pandemic. This is reflected in the strength of the recovery in their dividend payments, which was better than we expected. The easy work is done, meaning that growth will now slow.

“As we move into 2023, we expect growth to slow further. Corporate margins are currently under pressure and a potential recession is on the cards, which will affect both the ability and willingness of AIM companies to return cash to shareholders.”



7 September 2022: Fraudsters Target Investors In Increasing Numbers As Cost-Of-Living Crisis Bites  

An increasing number of investors have become victims of investment fraud, according to the latest figures from the UK’s financial services complaints service, Bethany Garner writes.

The Financial Ombudsman Service (FOS) said there had been a rise in the number of investment scams reported by consumers.

Between April and June 2022, the FOS received 570 complaints about “authorised” investment scams, in which someone is tricked into sending money to a fraudster posing as a legitimate person or business.  

Investment fraud accounted for 30% of all “authorised” scam complaints logged during this period, and represents a 14% increase compared with the same period in 2021.

Around a fifth of investment fraud complaints related to cryptocurrencies. These schemes usually involve scammers posing as legitimate intermediaries, and persuading consumers to transfer money to purchase cryptocurrencies.

Nausicaa Delfas, interim chief executive at the FOS, said: “Complaints about investment scams are currently the fastest growing type of fraud complaint that the FOS receives.”

As scammers take advantage of people’s increased financial vulnerability amid the cost-of-living crisis, Ms Delfas warned consumers to be on their guard. 

She said: “We are concerned that, in current economic circumstances, people could be tempted to invest in fake investments. Our advice to consumers is to be wary, conduct their own research, check the Financial Conduct Authority register and contact the firm directly on the number listed.”

Despite the uptick in investment fraud, the FOS added that the overall number of complaints about “authorised” scams has decreased since last year.  

But the service said it had also received nearly 200 new complaints about unregulated collective investment schemes (UCIS) between April and June 2022. 

UCIS are high-risk, collective investments aimed at high-net-worth, experienced investors. 

Of the consumers who complained about a UCIS, 45% said they were given inappropriate advice about using their pension to invest in the scheme. 


6 September: Portfolios Suffer August Backlash Despite Market Rally

UK investors withdrew £1.9 billion from equity funds last month, a record amount, according to the latest figures from Calastone, Andrew Michael writes.

The global funds network said that the August outflow of funds easily beat the previous outflow records of June and July 2016, when investors removed £1.54bn and £1.56bn of cash respectively in the wake of the Brexit vote.

Calastone said August’s net outflow was driven by a “significant increase in selling activity, rather than a drop-off in buy orders, indicating a decisive choice [by investors] to exit holdings”.

Global stock prices rose sharply in July, rallying in reaction to a fall earlier in the summer. But Calastone said that, rather than leaving investors buoyed, an upwards move on the markets had left customers exposed to UK funds unconvinced.

It said: “Investors sold their equity fund holdings (going) into the rally, withdrawing a modest £251m in the second half of July, ramping up to £2.08bn between 1 and 17 August.”

According to the data, UK funds were worst hit by the outflows last month, with investors pulling out £759 million from the sector. This marked the 15th month in a row that portfolios with a domestic tilt had suffered a net exit of money. 

Investors also dumped North American and Asia-Pacific equities funds to the tune of £426 million and £234 million respectively.

Since the beginning of this year, equity funds have shed £4.3bn overall. Calastone, which reports fund data going back eight years, said only March to October 2016 witnessed larger outflows (£5.2bn).

Calastone said that the only portfolios experiencing minor inflows during August were those linked to specialist investment sectors, such as infrastructure, renewable energy and environmental, social and governance (ESG) investing.

Edward Glyn, head of global markets at Calastone, said: “Markets are absorbing the likelihood that inflation will be extremely pernicious and persistent meaning that interest rates will stay higher for longer than initially expected. 

“The combination of a weaker economy and higher rates is very negative for share prices, especially of growth stocks.”



5 September: Latest Reshuffle Sees F&C Investment Trust Promoted

Asset management group abrdn has dropped out of the UK’s stock market index of leading blue chip companies after its share price fell by more than 40% this year, Andrew Michael writes.

With a market capitalisation of less than £3.2 billion, the company has been relegated from the FTSE 100 in a well-signalled move. The business, which rebranded from Standard Life Aberdeen in 2021, was formed when the two fund management firms merged in 2017.

One of the companies moving in the opposite direction is the £4.5 billion F&C investment trust.

The re-shuffle, announced by index compiler FTSE Russell, will come into force when the stock market closes on Friday 16 September. From that point, so-called passive investment funds that are designed to track the performance of the ‘Footsie’ will withdraw their positions in the company’s stock.

Two other businesses facing demotion from the benchmark stock index are kitchen maker Howden Joinery Group and the drug firm Hikma Pharmaceuticals.

F&C, run by fund management firm Columbia Threadneedle, is the UK’s oldest investment trust. It will be the fourth investment trust to take its place in the index, joining Scottish Mortgage, Pershing Square Holdings and 3i, the private equity investment vehicle.

Susannah Streeter at Hargreaves Lansdown, said: “Huge geopolitical uncertainty, sky-high inflation and worries about economic growth have been challenging for the asset management sector.

“abrdn’s operating profits came in lower than expected as fund flows reduced further. But this isn’t just a recent problem, assets have been walking out the door for years. Its environmental, social and governance options currently lag peers, and demand for ESG investments is on the rise, which puts it in a tricky position.”


31 August: St James’s Place Shakes Up Digital Offering For Clients

Wealth manager St James’s Place (SJP) is to launch a mobile investment app for its clients, writes Andrew Michael.

The company has around 4,600 advisers and 900,000 clients in the UK and Asia. It says the app will enable clients to manage and keep track of their investment performance and financial position.

Several wealth managers have created a client app. Brewin Dolphin launched one in 2019, while Evelyn Partners is thought to be planning one later this year.

SJP described the move as part of a wider ‘Next Generation Client Experience’ vision that will “use digital technology to make it easier for our clients and their advisers to collaborate, administer and manage their financial futures in more convenient ways”.

The company says that, once the app has been downloaded and registered, clients will be able to use biometric and FaceID to log-in securely in less than a second.

Clients will be able to check the value and performance of SJP products including pensions, investments, individual savings accounts, trusts and bonds along with any protection and mortgage products they hold with the company.

Interactive graphs will show investment performance over different time periods and clients will also be able to see how much money they have paid in, withdrawn and taken as income.

Ian Mackenzie, chief operations & technology officer at SJP, said: “The intention is to ease the burden of paperwork, documentation, storage, reporting and planning, freeing up our advisers’ time so they can better focus on making a difference to our clients’ future, and designed using leading identity and security technology to keep client details safe and secure.”


25 August: Advisers ‘Ignoring Investor Views On Ethical Issues’

UK retail investors are being let down by wealth managers who fail to discuss clients’ views on  responsible investing, according to research from Oxford Risk, Andrew Michael writes.

The behavioural finance company found that nearly half (46%) of adults with investment portfolios run by wealth managers have never been contacted by them about their attitude to environmental, social and governance (ESG) issues or the broader issue of responsible investing.

Just over a third of clients (37%) said portfolios reflected their views on sustainable investing, suggesting the majority of retail investors were not having their opinions catered for in this sphere.

Oxford Risk says this scenario comes at a cost to both clients and wealth advisers alike. It found that nearly one-in-three investors (31%) say they would invest more if their portfolio better reflected their views on ESG and responsible investing.

The company said this particularly applied to younger investors, where over half of under-35s (59%) say they would invest more if their money was tilted to responsible investing.

Around one-in-three of all clients said their adviser did not address their ESG investing aspirations.

Greg Davies, head of behavioural finance at Oxford Risk, said: “Accounting for investors’ sustainability preferences needs a deeper understanding both of financial personality, and that suitability – matching investors to the right investments for them – is at the heart of helping people use their wealth for good.

“It is surprising that nearly half of investors claim they have never been contacted by their advisers about their attitude to responsible investing and ESG, and fewer than two out of five say their investment portfolio doesn’t represent their views on responsible investing.”

Oxford Risk produces a suitability framework for wealth managers enabling them to work out an investor’s ESG preference to determine how much money should be weighted towards the ‘E’, ‘S’ and ‘G’ part of a portfolio.


24 August: Re-Shuffle Looms At UK’s Leading Stock Market Index

Abrdn, the asset management group, faces demotion from the UK’s stock market index of blue chip companies after its share price plummeted by almost 40% this year, Andrew Michael writes.

The firm’s market capitalisation – the sum of all its issued shares multiplied by the share price – has fallen to below £3.3 billion, leaving it perilously close to the bottom of the FT-SE 100 (see below), the UK’s blue riband stock market index.

The asset manager has experienced a tough year, with its recent interim results reporting an outflow of funds worth £36 billion during a six-month period.

Global index provider FTSE Russell will announce the latest reshuffle of both the 100 large-cap and 250 mid-cap indices at the end of this month.

Along with abdrn, other potential casualties from the quarterly re-rating of the main index include generic drug maker Hikma Pharmaceuticals and kitchen maker Howden Joinery Group.

Ben Laidler, global markets strategist at eToro, the social investment network, said: “Those tapped for an upgrade from the FT-SE 250 into the FTSE-100 include (medical technology firm) ConvaTec Group, whose share price has surged 20% this year, and the F&C Investment Trust that focuses on global equities. Both stocks have market caps well in excess of £5 billion.”

Changes to major stock indices, such as the FT-SE 100 in London and the S&P 500 in the US, have become more important as the money tracking them in index tracking and exchange-traded funds (ETFs) has surged in recent years.

Mr Laidlaw said: “The amount invested in ETFs has almost doubled to a dramatic £7.7 trillion since 2018.”


22 August: Equities And Gold Replace Crypto And Alternative Assets As Investors Adjust Portfolios

The majority of the UK’s retail investors are bracing themselves for recession before the end of this year, irrespective of the outcome of the Conservative Party leadership contest, according to research from online foreign exchange provider HYCM, writes Andrew Michael.

The result of the contest, to be announced on Monday 5 September, will decide whether Foreign Secretary Liz Truss or former Chancellor of the Exchequer, Rishi Sunak, becomes the UK’s next Prime Minister.

HYCM surveyed nearly a thousand retail investors each with at least £10,000 under management excluding both the value of their home and workplace pension. Nearly two-thirds (62%) of the investors said they believed the UK would be plunged into recession by the end of 2022.

Half of the respondents (50%) also said they were concerned that the current interest rate hiking cycle undertaken by the Bank of England (BoE) would not be enough to stamp out soaring inflation in the coming months. Investors said the impact of inflation, which currently stands at 10.1%, posed the biggest single threat to the performance of their financial portfolios.

The Bank of England recently warned that UK inflation could reach 13% before the end of 2022 with levels remaining elevated for the whole of next year.

More than half the investors said they regarded themselves as “risk averse” in the current high inflation, low growth economic climate. Just over a third (38%) said that ‘safe haven’ assets were their prime focus given the current investment landscape.

When asked about their investment strategy for the rest of 2022, a third (33%) of investors said they planned to reduce their holdings in cryptocurrencies, while just over a quarter (27%) told HYCM they were likely to increase their exposure.

Investors also indicated that they would be reducing their holdings in so-called alternative investments, including classic cars and private equity, while upping their exposure to stocks and shares, social investments and gold.

Giles Coghlan, chief currency analyst at HYCM, said: “With the Conservative leadership contest gaining momentum, all eyes are falling firmly on economic policy in the bid for the prime minister role. As Rishi Sunak warns that the lights are flashing red on the economy and urgent action must be taken to tame spiralling inflation, Liz Truss and her backers are casting doubt on current thinking from the BoE. Whatever course is taken, our research shows that investors clearly view a recession as inevitable.

“As the cost-of-living crisis continues to bite, it is therefore unsurprising to see many investors reducing their holdings in some riskier and more speculative assets in favour of those that characteristically provide a safe haven in times of uncertainty.”


16 August: Profits At BHP Jump On Soaring Coal Prices

Mining company BHP said it would return a record amount of cash to shareholders after reporting record profits for the first half of 2022 on the back of soaring commodity prices earlier this year.

Reporting its results for the year ended June 2022, the Australian-based miner revealed a total final dividend of £7.4 billion ($8.9 billion), increasing payments for the year to £13.7 billion ($16.5 billion), the highest distribution in the company’s near 140-year history.

Dividends are payouts to shareholders made by companies out of their profits. They provide an important source of income for investors, especially as part of a retirement planning strategy.

Link, the fund administration group, recently reported that dividends from mining companies accounted for nearly a quarter of all payments made to shareholders during the second quarter of 2022, the largest proportion from any industrial sector.

BHP’s annual profit rose by 26% to £17.7 billion ($21.3 billion), its highest figure in 11 years. The company says it is continuing to look for acquisitions, having offered to buy OZ Minerals earlier this month. In morning trading today in London, the company’s share price rose 4% to £2,337 on the back of the results.

Mike Henry, BHP chief executive, said: “These strong results were due to safe and reliable operations, project delivery and capital discipline, which allowed us to capture the value of strong commodity prices.”

Against a looming recessionary economic backdrop caused by faltering growth worldwide plus the prospect of rising interest rates, Henry said that the company was well prepared to manage an uncertain near-term environment, adding an optimistic note: “We expect China to emerge as a source of stability for commodity demand in the year ahead.”

Victoria Scholar, head of investment at investing platform interactive investor, said the price of coal hit record highs following Russia’s invasion of Ukraine at the end of February.

She added: “BHP has been a key beneficiary of the surge in commodity prices this year. Looking ahead, the environment looks increasingly challenging with copper prices down 25% since the March high and with concerns about rising global interest rates, labour constraints and an economic slowdown.”


8 August: Bestinvest Spotlights ‘Dog’ Investment Funds

Investment funds worth nearly £11 billion are named as consistently underperforming ‘dogs’ in research from online investing service Bestinvest, writes Andrew Michael.

The company identifies 31 underperforming funds, worth a combined £10.7 billion, highlighting the poor showing of three in particular: Halifax UK Growth; Halifax UK Equity Income; and Scottish Widows UK Growth, together valued at £6.7 billion.

Bestinvest describes the underperformance of this trio, each widely held by UK retail investors, as “entrenched”, to the extent that “questions must be asked over their [investment] approach”.

Both of the Halifax funds are from a stable of investments offered by Halifax Bank of Scotland (HBOS). HBOS’s parent, Lloyds Bank, is ultimately responsible for the Scottish Widows portfolio as well. Fund manager Schroders acts as sub-adviser to all three funds.

Bestinvest’s latest Spot the Dog analysis defines a ‘dog’ fund as one that fails to beat its investment benchmark over three consecutive 12-month periods, and which also underperforms its benchmark by 5% or more over a three-year period.

A benchmark is a standard measure, usually a particular stock market index, against which the performance of an investment fund is compared.

Bestinvest said that, despite their underperformance, the 31 funds it had identified will generate management fees of around £115 million this year, based on their size and costs.

The company’s previous Spot the Dog, published earlier this year, highlighted 86 dog funds worth £45 billion.

Bestinvest said: “Although there are unfortunately plenty of funds that have undershot the markets they invest in over the last three years, a change in fortune for funds investing in undervalued companies and dividend-paying shares means many of the funds that dominated the list in recent editions have escaped this time due to a much stronger relative performance in the last several months.”  

Jason Hollands, Bestinvest’s managing director, said the report demonstrated a big disparity between the best and worst-performing funds that can’t be explained by cost differences alone: “The exceptional 12-year period of strong equity market performance that came to something of a halt at the end of last year meant that, until recently, most funds investing in equities generated gains irrespective of the skill of their managers. 

“This has helped to disguise poor relative performance and bad value for money.

“In a bull market, when most funds rise in value with the upward tide, investing can seem all too easy, but tougher times are a period to reflect on your approach. If you want to be a successful DIY investor, then periodically reviewing and monitoring your investments is absolutely vital and you need to be super-selective in the funds or trusts you choose.” 


4 August: Equity Portfolios Suffer As Investors Pull Near-Record Sums

UK investors pulled out £4.5 billion from investment funds in June this year, the largest monthly withdrawal of 2022 and the second highest figure on record, according to the latest figures from industry body the Investment Association (IA), writes Andrew Michael.

The IA said investors were responding to intensifying economic uncertainty following a challenging first half of the year for market performance.

Last month, the US market officially moved into bear market territory when the influential S&P 500, recorded a 20% drop in value since the beginning of 2022.

The IA said that equity funds experienced outflows worth £2.3 billion in June. Within this cohort, the largest sector casualty was globally diversified portfolios, with investors pulling out money to the tune of £1.3 billion.

In contrast, so-called volatility managed funds, which aim to deliver positive returns to investors by investing in a blend of assets including equities, bonds and cash, were the IA’s best-selling sector in June, with net retail inflows worth £248 million.

Chris Cummings, IA chief executive, said: “Savers are pre-empting slowing economic growth and preparing for further interest rate rises as we enter new territory for markets. Higher rates mean a weaker performance outlook for the high-growth companies that helped to fuel the bull market of the last decade.”

“This month’s equity fund outflows indicate that investors are looking at ways to better balance their savings,” Cummings  added.

[ ] Assets under management in the European fund industry fell by £1.7 trillion (€2 trillion) from £12.8 trillion (€15.3 trillion) to £11.1 trillion (€13.3 trillion) over the first half of 2022, according to the latest figures from data provider Refinitiv Lipper.

Detlef Glow, head of EMEA research at Refinitiv Lipper, said: “It was no surprise that the European fund industry faced declining assets under management over the course of the year 2022 so far, as the geo-political situation in Europe, the still ongoing COVID-19 pandemic, disrupted delivery chains, increasing inflation, and interest rate hikes put some pressure on the securities markets.”


3 August: Less Than 1% Of Funds Delivered Top Performance Over 3 Years – Columbia Threadneedle

Just four investment portfolios, a record low, delivered top quartile performance over a rolling three-year period to the end of June this year, according to the latest figures from fund manager Columbia Threadneedle, writes Andrew Michael.

A top quartile fund is one that ranks in the top 25% of its peer group based on investment performance.

Columbia Threadneedle’s quarterly Multi-Manager Fund Watch survey reviewed 1,153 portfolios across 12 major fund sectors – as defined by the Investment Association (IA) universe – assessing performance in each of three 12-month periods up to June this year.

The Multi-Manager Consistency Ratio, the toughest test within the research, looked for funds that were top quartile for each of these periods. Columbia Threadneedle found that, up to the end of the second quarter of 2022, just 0.35% of funds, four in total, proved up to the mark.

The funds in question were: Quilter Investors Sterling Diversified Bond; Matthews Asia Small Companies; Luxembourg Selection Active Solar; and Fidelity Japan. 

Each fund is located in a different IA sector, making it difficult to determine why these portfolios produced the requisite investment returns, while so many of their rivals languished over the same period.

Columbia Threadneedle said that the funds industry was experiencing a “challenging period”, with macro factors and geo-politics currently creating an “interesting environment for investment”.

Factors included the ongoing implications of the war in Ukraine, rising inflation, plus the impact of central banks’ decisions worldwide to hike interest rates in the face of stiff economic headwinds.

Kelly Prior, investment manager at Columbia Threadneedle said: “This quarter’s findings are unprecedented, demonstrating the extreme rotations that markets have been through in the last couple of years and how different flavours of investment have led markets at different times.”

She added: “While the data points make for hard reading, we believe the data does indicate that fund managers are holding their nerve and not trying to chase these very unusual markets.”



1 August: Mining, Banking And Oil Sectors Lead The Dividends Charge – For Now

Total dividends from UK-listed companies hit £37 billion in the second quarter of this year, an increase of more than a third compared with the same period in 2021, according to the latest figures from Link, the fund administration group, writes Andrew Michael.

Dividends are payouts to shareholders made by companies out of their profits. They provide an important source of income for investors, especially as part of a retirement planning strategy.

Link’s latest UK Dividend Monitor reported that the headline total for dividends rose year-on-year by 38.6% in the second quarter of this year.

The figure, driven by one-off special payments, was the second-largest quarterly total on record, eclipsed only by the amount companies paid out to shareholders between the months of April to June in 2019.

Link said that dividends from mining companies accounted for nearly a quarter of all payments made to shareholders during the second quarter of this year, the largest proportion from any industrial sector. In addition to mining, banks and oil companies make up the UK’s three largest dividend-paying sectors.

Link added that sectors including housebuilders, industrial goods, media, travel and general financials each also had a strong second quarter, thanks to strong profit growth offering a boost to dividend payouts in the wake of the pandemic.

In light of this, the company said it was upgrading its UK plc dividend forecast for the full year with headline payouts expected to rise by 2.4% to £96.3 billion.

Link warned, however, that next year could prove more of a challenge to companies looking to further  increase their dividend payments as economic conditions increasingly take a turn for the worse and the conflict in Ukraine continues unabated.

Ian Stokes, managing director, corporate markets UK and Europe at Link, said: “Mining payouts are closely linked to the cyclical fluctuations in mining profits, and tend to rise and fall much more over that cycle than dividends from other industries.”

He added: “As we move into 2023, headwinds will strengthen. The easy post-pandemic catch-up effects are soon to wash entirely out of the figures, and an economic recession will crimp the ability and willingness of many companies to grow dividends.”


20 July: Perceived Risk Of Lower ESG Returns Proves A Turn-Off For Investors 

The majority of investors are unaware of environmental, social and corporate governance (ESG) investing, despite the shift to sustainability and increased concern about the impact investments are having on the planet, writes Andrew Michael.

According to research from financial advisers Foster Denovo, six in 10 investors (60%) said they were unfamiliar with the availability of specialist investment portfolios such as ESG funds.

However, Foster Denovo’s report, Investing with the Dynamic Portfolios: The latest research surrounding investors opinions on ESG investing, reveals signs of a growth in investor perception about the environment along with the impact made by their investments.

Once dismissed as a virtuous concept that potentially compromised portfolio returns, ESG investing has moved centre-stage within the global investment arena in recent years. 

According to Global Sustainability Investment Alliance, approximately £30 trillion in assets was being managed globally in accordance with ESG principles.

Foster Denovo said just over half (51%) of respondents either felt strongly or very strongly about the impact that climate change could have on their savings and investments.

In addition, nine in 10 (89%) said they were concerned about the impact that corporate practices and some large businesses were having on the environment.

A quarter (25%) of respondents told Foster Denovo that they had invested with ESG factors in mind. But the majority said they weren’t interested in ESG investments because of perceived lower returns from the sector compared with more traditional investment channels.

Foster Denovo described this response as “at odds with the majority of recent investment research which found that three-quarters of ESG-screened indices outperformed their broad market equivalents”.

Declan McAndrew, Foster Denovo’s head of investment research, said: “It’s clear that many people, including those not currently investing sustainably, are interested in and willing to learn more about ESG and want to put their money towards positively benefiting the planet as well as making returns.

“However, a lack of awareness about the availability of such products, what ESG means and a persistent misconception about lower returns are clearly having an impact.”


13 July: Gloves Off As Twitter Sues Musk For Ditching Takeover Bid

Twitter has carried through its threat to sue Elon Musk after the Tesla boss announced last week (see story below) that he is walking away from his £36.5 billion bid to buy the social media platform, writes Kevin Pratt.

In what looks set to be a lengthy and acrimonious legal battle – Twitter’s complaint filed with the Delaware Court of Chancery calls Mr Musk’s behaviour “a model of hypocrisy” – the main issues are the number of fake accounts on the platform, and the $1 billion break clause in the original contract.

Mr Musk is refusing to pay the sum, arguing that Twitter has not provided him with the information he needs to verify the number of genuine accounts.

The original offer for Twitter was at $54.20 per share but the stock is now trading below $35. Recent falls are attributed to Mr Musk’s announcement, but the price was already around the $40 per share mark before last weekend.

Twitter’s legal filing reads: “In April 2022, Elon Musk entered into a binding merger agreement with Twitter, promising to use his best efforts to get the deal done. Now, less than three months later, Musk refuses to honor his obligations to Twitter and its stockholders because the deal he signed no longer serves his personal interests.

“Having mounted a public spectacle to put Twitter in play, and having proposed and then signed a seller-friendly merger agreement, Musk apparently believes that he – unlike every other party subject to Delaware contract law – is free to change his mind, trash the company, disrupt its operations, destroy stockholder value, and walk away. 

“This repudiation follows a long list of material contractual breaches by Musk that have cast a pall over Twitter and its business. Twitter brings this action to enjoin Musk from further breaches, to compel Musk to fulfill his legal obligations, and to compel consummation of the merger upon satisfaction of the few outstanding conditions.”

In a tweet last night, Bret Taylor, Twitter chairman said: “Twitter has filed a lawsuit in the Delaware Court of Chancery to hold Elon Musk accountable to his contractual obligations.”

Mr Musk responded with a tweet of his own: “Oh the irony lol (laugh out loud)”.

Twitter’s filing to the Delaware court accuses Mr Musk of wanting to back out of the deal because of the drop in the stock market generally and the firm’s share price in particular: “After the merger agreement was signed, the market fell. As the Wall Street Journal reported recently, the value of Musk’s stake in Tesla, the anchor of his personal wealth, has declined by more than $100 billion from its November 2021 peak.

“So Musk wants out. Rather than bear the cost of the market downturn, as the merger agreement requires, Musk wants to shift it to Twitter’s stockholders. This is in keeping with the tactics Musk has deployed against Twitter and its stockholders since earlier this year, when he started amassing an undisclosed stake in the company and continued to grow his position without required notification. 

“It tracks the disdain he has shown for the company that one would have expected Musk, as its would-be steward, to protect. Since signing the merger agreement, Musk has repeatedly disparaged Twitter and the deal, creating business risk for Twitter and downward pressure on its share price.”

The market awaits a fuller response from the Musk legal team in the coming days.


9 July: Two Sides At Loggerheads Over £36.5 Billion Takeover Contract

Elon Musk has told Twitter he is pulling out of the previously agreed £36.5 billion deal to buy the social media micro-blogging platform. Twitter says it is determined to complete the transaction on the original terms, writes Kevin Pratt.

A letter to Twitter, filed with the US Securities and Exchange Commission, says Mr Musk “is terminating the Merger Agreement because Twitter is in material breach of multiple provisions of that Agreement, appears to have made false and misleading representations upon which Mr. Musk relied when entering into the Merger Agreement, and is likely to suffer a Company Material Adverse Effect.”

Mr Musk effectively put the deal on ice in May while his team determined the number of ‘spam’ accounts on Twitter, arguing that he needed accurate information on the number of genuine users to determine the true value of the company.

The latest letter states: “For nearly two months, Mr. Musk has sought the data and information necessary to ‘make an independent assessment of the prevalence of fake or spam accounts on Twitter’s platform’. 

“This information is fundamental to Twitter’s business and financial performance and is necessary to consummate the transactions contemplated by the Merger Agreement because it is needed to ensure Twitter’s satisfaction of the conditions to closing, to facilitate Mr. Musk’s financing and financial planning for the transaction, and to engage in transition planning for the business. 

“Twitter has failed or refused to provide this information. Sometimes Twitter has ignored Mr. Musk’s requests, sometimes it has rejected them for reasons that appear to be unjustified, and sometimes it has claimed to comply while giving Mr. Musk incomplete or unusable information.”

Bret Taylor, Twitter’s chairman, said in a tweet that he is determined to complete the takeover on the original terms: “The Twitter Board is committed to closing the transaction on the price and terms agreed upon with Mr. Musk and plans to pursue legal action to enforce the merger agreement. We are confident we will prevail in the Delaware Court of Chancery.”

The dispute between the two camps is likely to be drawn out and acrimonious, not least because the contract includes a £1billion break clause, payable by either party if they withdraw without good reason.

Mr Musk will therefore try to show that the contract is no longer valid because of Twitter’s actions or lack of action, while the company will insist it has acted within the terms of the arrangement. As stated in Mr Taylor’s tweet, it will sue Mr Musk to enforce the deal.

Twitter shares fell by 5% when the news broke that the takeover is in jeopardy. In after-hours trading in New York, they stood at around $35 (£29). Mr Musk’s original offer was for $54.20 (£45) a share.


7 July: Investment Association Says Digital Ledgers Would Benefit Consumers

The UK’s asset management industry is calling on the government to create a new class of fund that incorporates blockchain technology, the digital process that underpins much of the cryptocurrency industry.

The Investment Association (IA), the trade body representing the UK’s investment management firms running nearly £10 trillion worldwide, has urged the government and the City regulator, the Financial Conduct Authority (FCA), to work together “at pace” to approve blockchain-traded funds that would issue digital tokens to investors in place of traditional shares or fund units.

The IA says that the increasing adoption of so-called ‘tokenisation’ would ultimately reduce costs for consumers and improve efficiency in the delivery of funds, through quicker settlement and improved transparency of transactions.

It added that tokenisation may also broaden the assets held within a fund by increasing access to private markets and illiquid assets such as property, that cannot quickly or easily be converted into cash.

According to the IA, the landscape it envisages for funds of the future would offer consumers “more engagement and customisation, while maintaining important consumer protections”.

Greater variety

It added that this could include the provision of a greater variety of portfolios tailored to the specific needs of individual investors and a wider range of financial advice services to address the UK’s current advice gap.

Earlier this year, the Treasury, headed by Rishi Sunak MP, former Chancellor of the Exchequer, announced a series of measures designed to elevate the UK into a global hub for cryptoasset technology and investment.

The FCA issues regular warnings to consumers about the crypto industry, reminding them that cryptoassets are unregulated and high-risk.

The regulator’s current stance on crypto as an investment is that investors “are very unlikely to have any protection if things go wrong, so people should be prepared to lose all their money if they choose to invest in them”.

Chris Cummings, IA chief executive, said: “With the ever-quickening pace of technological change, the investment management industry, regulator and policymakers must work together to drive forward innovation without delay.

“Greater innovation will not only boost the overall competitiveness of the UK funds industry, but will improve the cost, efficiency and quality of the investment experience.”



5 July: Watchdog Unveils Recruits To Oversee Investment And Crypto Sectors

The UK’s financial watchdog has poached a director with specialist knowledge of economic crime and illicit finance from the National Crime Agency (NCA) for a new role overseeing the crypto-asset, e-money and payment markets.

The appointment is one of six new directorships revealed by the Financial Conduct Authority (FCA), as the regulator looks to beef up its top personnel covering traditional areas of investment, while burnishing its credentials amid calls for tougher oversight of the crypto sector.

Matthew Long will join the Financial Conduct Authority in October as director of payments and digital assets. Long is currently director of the National Economic Crime Command, part of the NCA.

He also led the UK Financial Intelligence Unit, which has national responsibility for receiving, analysing and disseminating financial intelligence through the Suspicious Activity Reports (SAR) regime.

SARs are pieces of information that alert law enforcers that client or customer activity is suspicious and might indicate money laundering or terrorist financing.

Joining Long in October will be Camille Blackburn in the new role of director of wholesale buy-side. 

Ms Blackburn will be responsible for policy development and supervision across asset management, alternative investments, custody banks and investment research.

She is currently global chief compliance officer at Legal & General Investment Management. Prior to that she was chief compliance officer at Aviva Investors and was also chair of the Investment Association’s Brexit committee.

Four other new directors have also been appointed in the FCA’s latest hiring round, including former City of London economic crime co-ordinator, Karen Baxter, who joins as director of strategy, policy, international and intelligence.

Three internal promotions – Roma Pearson, director of consumer finance; Anthony Monaghan, director of retail and regulatory investigations; and Simon Walls, director of wholesale, sell-side – complete the appointments.



29 June: Investment Trust Dividends Soar To £5.5 billion

Dividends paid out by investment trusts hit a record high of £5.5 billion in the year to March 2022, propelled by payouts from privately-owned companies not listed on stock markets.

An investment trust is a public limited company, traded on the stock market, whose aim is to make money by investing in other companies. The investment trust sector has become increasingly popular with retail investors in recent years.

According to fund administration group Link, two-thirds of investment trust dividends paid over the 12 months to March focused on so-called ‘alternatives’. These include investments in venture capital, renewable energy infrastructure and property.

Link says the figures equate to an overall increase in dividends of 15% compared with the previous year.

It adds, however, that shareholder payments from investment trusts investing in company stocks flatlined over the period, accounting for £1.85 billion of the total payout. These equity investment trusts traditionally play a key role in the London-listed investment trust sector.

While dividends from alternative trusts have increased nine-fold over the past decade, Link forecasts that shareholder payments from equity trusts will grow more slowly than the market average over the coming year.

Ian Stokes, Link’s managing director, corporate markets UK and Europe, said: “Ten years ago, alternatives were a much smaller segment of the investment trust market, but they have rapidly expanded as new investment opportunities have opened up in response to investor demand.”

Richard Stone, chief executive of the Association of Investment Companies, the trade body representing investment trusts, said: “This report demonstrates that investment companies offer an abundance of benefits to income investors and have continued to do so through challenging market conditions.”


28 June: Platforms Sweeten Deal With Interest Payments

Competition has intensified among online trading platforms as they battle to retain client funds now that the boom in ‘armchair’ share trading during the pandemic has tailed off. 

The rise in the popularity of commission-free trading platforms had already put pressure on the larger platforms to review their fee structures, with AJ Bell reducing their platform and foreign exchange fees from July.

Now interactive investor (ii) has announced that it will start paying interest on British pound and US dollar cash balances held in its Individual Savings Accounts (ISAs) and Self Invested Personal Pensions (SIPPs) accounts from 1 July. 

Historically, platforms have not paid interest on these balances, and investors may even have been charged for the privilege of holding cash in the past.

However, the stock market downturn has encouraged some investors to leave their ISA contributions uninvested as cash in their account. Others have sold their equity investments to hold the proceeds as cash in their ISAs and SIPPs, enabling them to keep the money within its tax-free wrapper.

The move by ii will see interest of 0.25% paid on the value of any balances over £10,000, with each account (eg ISA and SIPP) treated separately, rather than combined for the purpose of the interest calculation.

Richard Wilson, CEO at ii, commented: “Interest rates are still low, but following recent increases, ii will begin paying interest on accounts from 1 July.” 

Mr Wilson also pointed to the benefit for regular traders of overseas shares, who will now earn interest on US dollar balances held on their account.

This announcement brings ii in line with other major trading platforms as follows:

  • Hargreaves Lansdown pays interest of between 0.05% to 0.25% on cash held in ISAs, 0.05% to 0.20% on Fund and Share Accounts and 0.05% to 0.45% held in SIPPs.
  • AJ Bell offers a lower interest rate of 0.0% to 0.15% for ISAs and Dealing Accounts and 0.0% to 0.25% for SIPPs. 

Hargreaves Lansdown (HL) also announced the introduction of a ‘pay by bank’ service today, allowing clients to transfer funds directly from their bank accounts to their HL accounts, without the use of cards.

George Rodgers, senior product manager at Hargreaves Lansdown, commented: “Our clients can expect a simpler payment journey as well as instant settlement for deposits and withdrawals compared to days under the current system. Our adoption of Open Banking is a key milestone in our digital transformation strategy.”


28 June: Investment Scammers Add To Ombudsman’s Burden

Fresh data from the Financial Ombudsman Service shows that so-called ‘authorised’ scams – where consumers are tricked into transferring money into accounts they believe to be legitimate – increased by over 20% to 9,370 in in 2021/22.

The Ombudsman says fraudsters are increasingly using social media to lure their victims, with many of the total 17,500 fraud and scam cases recorded for the year relating to fake investments.

The Ombudsman says it upheld 75% of scam complaints in the consumer’s favour last year.

As far as insurance is concerned, the Ombudsman recorded 38,496 complaints (including Payment Protection Insurance) in the last financial year, compared to 44,487 the year before. 

The number of travel insurance complaints decreased by 75% from 8,175 in the financial year 2020/21 to 2,116 in the financial year 2021/22.

The fall coincides with an increase in the number of insurers who have added cover for Covid-related issues to their policies.

The Financial Ombudsman Service faced a backlog of complaints throughout the pandemic. Last month, it announced that the number of outstanding complaints had decreased to 34,000 from 90,000 in April last year.

It says it resolved over 58,000 insurance complaints (including PPI) in total in the last financial year. However, it upheld less than 30% (28%) of cases in the complainant’s favour.

Nausicaa Delfas, interim head of the Financial Ombudsman Service, said: “Over the past year, the Service continued to help over 200,000 customers who had problems with financial businesses on issues across banking, lending, insurance and investments. 

“In this period of economic uncertainty it is more important than ever that where problems do arise, they are addressed quickly.  We are here to help to resolve financial disputes fairly and impartially.”

The Financial Ombudsman Service always advises consumers to complain to their product or service provider first. If they are unhappy with how their provider has dealt with their case, they should then take their complaint to the Financial Ombudsman Service.


24 June: Interactive Investor Responds To Woes In ‘Sustainable’ Sector

One of the UK’s largest online investment platforms, interactive investor (ii), has ditched two funds from its buy list of ethical portfolios.

It has also revealed that only two of the 40 funds in its ACE 40 list of environmental, social and governance (ESG) investments – VT Gravis Clean Energy Income Fund and iShares Global Clean Energy ETF USD Dist GBP INRG – delivered positive returns since the start of 2022 until the end of May.

Funds in the sustainable space have become popular among investors, with strong performance underpinned by their bias to so-called growth-oriented sectors (growth investing focuses on companies with better-than-average gains in earnings and which are expected to maintain high levels of profit).

However, since the start of 2022, growth stocks have faltered in the face of strong inflationary headwinds and rising interest rates, as evidenced by the performance of the ACE 40 list overall.

In contrast, value investing – focusing on companies perceived to be underappreciated and undervalued – has gained increased backing from investors this year.

On the advice of Morningstar, which advises on the composition of the ACE 40, ii announced the removal of two funds: abrdn Europe ex UK Ethical Equity, and Syncona Investment Trust. In their place, the company will add M&G’s European Sustain Paris Aligned fund.

Dzmitry Lipski, head of funds research at ii, said: “We continuously review the list to ensure it meets customer needs and, in this instance, given the significant shift in the market environment this year we agreed with Morningstar to make these changes.”

In connection with the removal of Syncona, Morningstar said: “We feel that the level of risk the trust displays is elevated relative to the benefits.”.

Regarding the abrdn fund, it said: “Compared to peers, the team’s fund management experience remains limited. Overall, we believe there are stronger fund options available in this sector and have therefore recommended the removal of this fund from the ACE 40 list.”



14 June: Analysts Warn S&P 500 Could Fall Even Further From January High

US stocks closed in bear market territory yesterday (13 June) after the S&P 500 fell 3.9%, hauling down the stock index’s overall performance by 21.8% since its record high achieved on 3 January this year.

Stock market professionals generally define a bear market as one that has fallen least 20% from its peak.

The sell-off in equities was prompted by nervous investors taking fright at a higher-than-expected May inflation figure of 8.6% as reported last Friday (10 June) by the US Bureau of Labor Statistics.

The announcement stoked expectations that the US Federal Reserve could implement an interest rate rise of 0.75 percentage points at its next monetary policy meeting, which concludes tomorrow (Wednesday).

A rate hike of this magnitude would signal a more aggressive stance from the Fed towards its strategy of tackling soaring consumer prices.

Later this week, the Bank of England’s Monetary Policy Committee is expected to announce a 0.25% hike in the Bank Rate in its own bid to stave off steepling inflationary pressures in the UK.

Stock market analysts warned that the sell-off in US equities potentially has further to go.

Ben Laidler, global markets strategist at social investing network eToro, said: “The S&P 500 closed in bear market territory yesterday, over 20% down for the year, and history tells us there is still a way to go yet. Recession risks are rising and could see this market fall another 20%.”

Laidler added that while S&P 500 bear markets were a relatively infrequent event, when they did happen, they tended on average to last around 19 months and result in a 38% drop in prices: “This one has only lasted five months and is down 21%.” 

Russ Mould, investment director at online broker AJ Bell, said: “There is a lot riding on the Federal Reserve’s policy update tomorrow. Investors look as if they increasingly fear the central bank will become more aggressive with the pace of interest rates to try and curb inflation, given May’s cost of living figures were higher than expected.

“The Fed is focused on inflation and the economy, not the markets, yet its actions have significant influence on the direction of stocks and bonds. A decision to raise rates by more than half a percentage point could cause chaos on the markets and put a bigger dent into investors’ portfolios than they’ve already seen this year.”



7 June: Investors Hold Back Despite Prospect Of Better Returns

Nearly two-thirds of UK adults have money to invest but say they are prevented from doing so because they don’t know where to start, according to the investing app Dodl.

Research carried out by Dodl found that 65% of people do not have an investment account such as a stocks and shares individual savings account (ISA). But the company said the majority of the people in this group (95%) were not put off simply because they didn’t have sufficient disposable cash.

Instead, Dodl said they blame a range of issues such as not knowing where to start, the investment process being too complicated and not knowing what to invest in.

When asked how much money they potentially had set aside for investing, the average amount among respondents was £3,016.

Dodl said that leaving a sum this size in a top easy-access savings account paying 1.5% for 20 years would produce a return of £4,062. The company estimated that, if the same amount were invested over 20 years producing a 5% annual return, the total would be £8,002 after taking charges into account.

The company added that respondents were split when questioned about what would encourage them to begin investing. Just under half (48%) said they would prefer a narrow list of investments to choose from, while just over a third called for a wide range of investing options.

Dodl said nearly half of the responses (40%) were in favour of single funds that invested in mainstream themes such as technology and healthcare.

Dodl’s Emma Keywood said: “With living costs on the rise it is surprising that so many people say they have money saved in cash that they feel they could invest. The problem is they don’t know where to start or find it too complicated.  

“However, once people do a bit of research and dip their toe in the water, they often find that investing isn’t as scary as they’d thought.”


6 June: ISAs Provide Timely Boost To Funds Industry

UK investors returned to the stock market in April after multi-billion pound withdrawals in the first quarter of 2022.

Figures from the Investment Association (IA) trade body showed that investors put £553 million into funds in April. Over £7 billion was pulled from the funds market between January and March this year.

In April, the overall amount in funds under management stood at £1.5 trillion.

The IA said this year’s Individual Savings Account (ISA) season fuelled the turnaround. ISAs are annual plans that allow UK investors to shelter up to £20,000 a year from income tax, tax on share dividends, and capital gains tax.

The plans run in line with the tax year, so there is traditionally a surge in interest in the weeks leading up to the tax-year end on 5 April.

The IA said Global Equity Income was, for the first time, its best-selling investment sector in April. With weaker prospects share price growth – thanks to factors including the war in Ukraine, high global inflation and rising interest rates – company dividends have become increasingly important to the overall returns investors can make from stock and shares.

Also popular were the Volatility Managed, Specialist Bond and North American sectors. The worst-selling sector was UK All Companies.

In April, UK investing platforms were responsible for half of all gross retail fund sales, while UK intermediaries, including independent financial advisers, accounted for just over a quarter (28%). Discretionary fund managers (20%) and direct sales from investment provider to consumer (3%) made up the balance.

Miranda Seath, IA’s head of market insight, said: “Although inflows to ISA wrappers were half those of 2021, they were still the third strongest in the last five years. This is significant as April’s positive sales come after one of the most challenging quarters for retail fund flows on record.”


1 June: Hedgie Investment Strategies Split Along Gender Lines

Hedge funds led by women perform slightly better than those headed up by men over the longer term, according to research from broker IG Prime.

Hedge funds are pooled investment vehicles aimed at high-net worth individuals and other major investors.

In their quest for outsize returns, the investment strategies associated with hedge funds are often more eclectic and involve greater risk-taking than those found in most run-of-the-mill retail funds.

IG Prime’s research focused on the UK, Australia, Singapore, Switzerland and the United Arab Emirates. It considered the extent to which a higher proportion of women in hedge fund leadership roles correlated with improved fund performance.

The company said looking at all investing periods, from one month to five years, the findings suggested there was no consistent correlation between female leadership and either positive, or negative, fund performance.

But IG Prime added that over five-year periods in both the UK and Australia, it found that hedge funds with female management at the helm marginally outperformed investment portfolios run by men.

According to the company, the decision to appoint women as hedge fund leaders may prove “somewhat beneficial… from a financial perspective”.

In spite of this, the research also found that women accounted for just 15% of the leadership roles across international hedge funds compared with men.

IG Prime also found that female and male hedge fund traders adopted differing investment strategies. Nearly two-thirds (60%) of women said they relied on equity-led approaches to investing, compared with just over a quarter (26%) of men.

In contrast, nearly twice as many men (33%) said they focused on macro-investing strategies compared with women (18%). A macro strategy bases its approach on the overall economic and political views of various countries, or their macroeconomic principles.

When it came to cryptocurrencies, about a third (31%) of male traders said they were likely to incorporate crypto assets within their portfolios, compared with 20% of female traders.

IG Prime said: “When making investments in funds, the focus should be on people’s past performance and intended strategy for the funds. Due to the unique nature of funds, it remains a wise decision to tailor each investment decision to each fund.”


26 May: Investors Identify Retirement As Main Savings Goal

The majority of non-professional investors believe investing with a life goal in mind leads to more successful outcomes compared with trying to make money in the abstract, according to research from Bestinvest.

The investment service’s Life Goals Study found that 80% of investors with a financial target on the horizon believed that this would help them secure a more satisfactory result.

Bestinvest also said that nearly nine in ten investors (89%) had a set goal in mind that they are trying to achieve by making their money work harder for them via an investment strategy.

Three-quarters (77%) of investors referred to a retirement-related investment incentive, either one that helped them to give up work sooner, or to help fund a comfortable income stream alongside their state pension.

Other major goals driving investment strategies included building up a pot of wealth to provide financial security, boosting lifestyles in the run-up to retirement, paying for future family costs such as weddings or tuition fees and building up wealth to hand on to future generations.

Despite both men and women sharing the belief that having an investment goal would lead to better results, Bestinvest said women “were noticeably less likely to check whether they are on course to achieve their goals than men”.

Bestinvest’s Alice Haine said: “It’s concerning that female investors are choosing to pay less attention to their investments. Women are often more vulnerable to pension poverty as they have less money squirrelled away than men, either because of the gender pay gap, or because they have taken time out of their careers to care for children or loved ones.”

  • The average age of women when they start investing is 32, compared with men who typically start at the age of 35, according to research from Janus Henderson.

The fund manager also found that, on average, UK investors allocate around 16% of their money to investing. The majority of investors cited a lack of spare cash as the reason why they hadn’t started investing earlier.


26 May: Age Split On Prospects For Economy And Personal Wealth

Well-heeled older investors say inflation is their number one worry when it comes to the state of the UK economy and the prospects for their own finances, according to research from a wealth manager.

The Saltus Wealth Index also found that older high net worth individuals (HNWIs) – those with investable assets of more than £250,000 – have a far gloomier outlook about their finances compared with the affluent young.

According to the findings, the majority of younger HNWIs said they felt confident over the next six months about both the future of the UK economy as well as their own finances.

But when posed with the same questions, older HNWIs expressed significant concerns. According to Saltus, a third (34%) of HNWIs in the age-range 55 to 64 said they were confident about future prospects. The proportion fell further, to 23%, among HNWIs aged 65 or over.

When asked what they saw as the biggest threat to their finances, older HNWIs pointed to inflation (33%), Covid-19 (30%), exchange rates (25%), cyber security (25%) and geo-political risk (22%).

Saltus said this marked a shift from 2021, when Covid-19 was the top threat, followed by inflation, return on investments, Brexit and climate change.

UK inflation rocketed to 9% in April 2022, its highest level in 40 years, as prices felt the effect of soaring energy costs and the impact of the ongoing conflict in Ukraine. 

The rise has exacerbated a cost-of-living crisis that was already playing havoc with the finances of millions of UK households.

Michael Stimpson, a partner at Saltus, said: “There are a number of factors causing feelings of unease, with the impact of rising inflation the key concern, especially among older people whose fears about how it will affect their retirement plans highlights more than ever the importance of having a robust financial plan in place.”

  • The UK’s millionaires are prioritising recycling as part of their efforts to be environmentally friendly, instead of changing their investments, which could have a bigger impact.

According to Coutts, the private bank, wealthy individuals remain focused on sorting out plastic from paper. But the majority – 85% – have not made changes to their investment portfolio, despite evidence that this is the best way to enjoy a more eco-friendly lifestyle.


25 May: UK Dividend Payments Totalled £11.2 billion In First Quarter

Payouts to shareholders made by companies out of their profits jumped 11% to a record £242 billion ($302.5 billion) worldwide in the first quarter of 2022, according to the latest dividends data from Janus Henderson.

Dividends provide a source of income for investors, especially as part of a retirement planning strategy.

The investment manager’s Global Dividend Index said the growth in dividends could be a result of the “ongoing normalisation” of payouts following the disruption caused by the Covid-19 pandemic.

During 2020, companies worldwide cut back sharply on dividend payments to shareholders, opting instead to retain cash as a defence against the worst effects of the pandemic.

Janus Henderson reported that every region experienced double-digit growth in dividend payouts in the first quarter of this year, thanks to a stronger economic backdrop and the ongoing catch-up in payments following cuts during 2020 and early 2021.

However, it warned that the global economy faces challenges during the remainder of 2022 and predicted that the resulting downward pressure on economic growth would affect company profits in a number of sectors.

In the UK, oil companies in particular helped boost payouts to shareholders by 14.2% in the first quarter of 2022 to £11.2 billion ($14.7 billion).

Distributions in the healthcare sector also rose, after pharmaceutical giant AstraZeneca hiked its dividend for the first time in nearly 10 years. Janus Henderson said telecom operator BT also made a significant contribution to growth.

The US, Canada and Denmark each set all-time quarterly records paying out £114 billion ($142 billion), £10.7 billion ($13.4 billion) and £7.8 billion ($9.8billion), respectively.

Janus Henderson’s Jane Shoemake said: “Global dividends had a good start in 2022, helped by particular strength from the oil and mining sectors.

“The world’s economy nevertheless faces a number of challenges – the war in Ukraine, rising geopolitical tensions, high energy and commodity prices, rapid inflation and a rising interest rate environment. The resultant downward pressure on economic growth will impact company profits in a number of sectors.”


19 May: FundCalibre Ranks ESG Portfolios Using ‘Simple’ Definitions

FundCalibre, the online fund research centre, has launched what it says is a “simple” set of definitions it will use to scrutinise investment portfolios structured along environmental, social and (corporate) governance (ESG) lines.

ESG investing is as concerned with its impact on people and the environment as it is with potential financial concerns.

The concept has moved centre-stage within the investment arena to the point where trillions of pounds in assets are managed globally along ESG principles.

FundCalibre says it now includes an ESG assessment on the notes of each of the 228 ‘Elite Rated’ and ‘Radar’ funds that appear on its website. The assessments are each broken down into one of three categories: explicit, integrated, and limited.

‘Explicit’ funds are those that have an ESG or sustainable approach at the heart of their investment philosophy. Funds placed in this category are likely to have an independent panel or rely on a consumer survey to determine their ESG criteria.

‘Integrated’ funds are those that embed ESG analysis within the investment process as a complementary input to decision making. 

‘Limited’ funds contain an element of ESG in their process, but the portfolio is not influenced overall by the ideal of ethical investing.

Each assessment is publicly available and free to view.

Professional fund managers typically put together investment portfolios according to various ESG criteria and themes. But because ESG is a wide-reaching concept, there is no absolute set of principles to which funds must adhere.

Ryan Lightfoot-Aminoff, senior research analyst at FundCalibre, said: “With each fund manager doing something different, it has become very difficult for investors to know exactly how responsible a fund really is. What’s more, a lack of trust in asset managers’ ESG claims remains a barrier to investment.

“We launched a responsible investing sector in 2015 highlighting the funds in this category that our research team believe to be among the very best. We have now gone one step further and have included an ESG assessment.”



17 May: Investors Bemoan ‘Time-Consuming’ And ‘Complicated’ Process

Nearly half the UK’s young investors make investment choices while engaged in another activity, according to the City regulator and the nation’s official financial lifeboat.

In a survey exploring attitudes towards investing, 42% of respondents aged between 18 and 24 said they made their latest investment while sitting in bed, watching TV or returning home from the pub or a night out.

The research, carried out for the Financial Conduct Authority (FCA) and the  Financial Services Compensation Scheme (FSCS), also found around half of investors (44%) did not research their investments because they found the process “time-consuming” and “too complicated”.

The FSCS warned that, if consumers do not understand where they are investing their money, it increases the potential for them to fall foul of investment scams.

Earlier this year, a group of MPs warned of an alarming rise in financial frauds being perpetrated in the UK. The Treasury Select Committee suggested social media giants should pay compensation to people duped by criminals who use their websites.

According to the FSCS/FCA survey, around a quarter of investors (27%) said they were more likely to invest in an investment opportunity with a “limited timeframe” – such as one that was only available for the next 24 hours.

The FCA says time pressure is a common tactic used by scammers. It advises consumers to check its Warning List to see if an investment firm is operating without authorisation.

About one-in-five survey respondents said they hadn’t checked, or didn’t know, if their investment is FSCS-protected. The FCA says this puts consumers at risk of choosing investments with no possibility of compensation if their provider goes out of business.

FSCS protection means consumers can claim compensation up to £85,000 against an FCA-authorised business that has failed.

Consumers can check if their investment is financially ring-fenced by the FSCS via its Investment Protection Checker

Mark Steward, enforcement director at the FCA, said: “Fraudsters will always find new ways to target consumers, so make sure you do your homework and spend some time doing research. Just a few minutes can make a big difference.”


16 May: Older Investors ‘Less Likely To Embrace ESG Values’

Feelings among investors are sharply divided by age in relation to environmental, social and governmental (ESG) issues, according to research carried out on behalf of wealth managers and financial advisers.

ESG, one of several approaches within the wider concept of ‘ethical’ investing, is as concerned with its impact on people and the environment as it is with potential financial returns.

A study carried out by the Personal Investment Management & Financial Advice Association (PIMFA) – an industry body representing investment firms and advisers – reveals a “significant generational divide” in attitudes to ESG investing.

PIMFA found that a large majority (81%) of people across all generations rate ESG factors as either ‘very important’ or ‘important’ drivers of their investment decisions.

But while nearly three-quarters (72%) of investors aged between 18 and 25 believe some, if not all, of their investments should aim for the greater good, less than a third (29%) aged between 56 and 75 feel the same. Among investors aged 75 or over, the proportion drops further to one-in-five (21%).

PIMFA also found that ESG investment issues were more important to women than men, with 86% of women across all generations saying it is a factor in their investment strategy. 

However, while female investors are keener than men for their money to contribute to the greater good, a larger proportion of women (37%) say they lack confidence and ESG investment knowledge compared with men (26%).

Liz Field, PIMFA chief executive, said: “One of the more pronounced effects of the Covid-19 pandemic was the marked increase in interest in all things ESG. Of particular interest is how the five basic generational groups differ in their responses to ESG.

“The wealth management industry has a big opportunity to harness ESG investing as a catalyst to encourage more women to invest and secondly, to use ESG as both an educational and a practical tool to stimulate a much broader culture of savings and investment in the wider market.”



13 May: First Quarter Performance Figures Show That Value Managers Trump Growth Rivals

Investment performance at the UK’s largest wealth managers has experienced a dramatic U-turn this year, according to a leading investment consultancy. 

Asset Risk Consultants’ (ARC) analysis of 300,000 portfolios, managed by more than 100 wealth management firms, found that growth-orientated strategies have struggled given the prevailing economic conditions of 2022, while value-biased portfolios have enjoyed a revival in fortune.

Growth-based strategies represent the process of investing in companies and sectors that are growing and are expected to continue their expansion over a period of time.

Value investing concerns itself with buying companies that are under-appreciated both by investors and the market at large.

ARC says the scenario is a complete reversal from the end of last year. Many portfolios that were riding high at the end of 2021 are now languishing in the bottom quartile for performance, having been replaced with former laggards from the same period. 

Bottom quartile represents the worst-performing 25% of portfolios.

ARC says its findings show that the changing economic landscape has had a significant impact on managers whose investment strategies were previously based on a low inflation, low interest rate environment.

The company says that strategies favouring growth stocks, smaller companies and long-dated bonds had suffered the most. At the same time, around a third (30%) of managers with a value bias jumped from the fourth quartile at the end of 2021 to the top quartile in the first quarter of this year.

Graham Harrison, managing director of ARC, said: “The cause is the invasion of Ukraine by Russia, which has wide-reaching and long-term geo-political implications.”

Harrison pointed to other contributory factors including “a populist trend toward more protectionism, supply chain shortages caused by Covid-19 and a decade-long lack of real wage growth.”

He added: “The easy money has been made. We are at an inflection point for financial markets and investment strategies. The next decade will be significantly different for investors than it has been during the past three.”


6 May: Fund Outflows Mount As Uncertainty Rises

UK retail investors withdrew more than £7 billion from funds in the early months of the year, with March 2022 alone responsible for nearly half of that figure, according to the latest figures from the Investment Association (IA).

The IA reports that outflows spiked up from £2.5 billion in February this year to £3.4 billion in March. Investors also withdrew funds amounting to £1.2 billion in January 2022.

The pace of withdrawal by investors accelerated sharply over the first quarter of the 2022 exacerbated by tightening monetary policy in major markets and compounded by Russia’s invasion of Ukraine.

Surging inflation, rising interest rates and the Ukraine crisis have combined to trigger an investor flight from risk, particularly in relation to bond funds and, to a lesser extent, in equity-based portfolios.

Laith Khalaf, head of investment analysis at brokers AJ Bell, said: “The outflows from equities look modest compared with the withdrawals registered by bond funds. Over the course of the first quarter, investors withdrew £1.9 billion from equity funds, but £6 billon from bond funds.”

Chris Cummings, IA chief executive, said not all fund sectors witnessed outflows over the period: “March was a story in two parts, and outflows were balanced by many investors using their Individual Savings Accounts and seeking potentially safer havens in diversified funds, with multi-asset strategies benefiting in particular.
“Inflows to responsible investment funds continued to be a bright spot and demonstrate investors’ commitment to sustainable investing.”


4 May: Fund Manager Says Fewer Than 1% Of Funds Achieve Consistent Top Performance

Fewer than 1% of funds – out of a total of more than 1,000 – have managed to deliver sustained top performance over time, according to the latest research from BMO Global Asset Management.

The investment firm’s latest Multi-Manager FundWatch survey found that just five (0.45%) of the 1,115 funds it covers achieved top quartile returns over three consecutive 12-month periods running to the end of the first quarter of 2022.

It says this is the lowest number of funds it has recorded in this bracket since its survey began in 2008. It describes the figure as “well below” the historic average number of consistent, top-performing funds, which usually stands around the 3% mark.

The company points to market events that have damaged fund performance in the last three years, including Covid, inflation, climate change and related environmental, social and governance (ESG) considerations.

It also highlights the war in Ukraine and its geopolitical effect on the supply of resources for the dramatic drop in the number of consistent high-performing portfolios.

Rob Burdett, head of the multi-manager team at BMO, said: “The war in Ukraine is the latest in market shocks, with the resulting sanctions having a significant impact on commodities, inflation and interest rates, as well as the impact at a sector level, with knock-on effects for defence and energy stocks.

“These crises have caused significant gyrations in financial markets and underlying asset classes, resulting in the lowest consistency figures we have ever seen in the survey.”



3 May: Fundscape Warns Of Tough Year Ahead For Platforms

Assets held on investment platforms offering their services direct to consumers (D2C) have dipped below £300 billion in what could be a tough year for providers, according to Fundscape.

The fund research analysts says rampant inflation, fuel price increases, National Insurance hikes and the cost-of-living crisis have taken a toll both on investor sentiment and market prices in the first quarter of this year, even before factoring in the effect of the Russian invasion of Ukraine.

Fundscape says the overall result has led to a 6% reduction in the combined assets under management held on D2C platforms from approximately £315 billion to £297 billion at the end of March 2022.

D2C providers tend to earn the bulk of their revenues during the Individual Savings Account season between January and March each year, heightening the damage caused by a sluggish first quarter. 

Fundscape’s Martin Barnett said: “The first quarter of the year is the bellwether of investor sentiment and sets the tone and pace of investments for the rest of the year. 2022 could be a tougher year for many D2C houses, especially the robos.”

Robos, or robo advisers, provide an automated, half-way house option for investors looking for an alternative either to do-it-yourself investing, or delegating the full-blown management of their investments to a professional adviser.


28 April: CFA Reports Leap In Trust For Financial Services

A new Chartered Financial Analyst (CFA) Institute study shows that 51% of UK retail investors now trust the financial services sector, compared with just 33% in 2020. 

The CFA Institute is a global body of investment professionals, which administers CFA accreditation and publishes regular investment research, including its biennial report on investor trust.

According to the latest report, the majority of UK retail investors (59%) now believe it’s ‘very likely’ they will attain their most important financial goal. For 58%, this is saving for retirement, while a further 12% are prioritising saving for a large purchase such as a home or car. 

The CFA surveyed over 3,500 retail investors across 15 global markets, and found that trust levels have risen in almost every location. On average, 60% of global retail investors say they trust their financial services sector.

The CFA study views last year’s strong market performance as a key driver for investor trust. In 2021, both the S&P 500 and NASDAQ achieved average returns of over 20%, while the FTSE 100 returned 14.3% — its best performance since 2016 (although global markets have since suffered falls in line with the general economic downturn).

Another factor is the uptake of technologies such as artificial intelligence-led investment strategies and trading apps, which can improve market accessibility and transparency. Half of retail investors say increased use of technology has instilled greater trust in their financial advisor.

The study also revealed investor desire for personalised portfolios that align with their values. Two-thirds say they want personalised products, and are willing to pay extra fees to get them.

Investment strategies that prioritise ESG (Environmental, Social, and Governance) credentials are a key target area for this personalisation, with 77% of retail investors saying they are either interested in ESG investment strategies or already use them.

Rebecca Fender, head of strategy and governance for research, advocacy, and standards at the CFA Institute says: “The highs we’re now seeing in investor trust are certainly cause for optimism, but the challenge is sustaining trust even during periods of volatility.

“Technology, the alignment of values, and personal connections are all coming through as key determinants in a resilient trust dynamic.”

20 April: AJ Bell Aims Trading App At Market-Shy Investors

Investing platform AJ Bell has launched what it claims is a “no-nonsense” mobile app aimed at investors with considerable sums to invest, but who are daunted by the prospect of stock market trading.

AJ Bell is hoping that its Dodl app will appeal to savers disappointed with low returns on their cash and who are looking for an easy way both to access the stock market and manage their investments.

City watchdog, the Financial Conduct Authority, recently identified 8.6 million adults in the UK who hold more than £10,000 of potentially investable cash.

Research by AJ Bell prior to the launch found that about a third of people who don’t currently invest (37%) are put off from doing so because of not knowing where to start. About half (48%) said being able to choose from a narrow list of investments would encourage them to start investing.

Dodl will therefore limit investors to a choice of just 80 funds and shares that can be bought and sold via their smartphone. In contrast, rival trading apps offer stock market investments running into the thousands.

The app will offer several products that people need to save tax efficiently, including an Individual Savings Account (ISA), Lifetime ISA and pension. Dodl will also feature “friendly monster” characters that aim to break down traditional stock market barriers and make it easier for customers unfamiliar with the investing process.

AJ Bell says a Dodl account can be opened via the app in “just a few minutes”. Customers are able to pay money into accounts via Apple and Google Pay, as well as by debit card and direct debit.

Dodl has a single, all-in annual charge of 0.15% of the portfolio value for each investment account that’s opened, such as ISA or pension. A £1 per month minimum charge also applies. The annual cost of holding a £20,000 ISA via Dodl would be £30.

Buying or selling investments is commission-free, and no tax wrapper charges apply. AJ Bell says customers investing in funds will also be required to pay the underlying fund’s annual charge as they would if they were investing on the company’s main platform.

Andy Bell, chief executive of AJ Bell, said: “Investing needn’t be scary. In developing Dodl, we’ve focused on removing jargon, making it quick and easy to open an account and narrowing the range of investments customers have to choose from.”


14 April: Market Turbulence Takes Toll On Wealthy Investors

Millionaire UK investors experienced greater losses compared with their less well-off counterparts since the start of 2022, with market volatility doing more damage to riskier portfolios favoured by those with greater amounts to invest.

Interactive Investor’s index of private investor performance shows that those of its customers with £1 million portfolios experienced losses of 4.2% in the first quarter of this year.

By comparison, average account holders were down 3.6% over the same timeframe, while professional fund managers had lost 3.7% of their money.  

Figures stretching back over longer periods reveal an improvement in overall performance figures. Typical customers experienced losses of 1% over six months but were up by 5.4% over the past year. 

Professional managers fared marginally worse, being down 1% over six months and up 5.3% over the last 12 months.

Stock markets worldwide have endured a troubled time in the first quarter of this year. According to investment house Schroders: “Russia’s invasion of Ukraine in late February caused a global shock. The grave human implications fed through into markets, with equities declining.”

Richard Wilson, head of Interactive Investor, said: “The horror unfolding in Ukraine has framed what was already a torrid time for markets. So, it’s no surprise to see the first quarter of the year chart the first negative average returns since we first started publishing this index.

“Markets don’t go up in a straight line, and this index is a sobering reminder of that. It’s also a reminder of the importance of taking a long-term view, and not putting all your eggs in any one regional basket.”

[] In recent months, those with money in savings have become more wary about investing in markets.

Hargreaves Lansdown (HL), the investment platform, said that roughly one-third of investors who put money into a stocks and shares ISA this year have kept their money in cash rather than investing it.

In the previous two years, HL said that about a quarter of investors have favoured cash over markets-based investments.


31 March: Research Reveals Investor Inflation Concerns 

Most investors with individual savings accounts (ISAs) are concerned about the short-term impact of inflation on their portfolios, according to research from online investing platform Freetrade.

ISAs comprise a suite of government-backed savings plans which, depending on the product chosen, allow interest or investment growth to accumulate tax-free

In a poll of 1,000 ISA holders, commissioned by the company in association with the Investing Reviews website, two-thirds (67%) said they were worried about the effect of inflation on their investment gains over the next three years.

Freetrade found the typical investor expects to make returns of 5.8% per annum over that period. But with the consumer prices measure of UK inflation recently soaring to a 30-year high of 6.2%, the majority of investors expect to find it harder to make real gains in the foreseeable future.

Despite rising interest rates and increased stock market volatility because of the conflict in Ukraine, Freetrade said a significant proportion of investors – one-in-five (19%) – still expect to make double-digit gains in the immediate years ahead.

In another finding, less than a third (31%) of investors believe that a strategy of holding single company stocks promised the best future returns. In contrast, nearly half (49%) thought low-cost funds were likely to offer the strongest performance.

The poll also revealed more optimism about the potential of UK equities, following record outflows of £5.3 billion from the sector during 2021. One-in-five investors intend to increase their exposure to domestic assets, while 4% are inclined to sell off their UK holdings.

Freetrade’s Dan Lane said: “Maybe the UK market’s relatively cheap valuation is proving too hard to resist, or maybe the allure of US tech is waning slightly. Whatever the reason, the UK seems to be back on the menu in 2022.”

* For savers and investors who haven’t already done so, time is running out to use this tax year’s ISA allowance. All UK adults have an ISA allowance each tax year worth £20,000. The 2021-22 tax year ends on 5 April and the 2022-23 equivalent begins the following day. 


1 March: Global Dividends At Record High In 2021

Payouts to shareholders made by companies out of their profits surged to a record level in 2021, but global growth in dividends is forecast to slow sharply this year.

According to investment manager Janus Henderson, this trend was in evidence even before Russia’s invasion of Ukraine.

The company’s Global Dividend Index reported that companies paid out $1.47 trillion to shareholders in 2021, an increase of nearly 17% on the year before.

The figure represents a major rebound from the sharp cuts imposed on dividends by companies during 2020, when their preference was to retain cash due to the effects of the Covid-19 pandemic.

Dividends are a common source of income for investors, especially as part of a retirement planning strategy.

Janus Henderson said payouts reached new records in several countries last year including the US ($523 billion), China ($45 billion) and Australia ($63 billion).

In the UK, dividends rose to $94 billion, a 44% increase in 2021 compared with the previous year. The recovery came from a base of particularly severe cuts during 2020 that meant payouts still lagged pre-pandemic levels.

Janus Henderson said that 90% of companies globally increased or held their dividend steady during 2021. Banks and mining stocks alone were responsible for around 60% of the $212 billion increase in last year’s payouts. Last year, BHP paid the world’s largest-ever mining dividend worth $12.5 billion.

For the year ahead, before Russia’s attack on Ukraine, Janus Henderson had forecast dividend growth at a more moderate 3.1%. The figure may now need to be trimmed further.

Jane Shoemake at Janus Henderson said: “A large part of the 2021 dividend recovery came from a narrow range of companies and sectors in a few parts of the world. But beneath these big numbers, there was broad based growth both geographically and by sector.” 


17 February: Crypto Take-Up Doubles Among Younger Investors 

Investors aged 45 or under who own crypto assets have doubled in number in a year, according to research from Boring Money.

The consultant’s Online Investing Report 2022, based on a survey of more than 6,300 UK adults, also shows that mobile comms is becoming the dominant medium for younger investors buying funds and shares. 

Boring Money said the proportion of adults aged under 45 who own crypto assets has risen from 6% in 2021 to 12% over the past 12 months. Ownership among the over 45s was significantly lower at 3% this year, compared with 2% in 2021.

The Financial Conduct Authority, the UK’s financial watchdog, warned last year about the volume of newer investors who were being attracted to high-risk investments such as cryptocurrencies, and also the risk of ‘low friction’ trading on mobile.

Low friction trading allows investors to start trading within just a few clicks of their smartphone or tablet. The FCA says that adding a small amount of ‘friction’ to an online investment process, through the use of disclosures, warnings and tick boxes, helps investors to better understand risk.

According to Boring Money, 43% of investors say they have used their mobile in the past 12 months as a means of checking the balance on an investment account. This compares with 36% of investors in 2021. 

About one-in-five investors (19%) also reported that they had bought or sold through a mobile app compared with 16% last year.

Boring Money said one-in-five (19%) of the total UK retail investor population is made up of individuals with less than three years’ experience of investing, while 7% have been investing for less than a year.

Holly Mackay at Boring Money, said: “There is a ‘book-end’ effect in the DIY investment market today. At one end we have millions of people in cash, with significant balances and no investments. At the other end, we have some relatively inexperienced, mostly younger investors holding extremely volatile assets.

“There is a more natural middle ground for millions, and providers have to find some answers on how to transition more customers to that more comfortable area.”

  • The organisation that makes recommendations to the G20 nations on financial rules has said that the risks posed by cryptocurrencies to global financial stability could “escalate rapidly”.

The Financial Stability Board (FSB) warned that policymakers must act quickly to come up with rules covering the digital asset market, given its increasingly overlapping links with the traditional financial system.

According to the FSB, some parts of the crypto market – worth around $2 trillion globally – are hard to assess because of “significant data gaps”. 


14 February: Bestinvest Spotlights ‘Dog’ Investment Funds

Investment funds worth a combined £45 billion have been named and shamed as consistent underperformers by research from online investing service Bestinvest.

The firm’s latest Spot the Dog analysis shows that fund groups abrdn and Jupiter and wealth manager St James’s Place and were each responsible for six relatively poor-performing funds out of 86 so-called ‘dogs’ identified by the twice-yearly report. 

The research defines a ‘dog’ fund as one which fails to beat its benchmark over three consecutive 12-month periods, and also underperforms its benchmark by 5% or more over a three-year period.

A benchmark is a standard measure, usually a particular stock market index, against which the performance of an investment fund is compared. 

Bestinvest said the funds, despite their underperformance, will generate £463 million in management fees this year, even if stock markets remain flat. 

The analysis highlighted 12 funds that were each worth over £1 billion. These included JP Morgan’s US Equity Income fund worth £3.93 billion, Halifax UK Growth (£3.79 billion) and BNY Mellon Global Income (£3.47 billion).

Also featured in the analysis were Invesco’s UK Equity Income and UK Equity High Income portfolios, described by Bestinvest as “perennially misbehaving funds”.

Bestinvest’s previous Spot the Dog report last summer identified 77 funds worth just under £30 billion. The company says the reason for an increase in the number of poor performers is because of additions from the Global and Global Equity Income investment sectors.

Jason Hollands, managing director of Bestinvest, said: “Spot the Dog has helped shine a spotlight on the problem of the consistently disappointing returns delivered by many investment funds. In doing so, not only has it encouraged hundreds of thousands of investors to keep a closer eye on their investments, but it has also pushed fund groups to address poor performance.

“Over £45 billion is a lot of savings that could be working harder for investors rather than rewarding fund companies with juicy fees. At a time when investors are already battling inflation, tax rises and jumpy stock markets it is vital to make sure you are getting the best you can out of your wealth.”


3 February: Half Of DIY Investors Unaware Of Risk Of Losing Money

Nearly half the people who make investment decisions on their own behalf are unaware that losing money is a potential risk of investing, according to new research from the UK’s financial watchdog.

Understanding self-directed investors, produced by BritainThinks for the Financial Conduct Authority (FCA), found that 45% of self-directed investors do not view “losing some money” as a potential risk of investing.

Self-directed investors are defined as those making investment decisions on their own behalf – selecting investments and making trades without the help of a financial adviser.

In recent years, do-it-yourself trading has become increasingly popular among retail investors. 

According to the FCA, over one million UK adults increased their holdings in high-risk products such as cryptocurrencies or crowdfunding investments in the first seven months of the Covid-19 pandemic in 2020.

The research says “there is a concern that some investors are being tempted – often through misleading online adverts or high-pressure sales tactics – into buying complex, higher-risk products that are very unlikely to be suitable for them, do not reflect their risk tolerance or, in some cases, are fraudulent.”

It added that self-directed investors’ investment journeys are complex and highly personalised, but it was possible to categorise investors into three main types: ‘having a go’, ‘thinking it through’ and ‘the gambler’.

The FCA used behavioural science to test various methods of intervention to help investors pause and take stock of their decisions before committing in “just a few clicks”.

It found that adding small amounts of ‘friction’ to the online investment process, such as ‘frequently asked questions’ disclosures about key investment risks, warnings and tick boxes, helped investors comprehend the risks involved.

Susannah Streeter, senior investment and markets analyst at investment platform Hargreaves Lansdown, said: ‘’The boom of high-risk investing is causing huge nervousness among regulators, with the FCA increasingly concerned that vulnerable consumers are being swept up in a frenzy of speculation. 

“The ‘fear of missing out’ effect which took hold during the pandemic, has been drawing more people into the murky world of crypto investments and almost half still don’t understand the risks involved.”  


26 January: M&G Partners With Moneyfarm On Consumer Investment Service

M&G Wealth is teaming up with financial app Moneyfarm to provide a direct digital investment service aimed at meeting a range of customer risk appetites and profiles.

It will offer a collection of multi-asset model portfolios, backed by a range of actively managed and passive funds. 

Multi-asset investing provides a greater degree of diversification compared with investing in a single asset class, such as shares or bonds. Passive funds typically track or mimic the performance of a particular stock market index, such as the UK’s FT-SE 100.

Moneyfarm will deliver the operating models, including dedicated “squads” to support the technology platform and customer relationship management, together with custody and trading services.

Direct investing in the UK has witnessed rapid growth in the past five years, with an annual average increase in assets under management of 18% to £351 billion at the end of June last year, according to researchers Boring Money.

David Montgomery, M&G Wealth’s managing director, said: “With the launch of a direct, mobile-based investment platform, our customers will be able to access the channel, advice and investment proposition that most suits their financial situation and needs.”

Moneyfarm was launched in Milan in 2012 and has 80,000 active investors and £2 billion invested via its platform. 


25 January: Bestinvest Relaunches DIY Investment Platform

Bestinvest, part of Tilney Smith & Williamson (TS&W), is relaunching its online DIY investment platform with new features including free coaching, ready-made portfolios and a range of digital tools.

The company says it is revamping its existing platform into a “hybrid digital service that combines online goal-planning and analytical tools with a human touch”. Customers can ask for help from qualified professionals through free investment coaching.

If desired, clients can also choose a fixed-price advice package covering either a review of their existing investments or a portfolio recommendation. Bestinvest said one-off charges of between £295 and £495 will apply depending on the package selected.

The new site will go live to coincide with the end of the tax year on 5 April.

A range of ready-made ‘Smart’ portfolios offering a range of investment options to suit different risk profiles will accompany the launch.

The portfolios will be invested in passive investment funds, while being managed actively by TS&W’s investment team. Passive funds typically track or mimic the performance of a particular stock market index, such as the UK’s FT-SE 100. The TS&W team will adjust portfolios’ exposure to markets and different asset classes according to prevailing investment conditions.

Bestinvest said the annual investment cost will range between 0.54% and 0.57% of each portfolio’s value. 

From 1 February, the company added that it is reducing its online share dealing costs to £4.95 per transaction, regardless of deal size.

Bestinvest produces a twice-yearly report on underperforming or “dog” investment funds. It said it wants to bridge the gap between existing online services for DIY investors and traditional financial advice aimed at a wealthier audience.



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