Home Hedge Funds Platform Drops Ethical Funds From ‘Buy’ List – Forbes Advisor UK

Platform Drops Ethical Funds From ‘Buy’ List – Forbes Advisor UK


What’s the latest news from the world of investing and around the stock market? We monitor all the latest moves and keep you updated regularly with the key developments.

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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.”

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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.”

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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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