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Weekend press review: negative winds


As readers will undoubtedly know, it’s all set up to be a very important week in parliament this week with Theresa May’s next meaningful vote scheduled for tomorrow – and subsequent votes on Wednesday and Thursday depending on the outcomes. All that uncertainty means that there are still a number of different possible outcomes for the UK despite the fact that we’re due to leave the EU on the 29th of March. No news there though, but what might this mean for investors? Bravely – some might even say foolishly – The Sunday Telegraph Money has been trying to work out what might be hot and what’s not when it comes to investment, getting tips from different experts on which investments might do well in different scenarios  such as a softer Brexit, no deal, revoke article 50 etc. It’s not all negative of course, it’s just a matter of looking for which businesses and approaches might do better under different circumstances. As professional advisers will advocate to clients, investment is a long term process. However dramatic the short term political, economic and market considerations may be, we need to remember the considerable benefits and value of long term investment and the risk of trying to predict short term movements. That being said, if you want to find out what the expert tips are you know where to find them.

There is a whiff of the negative over at the Financial Mail on Sunday though. Jeff Prestridge is looking at the ten most shorted shares and asks different experts for their views on whether investors holding those shares – and others which might be the target of short sellers – should take action and sell their holding.  It’s obviously aimed at DIY investors and unlikely to provoke many questions from clients to their professional advisers so we’ll give it a wide berth here. Likewise for the article from Sally Hamilton – which looks at how investors can buy hedge funds which have the ability to short sell such as the funds managed by Crispin Odey.  She also mentions that some investment companies have the scope to do so and gives some examples such as Fidelity Special Values IT.

Over at the Sunday Times Money, Ian Cowie is also warning readers to review their portfolio in the light of possible turbulence ahead. His argument is well balanced, suggesting that now is a good time for a “…precautionary review of risks and rewards. Look at your portfolio, then try to imagine which assets you would still be glad to hold if prices fell by 25%.” He reminds readers that diversification is the way to balance risk and to avoid having too much exposure to a single company, country or commercial sector. Wise words regardless of the market uncertainty. He then proceeds to report on some of the investment company funds which typically take a more conservative approach – Mid Wynd, Personal Assets and Ruffer ITs are featured. In different ways, each management team is preparing their portfolio for the outlook ahead. Interestingly, he reports that Personal Assets Trust (always a trust which puts capital preservation at its heart) is largely invested in gilts and gold. But it’s not just Brexit which is making the managers cautious, threats to international trade from rising populism around the world and the possibility of inflation are also on their radar.

Maintaining last weekend’s negative report on the trust, the Woodford equity income fund is back under the Sunday Times cosh again this week. This time it’s the asset allocation within the fund that is in the spotlight. The article reports that from the January factsheet just 26 of the 90 companies in the fund pay a dividend and that these represent 59% of the fund’s assets. Interestingly this is on the page opposite Ian Cowie’s argument about the value of diversification, however we doubt if DIY investors would link the two.   A barbell approach can often be employed by fund managers but the ST is warning readers that Woodford equity income fund “…relies on a handful of big stocks to make annual payments to shareholders.” The article then compares this situation to other equity income funds such as Evenlode and Man GLG where it reports that the exposure to dividend paying stocks is higher.

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