12 November 2019 - Style Council – revisited

11 November 2019 - Five trusts for investors who believe a value revival is on the way

12 September 2019 - Deciphering the dividend gap and our 2020 dividend vision – JOHCM UK Equity Income Fund

Deciphering the dividend gap and our 2020 dividend vision - JOHCM UK Equity Income Fund

Click here to download the PDF article.

18 June 2019 - Active managers return to outperforming passive in 2019

FE Trustnet finds that there has been a fall in the proportion of index-tracking funds making top-quartile returns this year.

The number of passive funds outperforming their active rivals has dropped in 2019, following the tough conditions of last year that helped them to outpace stock pickers, research by FE Trustnet suggests.

Last year was a difficult one for market as issues such as the Federal Reserve’s tightening programme, the US-China trade war, Brexit and spluttering economic growth prompted market sell-offs.

As such, many active managers were wrong-footed and failed to beat the market. This means that index trackers rose up the sector rankings and beat many of their active peers.

Performance of UK sector vs index in 2018

Performance of UK sector vs index in 2018

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28 May 2019 - Is it time to switch from growth- to value-based strategies?

Yellow Capital

Growth and momentum strategies have, by and large, been the only game in town for the last five years, as evidenced by the meteoric rise of the NYSE Fang+ Index. Established in 2014, this benchmark contains ten high-octane growth stocks – America’s Facebook, Amazon, Apple, Netflix, Alphabet (the parent of Google), NVIDIA, Tesla and Twitter and China’s Baidu, Tencent and Alibaba. They are in various stages of their development, from relatively mature cash generator (Apple) to wildly profitable (Alphabet, Alibaba) to deeply cyclical (NVIDIA) to just breaking into profit (Netflix) to apparent cash-sink (Tesla).

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2 April 2019 - Best global equity funds of 2019 revealed

Article taken from Financial Adviser.

The best performing global equity funds of the first quarter of 2019 have been revealed.

Data from FE Analytics shows the best performing fund in the IA Global sector since the start of 2019 was the £795m Baillie Gifford Global Discovery fund, which has returned 17 per cent in three months.

That performance was enough for the fund to beat the other 273 funds in the sector, the average of which has returned 8 per cent.

The largest sector exposures in the fund, which has been managed by Doug Brodie since 2011, are to healthcare and telecoms, themes which are prevalent in many Baillie Gifford funds.

A significant driver of performance in the first quarter of the year has been Ocado. The UK technology company and grocer’s shares have risen from £8.10 to more than £13 this year to date.

Meanwhile, the best performing global equity investment trust this year to date is Lindsell Train.

This is a £178m investment trust that trades at a 25 per cent premium to its net assets, but rarely issues new shares.

The largest investment in the trust is a stake in Lindsell Train Limited, a privately held asset management company that employs the fund managers of this trust.

Click here to continue reading the article on Financial Adviser.

30 March 2019 - The chart that tells the story of value investing’s potential

Value stocks are currently the most out of favour in the history of financial records. Is now the time for value to make its comeback? – Article taken from Schroders

Value stocks are on their longest losing streak versus growth stocks since records began, according to data stretching back to 1936.

Value investing is the art of buying stocks which trade at a significant discount to their intrinsic value. Basically, buying companies which appear undervalued by investors for no justifiable reason.

Growth investors pay less attention to a stock’s price. Even if a company looks expensive they may believe its above average future growth justifies the expensive price tag.

Value’s longest losing streak in history

There have been three periods of dramatic underperformance by value relative to growth since records began: the tail-end of the Great Depression in the late 1930s, the build up to the bursting of the dotcom bubble in the late 1990s and now.

As the chart below shows, value’s underperformance during the late 1930s and 1990s was sharp but also short, lasting around four years and two years respectively. In comparison the current underperformance which began in 2009 is now nearly a decade old.

The good news for value investors is that in the past, value’s bouncebacks were even more dramatic than the underperformance.

Click here to continue reading the article at Schroders.

31 October 2018 - Budget 2018 and EIS & VCT

11 September 2018 - What needs to happen for gold to shine again – by Russ Mould of AJBell

As regular readers will doubtless be painfully aware, this column shares Warren Buffett’s view that the best time to start researching – or even buying – an asset is when no-one else is. Anyone who sympathises with that contrarian take on markets and asset allocation might therefore be thinking about gold, not least because no-one else seems to be.

In August the metal dipped below $1,200 and reached its lowest level since January 2017.

Gold is hovering near 18-month lows

Source: Thomson Reuters Datastream

This slide may seem all the more surprising to some advisers and clients given its status as a perceived haven in times of strife. It would have been logical to expect the gathering crises in Turkey and Argentina, for example, to take gold higher but nothing of the sort has happened.

This may be because markets are still of the view that Turkey and Argentina represent a little local difficulty but nothing more and certainly nothing with the power to roil markets on a global basis. Such complacency proved ill-founded when it came to a devaluation of the Thai baht in 1997 and a downturn in the Florida property market in 2007 and only time will tell this time around.

But, besides faith in the global economic outlook, there is an even more powerful force that is working against gold (oddly, just as it is against Turkey and emerging markets more generally). That is the dollar.

King dollar has been lording it over the gold price

Source: Thomson Reuters Datastream

Dollar dynamic

Like most raw materials gold is priced in dollars, so if the greenback goes up then the precious metal becomes more expensive to buy in local-currency terms, potentially dampening demand (or so the theory goes).

Financial market participants’ awareness of this historic relationship means they could also look to ride dollar strength by shorting gold, selling it now to try and buy it back later at a lower price and pocket the difference as a profit.

It is possible to track short positions in gold via futures contracts on America’s COMEX, for both commercial and non-commercial interests.

Each futures contract represents 100 ounces of gold.

Commercial traders are likely to be gold miners or consumers of the metal such as jewellers who may use futures contracts to hedge their exposure or lock in prices at a certain level, but non-commercial traders are financial market speculators.

What is interesting here is that non-commercial short gold futures contracts have surged from 73,905 in June to 222,210, a figure which is more than double the amount of bearish positions on gold a year ago and the highest going back at least 20 years.

The implication is that bears are clearly stomping on gold, with dollar strength as the most likely pretext for doing so.

Short positions against gold have soared during the summer

Source: COMEX, Thomson Reuters Datastream

Contrarian advisers and clients may be intrigued to note that short futures positions against gold have surged by more than 100% year-on-year on several occasions since 2010. Gold subsequently rallied on almost every occasion, although it must be acknowledged that 2013 was a notable exception.

Short squeeze

Fans of gold will therefore be arguing that all of the bears have piled in, given the huge number of short positions, leaving gold ripe for a snapback if the sceptics are put to flight.

The question is what could be the trigger for that? One possibility is central bank policy, because of its impact on the dollar.

The US currency is gaining as the US Federal Reserve reduces its Quantitative Easing programme and markets prepare themselves to be further deprived of liquidity by an end to increased QE from the European Central Bank. The Bank of England has already stopped adding to QE, leaving just the Swiss National Bank and the Bank of Japan to create money out of thin air.

Gold has done well when central banks have been adding to QE (amid fears the monetary authority have lost control of the global economy) and badly when they have not (in the view that the central banker have everything in hand and there is no need to create more ‘money’).

Central banks’ loss of control and return to QE could be one possible trigger for a recovery in gold

Source: Bank of England, Bank of Japan, European Central Bank, FRED – St. Louis Federal Reserve database, Swiss National Bank, Thomson Reuters


In sum, gold may well thrive if central banks, for any reason, find themselves obliged to stop raising interest rates, or start cutting them, or – most dramatically – crank up the electronic printing presses and turn to QE once more.

That may seem outlandish right now.

But an expansion in the aggregate assets of the British, EU, American, Swiss and Japanese central banks from $3.5 trillion to $15 trillion from 2007 to 2018 would have seemed like science fiction a decade ago and the Fed moved to bail out the Long Term Capital Management hedge fund at a cost of $3.6 billion in 1998 after the Asia and Russian debt crisis.

Who knows, Turkey’s crisis could still have wider implications than we dare imagine, to the benefit of gold and gold miners, while a surge in global indebtedness since 2007 could still oblige central banks to return to record-low interest rates and QE if – and when – the next global downturn comes.

11 June 2018 - Should investors remain positive on European equities?