INSIDE THIS ISSUE: BLACKROCK Bonds as ballast
TRIPLE POINT Putting your eggs in the right basket SCHRODERS Some inconvenient truths about income M&G Democratising sustainable investing
KUBER Pay less tax?
Now that’s a relief! Plus much more...
In a world that’s ever-changing, we shouldn’t lose sight of what got us here. We believe success lies in marrying trusted techniques with the latest advances in tech. Let’s define the future of investing together. Join us at invesco.com/change
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INSIDE THIS ISSUE: BLACKROCK Bonds as ballast
TRIPLE POINT Putting your eggs in the right basket SCHRODERS Some inconvenient truths about income M&G Democratising sustainable investing
KUBER Pay less tax?
Now that’s a relief! Plus much more...
Quality shines out when you know what you’re looking for. When you seek the best, you need to know what to look for. The ASI Europe ex UK Equity Fund uses our global resources, analysis and experience to identify exceptional European companies with the potential to deliver faster growth and higher returns than the market as a whole. We call it quality investing. The value of investments, and the income from them, can go down as well as up and an
investor may get back less than the amounted invested. Find out more at aberdeenstandard.com/europeanequities
31/07/2018 to 31/07/2019
31/07/2017 to 31/07/2018
31/07/2016 to 31/07/2017
31/07/2015 to 31/07/2016
31/07/2014 to 31/07/2015
ASI Europe ex UK Equity I Acc in GB
19.67 24.63 23.84
Index : FTSE World Europe ex UK TR in GB Sector : IA Europe Excluding UK TR in GB
Source: Financial Express Analytics; discrete annual performance as at 31/07/2019; I Acc share class in GBP; net of charges.
Aberdeen Standard Investments is a brand of the investment businesses of Aberdeen Asset Management and Standard Life Investments. This content is available in the following countries/regions and issued by the respective entities detailed below: United Kingdom (UK): Aberdeen Asset Managers Limited, registered in Scotland (SC108419) at 10 Queen’s Terrace, Aberdeen, AB10 1XL. Standard Life Investments Limited registered in Scotland (SC123321) at 1 George Street, Edinburgh EH2 2LL. Both companies are authorised and regulated in the UK by the Financial Conduct Authority.
FUND SPOTLIGHT – 3
WE L C OM E . . . ...TO THE THIRD EDITION OF FUND SPOTLIGHT.
investing could be a good option for those investors who are currently uncertain where to invest. In their article ‘While you wait’ he highlights that there are three certainties in life: death, taxes and uncertainty, and how should you invest if you’re uncertain? Puma investments are offering Tenet clients a special deal on Puma Alpha VCT. Invest before 20th December 2019 and you’ll benefit from an initial fee of 1%, reduced from 3%. Find out more about the offer on page 11. Triple Point’s article ‘Putting your eggs in the right basket’ looks at how investors naturally seek the best of both worlds: a high, predictable return on their money, combined with minimal downside risk. We all know this is difficult to achieve and rare to find, Triple Point highlight Direct lending as a market that has evolved over the last decade, with a growing number of investment opportunities and they outline the characteristics of direct lending on page 17. Plus there are plenty more articles in this issue from other fund specialists including Architas, Tatton Investment Management, Kuber, M&G and Bordier UK, so we hope you find this supplement an interesting read and useful for keeping up to date with the current funds in the market place.
Our dedicated supplement for Fund Managers to showcase their products and services and to ensure you are up to date with all the latest news and information in the fund management sector. We open up this issue with an article from Blackrock, ‘Bonds as ballast’. Building portfolio resilience is crucial at a time of elevated macro uncertainty. Relatively muted cross-asset volatility suggests markets are not fully pricing in heightened geopolitical risks that threaten to weaken economic activity. Blackrock believe central banks’ dovish pivot is buying investors time to add resilience to portfolios – with government bonds playing an important role in providing ballast. Read the full article on page 4. ALSO IN THIS ISSUE Financial advisers are increasingly looking at venture capital trusts (VCTs) for clients who, not so long ago, they probably wouldn’t have. But not all advisers are tapping into VCTs full potential. This could be a mistake. While it’s true that VCTs won’t be right for every client, it’s also true that for many clients they can help solve increasingly common problems. On page 7 Paul Latham, Managing Director of Octopus discusses the pros and cons of VCTs and takes a look at why they have become so popular.
On page 10 Simon Evan-Cook, Senior Investment Manager for Premier Miton’s multi-manager funds, explains why income
Fund Spotlight is for internal purposes only and is not intended as an advertisement. As a result this should not be issued in any form to clients. Not all the products in this feature are the responsibility of the Tenet Group Limited. Terms and Conditions. Although every effort has been made to ensure the accuracy of the information contained in this publication, The Tenet Group cannot accept responsibility for any errors it may contain. The Tenet Group cannot be held responsible for the loss or damage of any material, solicited or unsolicited. No reproduction of any part of this publication, in any form or by any means, without prior written consent from The Tenet Group. The views expressed in this publication do not necessarily reflect those of the advertisers or the publishers.
4 – FUND SPOTLIGHT
BUILDING PORTFOLIO RESILIENCE IS CRUCIAL AT A TIME OF ELEVATED MACRO UNCERTAINTY. RELATIVELY MUTED CROSS-ASSET VOLATILITY SUGGESTS MARKETS ARE NOT FULLY PRICING IN HEIGHTENED GEOPOLITICAL RISKS THAT THREATEN TO WEAKEN ECONOMIC ACTIVITY. We believe central banks’ dovish pivot is buying investors’ time to add resilience to portfolios – with government bonds playing an important role in providing ballast. BONDS AS BALLAST
for this role due to their negative correlation with equity returns. See the Euro area chart below left. European bonds may be less effective shock absorbers as euro area rates approach a lower bound. Yet, we also note that the cost of this diversification is higher, and the risk/reward trade-off is different on a near-term horizon. On a tactical basis, we prefer euro area bonds over US Treasuries. CENTRAL BANKS Policy rates at major central banks are falling again, backing away from neutral rates. We see the Federal Reserve cutting rates further, but not by as much as what markets are pricing in. And it’s far from certain that the Fed will try to respond to the trade war fallout with meaningfully looser monetary policy. Supply chain disruptions could deliver a hit to productive capacity that fosters mildly higher inflation, even as growth slows. This complicates the case for further policy easing. Elsewhere, the ECB materially exceeded market expectations on stimulus, launching open-ended asset purchases, cutting rates and strengthening its forward guidance. GROWTH AND INFLATION Persistent uncertainty from protectionist policies is denting corporate confidence and slowing business spending. We see little near-term risk of recession, thanks to dovish central banks and a still-robust US consumer. We see policy easing helping sustain the economic expansion, but the road to recovery could be a bumpy one in the near term. Easier financial conditions are being offset by the negative impact of a protectionist push – and have not yet filtered through to the broader economy. Yet we see growth troughing over the next six to 12 months as easier financial conditions filter through to the broader economy. Unless otherwise stated, all data is sourced from BlackRock as at October 2019. RISK WARNING Changes in the rates of exchange between currencies may cause the value of investments to diminish or increase. Fluctuation may be particularly marked in the case of a higher volatility fund and the value of an investment may fall suddenly and substantially. Levels and basis of taxation may change from time to time. Capital at risk. The value of investments and the income from them can fall as well as rise and are not guaranteed. You may not get back the amount originally invested. Important Information This material is for distribution to Professional Clients (as defined by the Financial Conduct Authority or MiFID Rules) and Qualified Investors only and should not be relied upon by any other persons. Issued by BlackRock Investment Management (UK) Limited, authorised and regulated by the Financial Conduct Authority. Registered office: 12 Throgmorton Avenue, London, EC2N 2DL. Any research in this document has been procured and may have been acted on by BlackRock for its own purpose. The results of such research are being made available only incidentally. The views expressed do not constitute investment or any other advice and are subject to change. They do not necessarily reflect the views of any company in the BlackRock Group or any part thereof and no assurances are made as to their accuracy. This document is for information purposes only and does not constitute an offer or invitation to anyone to invest in any BlackRock funds and has not been prepared in connection with any such offer. ©2019 BlackRock, Inc. All Rights reserved. MKTGQR1019E-983698
Raising resilience Stock-bond correlations in the US and euro area, 2000-2019
The figures shown relate to past performance. Past performance is not a reliable indicator of current or future results. Source: BlackRock Investment Institute, with data from Refinitiv Datastream, September 2019. For illustrative purposes only. Notes: The charts show the correlations between daily percentage moves for stocks and bonds over a rolling one-year period. The dot shows the correlation over the most recent 90 day period. For the United States, we use the MSCI USA index for stocks and the 10-year Treasury for bonds. For the euro area, we use MSCI Europe ex-UK index and the German 10-year bund. Indexes are unmanaged and not subject to fees. It is not possible to invest directly in an index. THEMES Government bonds play an important role in building portfolio resilience – even at low yield levels. We see them as crucial diversifiers that can help offset the impact of equity selloffs in an environment of rising macro uncertainty. We prefer US Treasuries
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* Risk warning – Tax treatment depends on the individual circumstances of each Investor and may be subject to change in future. The availability of tax reliefs depends on the Company maintaining its qualifying status. Investments in unquoted companies carries high risks. The underlying investments of these propositions are likely to be both illiquid and high risk, not suitable for all investors and investors should not consider investing unless they can aord the full loss of their investment. No established market exists for the trading of shares in private companies, making it dicult to sell shares. This document is a financial promotion for the purposes of section 21 of the Financial Services and Markets Act 2000 and has been approved by Enterprise Investment Partners LLP. Deepbridge Advisers Limited is a subsidiary of Deepbridge Capital LLP (FRN: 563366). Interested Investors should seek independent advice before considering investing. This document does not constitute financial, tax or investment advice. Applications are only accepted on the basis of suitability and qualification criteria. Please refer to the full disclaimer and risk section in the respective Information Memorandum for further details. Past performance is not a reliable indicator of future performance.
FUND SPOTLIGHT – 7
Paul Latham Managing Director
WH Y H AV E V C T S B E C OM E S O P O P U L A R ?
FINANCIAL ADVISERS ARE INCREASINGLY LOOKING AT VENTURE CAPITAL TRUSTS (VCTS) FOR CLIENTS WHO, NOT SO LONG AGO, THEY PROBABLY WOULDN’T HAVE. This is reflected in the fundraising figures, which have shot up in recent years. From those bumping up against their lifetime allowance (LTA) for pension contributions to high earners seeking to reduce their income tax bill, the range of clients who could benefit from a VCT has become broader. Landlords and business owners are also among those who could benefit. But not all advisers are tapping into VCTs’ full potential. This could be a mistake. While it’s true that VCTs won’t be right for every client, it’s also true that for many clients they can help solve increasingly common problems. VCT TAX RELIEFS CAN HELP WITH PLANNING VCTs offer attractive tax reliefs on investments up to £200,000 each year. The Government created VCTs to give investors an incentive to put their capital at risk and back early-stage businesses. VCT investors can claim up to 30% upfront income tax relief, provided they hold the investment for five years. And there’s no tax to pay on any dividends or capital gains. If a client has the right capacity for risk, then these tax reliefs may mean a VCT is well worth considering. The upfront income tax relief can be particularly useful in a broad range of different planning scenarios (see below). VCTS CAN HELP CLIENTS IN THESE INCREASINGLY COMMON SITUATIONS Take clients saving for retirement. They can now incur additional charges if they exceed their annual allowance (currently capped at £40,000 a year) for pension contributions
or their LTA (£1.055 million for the current tax year).For those clients worried about triggering these charges and who are comfortable with the associated risks, a VCT can be a tax-efficient way to invest as part of a retirement strategy. Then there are clients who own a business. Recent changes to dividend taxation mean entrepreneurs who pay themselves through dividends could face higher tax bills and lower take-home earnings. VCTs could be a way to offset these costs and help clients extract money from a business tax efficiently. Clients who own rental properties could also benefit. Until 2017, buy-to-let landlords could deduct their mortgage payments from their rental income and only pay tax on the net income. The Government is now phasing out this relief. From April 2020, landlords will only receive a tax credit. As this credit will only refund at the basic rate of tax, higher or additional-rate taxpayers won’t get all the tax back on their mortgage repayments. It’s part of a broader shift that has made investing in rental property less lucrative. Landlords have also been affected by the introduction of a higher rate of stamp duty on purchases of additional homes. On top of that, a draft Tenant Fees Bill aims to limit how much lettings agents can charge tenants, meaning they could well increase the fees they charge landlords to make up the shortfall. These recent changes have made it even more important for landlords to consider the tax implications of their property investments. RISKS TO KEEP IN MIND BEFORE RECOMMENDING A VCT Of course, just because a client faces one or more of these problems, that doesn’t automatically mean a VCT will be the right choice. VCTs invest in smaller, less established companies, and this type of investing won’t fit with the risk profile of some investors. The value of a VCT investment, and any income from it, can fall as well as rise and investors may not get back the full amount invested.
As well as the risk of loss, clients should be aware that the share prices of VCTs can fall or rise more sharply than the shares of large companies listed on the London Stock Exchange’s main market. They can also be harder to sell. circumstances, and tax rules could change in the future. Tax reliefs also depend on the VCT maintaining its VCT-qualifying status. WHERE TO FIND OUT MORE VCTs are versatile, and don’t just benefit clients facing the problems outlined above. Any high-earning client who is comfortable with the risks could potentially benefit from using the upfront income tax relief that VCTs offer as part of their planning. Octopus Investments, the largest VCT manager in the market, has drawn up a more detailed list of VCT planning scenarios to help advisers identify whether they have clients who could benefit. You can read them at octopusinvestments.com/vctclientscenarios. For professional advisers and paraplanners only. Not to be relied upon by retail clients. VCT investments are not suitable for everyone. Any recommendation should be based on a holistic review of your client’s financial situation, objectives and needs. Mention of any individual companies is for illustrative purposes only and should not be considered an investment recommendation. We do not offer investment or tax advice. Issued by Octopus Investments Limited, which is authorised and regulated by the Financial Conduct Authority. Registered office: 33 Holborn, London, EC1N 2HT. Registered in England and Wales No. 03942880. Issued: October 2019. CAM008772. Clients should also remember that tax treatment depends on individual
Pay less tax? Now that’s a relief! It is widely known that Enterprise Investment Scheme investments are high risk. And whilst you might secretly have your money (quite literally) on that new tech start-up being the next Apple Inc., it is always prudent to manage the client’s expectations and prepare for the worst. So, in the event
your client receives that ‘Notice of Liquidation’ what should they do? The answer – keep calm and claim their EIS loss relief.
£3,000 (30%) upfront income tax relief, their effective cost is £7,000.
When an EIS company fails or the shares are sold at a loss, EIS loss relief is your ticket to softening the blow by using it to offset your client’s income tax bill or capital gains tax bill (depending on their individual circumstance). The loss relief can be claimed in either the same tax year as when the loss is realised or the following year. This article steps through a simplified example and demonstrates how a 45% income tax payer’s maximum exposure is only 38.5% for EIS investments. Firstly, what can I do to help reduce my client’s investment loss? Predicting which companies will succeed or fail when making investment decisions is extremely challenging, particularly with early stage companies. Diversification is one of the best ways to help manage risk and Kuber’s EIS platform is specifically designed to help you achieve optimal diversification for your client. Whilst diversifying by numbers is important, Kuber can offer diversification across other important factors such as industry sector, maturity stage, geographical region and perhaps most importantly, manager approach and expertise. The platform can provide a single point of access to EIS investments from different fund managers while reducing the administrative burden. 1) Calculate your effective cost. For an investor to qualify for loss relief, the sale value of the investment needs to be less than the effective cost. The effective cost can be calculated by subtracting the previously claimed income tax relief (30% of the original investment) from the amount invested. For example, if your client invested £10,000 into XYZTech Ltd, and claimed
2) Choose between claiming against income tax or capital gains tax. The flexibility of EIS loss relief means your client can either claim it against income tax or capital gains tax. If you are unsure about which relief option provides the optimal outcome for your client, we strongly suggest seeking specialist tax advice before proceeding. 3) Calculate your loss relief. Before calculating the relief, you’ll need to determine the effective loss by subtracting the sale value of the investment from the effective cost. For example, if your client’s investment in XYZTech Ltd sold for £3,000, the loss will be £4,000 (£7,000 effective cost less a £3,000 sale value). The relief for income tax can then be calculated by multiplying your client’s marginal rate of income tax by the effective loss (see top right diagram for the continued example.) It is worth noting that the client can claim the loss against the current or previous tax year’s income tax bill. Alternatively, you can offset your clients loss against a capital gains tax bill. In this scenario, the loss is simply multiplied by the rate at which the client pays capital gains tax. The examples are based on selling an EIS qualifying investment in the 2019/20 tax year. The exact amount of loss relief may be subject to other factors such as fees, the applicable tax year or your client’s eligibility to make the claim.
£10,000 Originally Invested
£4,000 Effective Loss
£3,000 Income Tax Relief Claim
£3,000 Investment Sale Value
Calculate your effective loss
Higher rate tax payer
Basic rate tax payer
Additional rate tax payer
Offset the £4,000 loss against income tax
How do I report the loss? Assuming your client completes a self-assessment tax return, then completing the SA108 form (available at hmrc.gov.uk) will enable them to claim EIS losses against either income tax or capital gains tax. To offset against income, report the amount of loss in the section titled “Unlisted shares and securities” (be sure to specify which tax year the relief is applied to and the amount attributable to an EIS loss). To offset against capital gains tax, your client can use the same form, however, they will need to state the loss is attributed to capital gains.
Please read the following information carefully as a professional adviser. The information contained in this promotion is for discussion purposes only for professional advisers and their clients, it is not for Retail Clients. EIS/SEIS/BR Funds are not suitable for all investors as the underlying investments are often illiquid and therefore high risk. UK taxpayers should note that tax treatment depends on the individual circumstances of each client and may be subject to change in the future. Investors may not receive back some or all of the initial investment. Advice should always be sought from a professional adviser prior to investing. For purposes of compliance with the UK Financial Services and Markets ACT 2000 (FSMA), this material is communicated by Kuber Ventures; and the contents of this financial promotion have been approved for the purposes of section 21 of the FSMA by Sturgeon Ventures LLP which is authorised and regulated by the Financial Conduct Authority (FCA) and it has its trading office at Linstead House, 9 Disraeli Road, London SW15 2DR. Kuber Ventures Limited’s advisors are all regulated by the Financial Conduct Authority (FCA) and can be found on http://www.fca.org.uk/ Kuber Ventures Limited (FRN 574987) is an Appointed Representative of Sturgeon Ventures LLP which are authorised and regulated by the Financial Conduct Authority (FCA). Kuber Ventures Limited, Audley House, 12-12a Margaret Street, London, W1W 8RH. Registered number: 8693809, VAT: 175 9290 69.
For more information: Call +44 (0) 20 7952 6685 Email email@example.com Or visit www.kuberventures.com
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Important Information. For Professional and/or Qualified Investors only (not to be used with or passed on to retail clients). Past performance is not a guide to future performance. Your capital is at risk. The value of investments can fall as well as rise and your clients may get back less than invested. This material is for information only and does not constitute an offer or solicitation of an order to buy or sell any securities or other financial instruments, or to provide investment advice or services. Issued by Threadneedle Investment Services Limited, Registered No. 3701768 and Threadneedle Asset Management Limited, Registered No. 573204, both registered in England and Wales. Cannon Place, 78 Cannon Street London EC4N6AG, United Kingdom. Authorised and regulated in the UK by the Financial Conduct Authority. Columbia Threadneedle Investments is the global brand name of the Columbia and Threadneedle group of companies. 06.19 | J28992 | 2443706
10 – FUND SPOTLIGHT
Simon Evan-Cook Senior Investment Manager
WH I L E Y O U WA I T
SIMON EVAN-COOK, SENIOR INVESTMENT MANAGER FOR PREMIER MITON’S MULTI- MANAGER FUNDS, EXPLAINS WHY INCOME INVESTING COULD BE A GOOD OPTION FOR THOSE INVESTORS WHO ARE CURRENTLY UNCERTAIN WHERE TO INVEST. They say there are only two certainties in life: death and taxes. I’d like to add a third: uncertainty. Although maybe I didn’t need to – it’s implicit. But I think it’s worth emphasising the point – that if only death and taxes are certainties then, by default, you can be certain of plenty of uncertainties too. I don’t think many would argue with that today. Brexit is the obvious example. It’s particularly obvious for someone writing an investment article before the Brexit deadline that won’t be published until after it: The egg-on-face risk is unusually high. But, as it happens, I think Brexit provides a useful example of how we should think about managing money: Basically, we shouldn’t be investing any differently today than we would at any other time. Think back to 2012. The year of the London Olympics, and possibly the point when optimism about Britain peaked. Back then, an EU referendum was just one of many ‘things that might happen in the future’. But being in an optimistic sort of national mood, we all thought we could ignore it and still feel reasonably certain about the future. Hindsight tells us we shouldn’t have. We should have felt deeply uncertain, because just four years later an EU referendum would spark an unprecedented period of political turmoil. Now many would-be investors are frozen - like deer in headlights - waiting for the return of certainty before taking any action. My point is this: if certainty looks and feels like 2012, then it’s an illusion. And when it comes to investing, you should be under no illusions. Now, however, we are deeply uncertain. This is healthy: the future was, is, and always will be uncertain, so we should always act like it is. Which brings me to investing. How should you invest if you’re uncertain? (Which, if you’ve accepted my point, should be all the
time). We think income investing is one of the best ways. This is tortoise by nature, and will almost certainly pay you less than picking the next great tech unicorn. But when investing, staying on for the journey is often the hardest bit, and a tortoise is much less likely to buck you off than a unicorn. British companies, for example, were paying dividends in 2012. They continued paying them through 2016, and are still paying them today. All the while they yielded somewhere in the ballpark of 4%, while the Bank of England’s base rate on cash was less than 1%. Going forward, we suspect they’ll continue paying dividends regardless of what happens (happened) on 31st October. But there’s more out there than British equities. For our multi- manager income funds, we have a world of income-producing assets to pick from. We’re trying to pick the most compelling, reliable ones to generate a solid income stream for our fund holders. And sure enough they’ve continued to produce good income, and even grown their prices too. That’s exactly what we’ve always tried to do, and exactly what we’ll continue to do too. Of that you can be certain. Find out more For more information, contact our Business Development team on 0333 456 9033 or email firstname.lastname@example.org. This article is for information purposes and is only to be issued to financial intermediaries. It is not for use with customers. It expresses the opinion of the author and does not constitute advice. Past performance is not a reliable indicator of future returns. Issued by Premier Miton Investors. Premier Portfolio Managers Ltd is registered in England no. 01235867. Premier Fund Managers Ltd is registered in England no. 02274227. Miton Asset Management Ltd is registered in England no. 01949322. Miton Trust Managers Ltd is registered in England no. 04569694. All these companies are authorised and regulated by the Financial Conduct Authority and are members of the ‘Premier Miton Investors’ marketing group and subsidiaries of Premier Miton Group plc (registered in England no. 06306664). Registered office for Premier Portfolio Managers Ltd, Premier Fund Managers Ltd and Premier Miton Group plc: Eastgate Court, High Street, Guildford, Surrey GU1 3DE. Registered office for Miton Asset Management Limited and Miton Trust Managers Limited: 6th Floor, Paternoster House, 65 St. Paul’s Churchyard, London EC4M 8AB. For your protection, calls are recorded and may be monitored for training and quality assurance purposes.
To celebrate the recent launch of Puma Alpha VCT – our fourteenth Puma VCT – we’re offering Tenet subscribers a special extension of our early bird offer. Puma Alpha VCT Invest before 20 December 2019 and you’ll benefit from an Initial Fee of 1% , reduced from 3% (rebated in the form of additional shares). Call our Business Development Team on 0207 408 4070 or visit www.pumainvestments.co.uk to find out more. Puma Alpha VCT invests in scale-ups not start-ups – sourcing businesses with proven markets, strong management teams and a clear path to growth.
This communication is a financial promotion issued by Puma Investments in accordancewith section 21 of the FinancialServicesandMarketsAct2000.PumaInvestmentsisatradingnameofPumaInvestmentManagement Limitedwhich isauthorisedandregulatedby theFCA(FRN590919).An investment intheservicecarries riskand may not be suitable for all investors. Investors should refer to the Prospectus, copies of which are available at pumainvestments.co.uk. Key risks of the service include: Past performance is not a guarantee of future performance; youmay losemoney; tax reliefs are not guaranteed; long-termandpotentially illiquid investment. This communication is intended for the recipient only. The registered address of Puma Investments is Cassini House, 57 St. James’s Street, London SW1A1LD.
Actively managed income at passive prices – that’s extraordinary
OCF capped for active management 0.29 %
BMO Universal MAP Income An actively managed income fund aiming to deliver 4-4.5% per annum paid quarterly at a historically low OCF of 29bps – another breakthrough from BMO Global Asset Management. The Universal MAP Income fund can be a core building block in a client’s portfolio. It offers a choice to those advisers who are using low cost natural income products and taking income from capital to create an income stream for their clients. As with any investment, your capital and income is at risk. Past performance should not be seen as an indication of future performance. To find out more visit: www.bmogam.co.uk
The fund is a sub fund of BMO Investment Funds (UK) ICVC III registered in UK and authorised by the Financial Conduct Authority. English language copies of the Fund’s Prospectus and the key investor information document (KIID) can be obtained from BMO Global Asset Management, Exchange House, Primrose Street, London EC2A 2NY, telephone: Client Services on 020 7011 4444, email: email@example.com or electronically at www.bmogam.com. Please read the Prospectus before taking any investment decision. © 2019 BMO Global Asset Management. Financial promotions are issued for marketing and information purposes in the United Kingdom by BMO Asset Management Limited, which is authorised and regulated by the Financial Conduct Authority.
FUND SPOTLIGHT – 15
E X P L A I N I N G E S G A N D T H E I N V E S C O A P P R O A C H
WHILE WE TALK ABOUT OUR APPROACH TO ESG AT INVESCO, IN REALITY, ESG IS INCORPORATED INTO EVERYTHING WE DO. BUT WHAT IS ESG AND HOW DID WE GET TO WHERE WE ARE TODAY? WHAT IS ESG? ESG means environmental, social and governance investing. In practice it’s about incorporating ESG issues into the core investment process and providing solutions for client needs. ESG Investing is a term that is often used synonymously with sustainable investing, socially responsible investing, negative screening, or exclusion. Certainly, the elimination of companies or sectors deemed to be ‘sinful’, is one of the best known and most commonly cited forms of ESG investing. This can mean the complete exclusion of companies in the alcohol, tobacco, gambling or armaments sectors. At Invesco we define it as the consideration of environmental, social and governance factors alongside financial factors in the investment decision-making process. It is essentially one of the most effective mechanisms to reduce risks, maximise returns and have a positive impact on society and the environment. Where companies, sectors, or countries have poor ESG ratings, we view engagement with investee companies as the most effective way of securing mutually beneficial outcomes for both our clients and investee companies. We find working on the basis of engagement or dialogue rather than exclusion, to be better aligned with both superior investment performance and improving ESG performance.
is something that we believe can really drive change. The third pillar is being an active owner. Invesco votes at shareholder meetings and engages with the senior management of listed companies to address ESG issues. The fourth part of our approach is being a solutions led investor around ESG. Given the breadth of capabilities at Invesco we’re able to respond in a very dynamic way to client needs in this area. The diversity of Invesco means that investment centres and strategies will vary their approaches to the implementation of responsible investment. And this is underpinned by external research and a global team of experts working alongside our investment team. For more information about how we can work together for a better future, visit invesco.com/change Investment risks The value of investments and any income will fluctuate (this may partly be the result of exchange rate fluctuations) and investors may not get back the full amount invested. Important information Where individuals or the business have expressed opinions, they are based on current market conditions, they may differ from those of other investment professionals and are subject to change without notice. Issued by Invesco Asset Management Limited, Perpetual Park, Perpetual Park Drive, Henley-on-Thames, Oxfordshire RG9 1HH, UK. Authorised and regulated by the Financial Conduct Authority.
investing, has grown significantly amongst both institutional and retail investors. Today, ethical considerations and alignment with values remain common motivations of many ESG investors but the field is rapidly growing and evolving, as many investors look to incorporate ESG factors into the investment process alongside traditional financial analysis. Ultimately, we believe that as investment managers, our most effective way of driving change in ESG behaviours by companies is through investor-led engagement. WHY ESG? Changing consumer preferences, regulatory, digital and environmental trends are introducing new risk factors for investors. As companies face rising complexity on a global scale, investors may re-evaluate traditional investment approaches. Focusing on a company’s management of disruption drivers and direction of change, as part of ESG analysis, is more important than ever before. ESG can mean different things to different people. Given our views on the importance of engagement with companies, the monitoring of ongoing and potential ESG issues is a crucial step in our investment processes. We look at each sector and company individually. After all, a mining company and a financial company, for example, may be faced with different ESG risks and opportunities and therefore we evaluate them on the key issues specific to their respective industries. INVESCO’S ESG APPROACH Invesco’s ESG approach is based on four key pillars. Firstly, we want to be a trusted partner and committed to ESG and, for us, that really means incorporating ESG as part of our core investment process and being committed to the UN backed Principles for Responsible Investment where we’ve achieved an A+ rating for the last three consecutive years. The second pillar is around being an engaged investor. We collaborate (both internally and also externally) on ESG issues and are a partner with key ESG institutions, which
THE EVOLUTION OF ESG INVESTING
Socially responsible investing was once a fringe movement. In the past two decades however, the concept of responsible investment, or ESG
HOLD ON TO YOUR CLIENTS’ CASH. INVEST IT.
Is cash really king? With these low interest rates? No. Since 2008, we have offered equity-like returns while protecting clients’ cash. The king is dead. Long live the new certainties of investing.
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Past performance is not a guide to future performance. This communication is intended for financial advisers only. Performance figures correct as at 30/09/2019 relate to Investec Structured Products, which is a trading name of Investec Bank plc. Investec Bank plc is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. It is a member of the London Stock Exchange registered under Financial Services Register reference 172330. Investec Bank plc is a limited company registered in England and Wales at Companies House. Our registered office is 30 Gresham Street, London EC2V 7QP and our registered number is 00489604. Our VAT number is 480912639.
FUND SPOTLIGHT – 17
P U T T I N G Y O U R E G G S I N T H E R I G H T B A S K E T
INVESTORS NATURALLY SEEK THE BEST OF BOTH WORLDS: A HIGH, PREDICTABLE RETURN ON THEIR MONEY, COMBINED WITH MINIMAL DOWNSIDE RISK. WE ALL KNOW THIS IS DIFFICULT TO ACHIEVE AND RARE TO FIND. WHICH IS THE BEST OPTION TO CHOOSE IN A CHALLENGING INVESTMENT ENVIRONMENT? In a decade of volatile equity markets, low-interest rates and higher inflation have created a challenging environment for income-seeking investors. If safety is the paramount consideration, UK investors will struggle to preserve, let alone grow, the value of their capital. According to MoneySavingExpert, the best instant access cash ISA rate available today is 1.46%. At a time when inflation is running at 1.7% per annum, this means that savers are losing money in the current inflationary climate as their funds are depreciating in real terms. The simple truth is that if investors really want to see their money grow, they have to accept an element of risk. The level of risk depends on an individual’s personal risk appetite and/or their financial capacity to absorb any possible losses.
as property development or renewable energy plants. However, there are some options which do provide a way to introduce diversification in order to balance their underlying portfolios, and therefore reduce concentration risk. TRIPLE POINT INCOME SERVICE Triple Point’s Income Service aims to generate a predictable, attractive fixed rate of return whilst providing funding to thousands of UK businesses. Invested funds are exposed to a diverse Direct Lending portfolio, including Secured Lending, Leasing and Working Capital Loans. Investors in our Income Service benefit from Triple Point’s 15 years’ experience of direct lending and managing private, institutional and public capital. As a leader in the private debt market, Triple Point currently manages over £485m of assets in lending and leasing strategies and has provided funding to over 100,000 businesses. Triple Point is a leader in the private debt market and to date manages over £485m of assets in direct lending strategies – and has provided funding to over 100,000 UK customers. Risk Warning: The Triple Point Income Service places capital at risk and returns are not guaranteed. FSCS protection does not apply to investments held in the Triple Point Income Service. Remember that investments are for a fixed term during which your capital is tied up, and that past performance is not a reliable indicator of future performance.
sector. Since 2008, there has been an increase in capital inflows as a direct result of the low- interest rate environment and the retrenchment of banks from providing credit to SMEs. There are now a pool of funders operating in place of banks that represent the growing and active alternative finance market carrying out direct lending. Direct lending enables investors to gain exposure to or directly invest in loans made to smaller – midsized (SME) companies. The direct lending market is, therefore, a relatively new asset class for retail investors, but one that has experienced significant growth in recent years. A study published by Intelligent Partnership commented that there is “a compelling reason for the inclusion of debt-based investments in a balanced portfolio” and, as such many IFAs are taking them into consideration. investment is that it offers an attractive fixed rate of income (typically 6% per annum or more) with a specific, fixed maturity date (when investors receive their capital back), and the better investments are typically contractually secured against the underlying tangible assets. According to Triple Point’s Jack Rose, “Investors are looking for an attractive yield without entering into an inappropriate relationship with risk. The financial advisers that we work with, tell us that they prefer products with a high level of underlying diversification in each investment. If you can marry that up with an experienced provider, then I think it becomes a very interesting proposition.” Many products in this space focus on providing funding for a specific sector or project, such CHARACTERISTICS OF DIRECT LENDING The main characteristics of this type of
DIRECT LENDING AS AN ASSET CLASS
One market that has evolved over the last decade, with a growing number of attractive investment opportunities, is the direct lending
For Investment Professionals only
Democratising sustainable investing
Examples might include green bonds (bonds where the proceeds of their sale are dedicated to sustainable activities) where the universe is relatively small, or green infrastructure, which may be less liquid and involve a longer time commitment. Investing through a fund is likely to allow investors of all sizes the opportunity to gain access and liquidity. The benefits of adopting a multi-asset approach to sustainable investing Valuation is key, so taking a multi-asset approach allows an investor to capture value across a wide range of asset classes, diversifying risk at the same time. Access to different types of sustainable investments with different risk/reward characteristics may be able to reduce the overall volatility of returns. This is because one asset class may provide some offset should another asset class suffer from market weakness. In addition to mitigating the financial risks, providing the broadest potential universe of accessible asset classes may also increase the overall sustainability of the portfolio from an ESG and impact perspective. For example, compared to equities, green infrastructure may offer a steady income and lower volatility, and do so while also making a positive The M&G Sustainable Multi Asset Fund’s approach integrates the benefits of diversified asset allocation with a responsible investment approach aiming to deliver attractive long-term total returns, while considering environmental, social and governance factors. This strategy enables investors to align their financial and sustainable goals, providing an ideal opportunity to contribute towards a more sustainable future. The value and income from the fund’s assets will go down as well as up. This will cause the value of your investment to fall as well as rise. There is no guarantee that the fund will achieve its objective and you may get back less than you originally invested. The fund allows for the extensive use of derivatives. Please note that this product is not currently on the Tenet Panel. Therefore, appointed representatives who deem it suitable for a particular client will need to follow the Off Panel Approval process. contribution to renewable energy generation. M&G Sustainable Multi Asset Fund
Sustainability has become a key item on the agenda of governments, institutions, corporates and private investors, large and small. Accordingly, those investors increasingly now want to commit their money to funds that aim to achieve attractive financial returns, at the same time as generating good outcomes and avoiding harmful effects on society or the environment. In light of that, sustainable investing has developed significantly in recent years, building on decades- old ethical-investing principles, which were typically exclusions- based and often rooted in underlying beliefs. Over time, a company’s attributes regarding its environmental and social impact or its general approach to good governance, its ESG characteristics, were evaluated and considered alongside its prospective returns. ESG investing covers a range of activities, from applying negative or positive screens to filter investments out or in, to fundamental analysis and engagement with companies. This approach encourages not only avoidance of undesired exposures but also a focus on selecting the best available among the potential candidates for investment. The aim is to identify those companies operating more sustainably and are more capable of adapting to a changing world, where incorporating ESG behaviours is considered business as usual. More recently, sustainable investing has extended to incorporate consideration of the positive impact or contribution an investment is expected to make. Companies can be assessed on what they are explicitly doing to address the major environmental and social challenges the world is facing, as well as the scale and materiality of that impact. This approach allows investors to build investments in companies delivering not only attractive financial returns, but positive externalities; benefits to society and the environment, too. In the past, sustainable investing may have been seen as a niche approach, accessible only by large institutional investors. However, it has now moved into the mainstream, and we believe it should be open to all investors, regardless of the amount they invest. The nature of some of the asset classes may make them less accessible for some investors. This may be due to the large scale required for each individual asset or because of limited liquidity.
For more information please visit: www.mandg.co.uk/sustainable-multi-asset-fund
For financial advisers only. Not for onward distribution. No other persons should rely on any information contained within. This financial promotion is issued by M&G Securities Limited which is authorised and regulated by the Financial Conduct Authority in the UK and provides ISAs and other investment products. The company’s registered office is 10 Fenchurch Avenue, London EC3M 5AG. Registered in England and Wales. Registered Number 90776. MAY 19 / 363106Page 1 Page 2 Page 3 Page 4 Page 5 Page 6 Page 7 Page 8 Page 9 Page 10 Page 11 Page 12 Page 13 Page 14 Page 15 Page 16 Page 17 Page 18 Page 19 Page 20 Page 21 Page 22 Page 23 Page 24 Page 25 Page 26 Page 27 Page 28
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