Tag: Wealth Management

market insights

Market Insights Monthly Bulletin – July 2021

Month in Review

As we hit mid-Summer, Markets are well into their standard seasonal quiet phase at this point. Many market participants are on vacation, the public institutions are typically quiet and there is little happening in terms of company results and announcements. As a result, markets have a habit of drifting sideways for a period at this time of year and this is certainly the general pattern in markets at the moment. That said, it’s not all quiet on the Western front, or the Eastern front for that matter. A regulatory crackdown by the Chinese Government on the larger Chinese tech companies has spooked many overseas investors and caused share prices to fall in China. As is often the case with policy changes in China, this move appears to be driven by multiple reasons including reinforcing Central Governments grip on the money supply, encouraging overseas investment by Chinese citizens, and stimulating a greater work ethic amongst Chinese youth who have become less enthusiastic about signing up to low paid high stress career opportunities.

Elsewhere, markets continue to be on high alert for Central Bank signals as to when QE might be eased and interest rates may rise, particularly in the US and UK. In addition, Covid optimism is on the up as case numbers fall in the UK and a number of other countries. And finally, the $1 trillion infrastructure bill being promoted by President Biden was finally passed this week. While its immediate impact may be relatively muted because of its long-term nature, it will certainly lead to attractive investment opportunities for infrastructure funds and underpins our view that there is a place in every portfolio for infrastructure exposure.

Equity Markets

The impact of the move by Chinese authorities referred to above can be clearly seen in the performance of its equity market which fell by more than 10% during July. In contrast both Europe and the US were up by almost 2% over the month. On a one-year view, the major markets have all returned more than 30% but again China is the exception, delivering less than 10% in euro terms over the 12-month time frame. While activity levels are likely to remain muted in August, the momentum in equity markets between now and the end of the year is expected to be generally supportive for markets, helped by better company results as the grand reopening continues.

Equity Market Performances (in euro terms)

MarketPerformance July 2021*Performance 1 year*YTD*
Ireland0.4%38.1%13.7%
UK-0.2%30.2%16.5%
Japan-3.3%20.7%-2.9%
Europe1.7%33.1%18.7%
US1.9%36.1%21.7%
China-10.9%9.5%-2.2%

*Source Financial Times, Financial Express

Bonds

Bonds generally strengthened over the month as inflationary concerns receded, at least temporarily. A relatively flat bond market is likely to be the order of the day, possibly for several months at least. The triggers to alter this course will almost certainly be signals from the authorities to raise interest rates and/or ease up on QE supports. So, while there are still niche parts of the bond market offering attractive yields, the mainstream is unlikely to provide any excitement for a while yet.

Cash

So far with the exception of smaller personal deposits, negative interest rates are gradually being applied across the board within the Irish banking system. Pension funds and retirement funds will need to adjust to this new phenomenon which we would expect to persist for quite some time. Those holding longer term cash in their funds should certainly be exploring other options. For example, the Harvest cash Alternative Strategy (a mix of three funds) has returned 2.9% year to date compared with a negative return from cash.

Infrastructure

The world needs infrastructure investment. The US in particular has underinvested significantly in infrastructure in recent decades to which US road user can attest. And apart from basic physical works, the green agenda will demand very substantial infrastructure, particularly in the area of alternative energy sources. Added to this, most developed country governments have identified infrastructure as a key area to be focused on in the regeneration of economies post Covid. These initiatives should provide some very significant opportunities for infrastructure funds over the coming decade, and we are recommending all pension clients consider adding an infrastructure fund to their portfolios. One of our key selections in this space is described below.

Investment Outlook

We expect the post covid momentum to continue to act as a tailwind for equity markets over the coming months so the general mood should remain positive. On the other hand, equity valuations are certainly quite stretched in comparison with historical norms and markets will certainly be vulnerable to bad news. However, when considering equity valuations, we do need to be conscious of both the negative interest rate environment and the very low returns currently on offer from other asset classes.

Fund in Focus

Our fund for this month is –First Sentier Global Listed Infrastructure –  Click here to see more details

As always, you should only consider the investment views contained in this Market Insights update in the context of your own attitude to risk and how such choices might impact your Asset Allocation model. Should you wish to discuss your investment portfolio, please contact Harvest Financial Services on 01 2375500 or email justask@harvestfinancial.ie.

where to invest

Funds in Focus – Where to invest?

Fund in Focus – Aberdeen Asian Income Fund

August 2021

This month’s fund in focus is the Aberdeen Asian Income Fund. Having emerging markets exposure in your investment portfolio is becoming increasingly important as Asia continues to deliver growth well above the world average. While Covid inevitably impacted over the past eighteen months, all the evidence would suggest that Asia is coming out of the blocks quickly post the pandemic. As a result the outlook remains positive.


The US – China geopolitical tensions will result in China becoming more self – sufficient over the coming years. In addition, other countries such as Vietnam and India are benefitting from the ongoing relocation of basic industries away from China to lower cost economies. The investment opportunities presented by these trends are captured by the active management style of this fund. The fund is well diversified across many sectors including domestic consumption, technology and green energy. However as an income focused fund, its exposure to some of the very high growth sectors is limited and it will tend to underperform the market during strong growth phases. On the other hand its volatility is two thirds of the market and it will tend to underperform during volatile phases. A particularly attractive feature is the high dividend yield. The current annual yield is 4% which is paid out to investors quarterly. This may be of particular interest to ARF investors who are looking to generate income from their investment portfolio.

If you would like to discuss this fund or look at other income opportunities, please contact your Client Advisor or contact us on 01 2375500. Investment in this fund will allow you to gain a liquid and diversified exposure to Emerging Markets, managed by a specialist, well recognised investment manager, while also delivering a steady income.

Fund in Focus – First Sentier Global Listed Infrastructure

July 2021

Following the passing of the $1 trillion Biden Infrastructure Bill in the US this week, our monthly fund in focus is the first Sentier Global Listed Infrastructure Fund. Biden’s plan is the most substantial expenditure on the nation’s roads, bridges, waterworks, broadband and the electric grid in decades. We can also assume that this plan will pave the way for global governments as it highlights the importance of strong and stable infrastructure for economies.

  • Listed infrastructure provides essential services to society, making it less sensitive to the economic cycle.
  • The fund invests in a variety of different types of infrastructure assets globally giving a good geographic and sector spread.
  • Growth is being driven by long term structural themes such as the build-out of renewable energy, the need
    to ease urban congestion and increasing reliance on mobile data.
  • Investment in infrastructure is key when creating a well-balanced investment portfolio as these types of investments have tended to be less volatile than other equity classes.
  • Infrastructure can be used as a lower volatility complement to global equities.

Fund in Focus – Guardcap Global Equity Fund

June 2021

For our monthly Fund in Focus we are highlighting the Guardcap Global Equity Fund. This a high conviction equity fund which targets companies with strong positions in growing niche markets, while generally avoiding the big names The philosophy of the fund is that long term sustained growth drives returns.

  • The fund includes a very select, thoroughly researched concentrated portfolio of quality companies (20-25) selected based on their track record and potential of delivering sustainable capital growth with great diversification across various sectors and regions.
  • Each company having significantly better quality and growth characteristics than the market average, and each being undervalued in relation to its long-term future earnings and cash flows at the time of purchase.
  • The fund managers follow a rigorous process where a large pool of stocks is reduced to those which best fulfil such criteria as sustainable competitive advantage over other similar companies, excellent management and a strong financial history and outlook.
  • Income and capital gains from the Fund are reinvested.
  • The fund provides a scale of opportunity for investors and would be considered a core global equity holding in a portfolio for both personal and pension investors.
Where to Invest

Fund in Focus – Blackrock World Mining Trust

May 2021

For our monthly Fund in Focus we are highlighting the Blackrock World Mining Trust. This fund is designed for investors who seek income and growth and intend to invest for five years or longer.

The mining and commodities sector is benefiting from the world’s most compelling long-term trends from digital transformation, to the sustainability agenda, to gold and precious metals. Targeting income and capital growth, the Trust provides a diversified blend of companies designed to benefit from the changing global economy.

  • > The trust provides exposure to the global hard commodities market
  • > It is very well diversified across a wide range of commodities.
  • > Net dividend yield target of 3.5% per annum.
  • > Managed by one of the largest global asset managers.

This investment would be suited to investors looking for a specialist commodities trust to provide long-term diversification of income and capital, geared to the changing dynamics of the global economy.

Rathbones Ethical Bond Fund – April 2021

For our monthly Fund in Focus section we have selected a component fund of our ESG Investment Strategy – the Rathbones Ethical Bond Fund. This fund aims to deliver both income and growth on a consistent basis to its investors. The fund also applies strict ESG criteria to the bonds it purchases focuses solely on bonds issued by companies who measure up to the required standards.  Thirdly, the Fund aims to deliver a greater total return than its benchmark, the Investment Association (IA) Sterling Corporate Bond sector over any rolling five-year period. The fund has been successful on all three counts and has consistently outperformed its benchmark over the past ten years.

  • The fund is a traditional socially responsible investment fund.
  • Experience of managing ethically screened private-client investment business.
  • Engagement, governance, and stewardship managed by a central governance committee.
  • Open and transparent ethical criteria and reporting lines.
  • The fund targets an investment grade high yield with a strong ethical overlay.
  • Quarterly pay-out of income.

To make sure that investments are suitable, the fund manager has access to Rathbones’ dedicated ethical, sustainable and impact research team.  Together, this actively managed fund applies ethical screens to assess potential investments; having confidence that long-term growth can be achieved by companies which conduct their business and apply capital responsibly.

where to invest

The fund has been a consistent outperformer over the past few years but particularly so over the past year. The fund offers a very broad global exposure to the ESG opportunity and is a very appropriate core bond holding in client pension and investment portfolios.

Schroder Sustainable Growth Fund – March 2021

For our monthly Fund in Focus we have highlighted one of the funds in our ESG Investment Strategy. The Schroder Sustainable Growth Fund aims to provide capital growth by investing in equities of companies worldwide which meet the investment manager’s sustainability criteria which include the following:

  • managing the business for the long-term
  • recognising the company’s responsibilities to its customers, employees, and suppliers
  • respecting the environment

In addition, the investment manager believes that when aligned with other drivers of growth, this can result in earnings stronger growth which is often under appreciated by the market. Issues such as climate change, environmental performance, labour standards, or board composition that could impact a company’s value will be considered in the assessment of companies.

where to invest
Source Financial Express

The fund has been a consistent outperformer over the past few years but particularly so over the past year. The fund offers a very broad global exposure to the ESG opportunity and should be a core equity holding in client pension and investment portfolios

2X Midcap Library Fund – Feb 2021

The 2X Ideas Midcap Library fund is a Swiss based actively managed global equity fund which targets companies with valuations between US$2 – 30 billion. The management style is highly research driven, seeking out companies around the globe with very strong positions in their own market niches and with the potential to deliver growth well above the average over the long term, largely independent of economic cycles. While none of the 100 companies held by the fund could be regarded as small companies, the majority are not household names with the result that the investor is being given an exposure to growth opportunities not commonly found in other global equity funds. The investment approach taken by the fund has proven itself against the market over the last number of years. *2xideas vs MSCI World Perf. 1- year graph

Source Financial Express

NextEnergy Solar Fund Limited

December 2020

  • UK’s largest solar farm operator
  • 90 separate acquisitions of solar projects
  • Market capitalisation £630 million
  • Annual dividend yield c.6% (paid quarterly)
  • Gross return of 45% over past 5 years

‘Every hour the world receives enough energy from the sun to power the entire planet for a year’.

Background

NextEnergy Solar Fund Limited (NESF) is a solar infrastructure investment company primarily focused on the UK. As at 30 September 2020 the Company has completed 90 separate acquisitions of solar projects with total capacity installed of 755MW and total invested capital of approximately £950m. The company’s solar farms are almost all UK-based although it does own a small number of installations in Southern Italy and is seeking further opportunities outside of the UK. The Company has an investment limit of up to 30% of the Company’s gross asset value (GAV) in solar assets outside the UK. Currently, the non-UK investment represents 12% of GAV.

Investment Strategy

NESF’s investment objective is to provide ordinary shareholders with attractive risk adjusted returns, principally in the form of regular dividends, by investing in a diversified portfolio of primarily UK-based solar energy infrastructure assets. As a result, returns to shareholders are primarily in the form of annual dividends rather than capital growth. Based on its current profile of investments, we the income is secured for a long time to come. The company should also be a beneficiary of the UK Governments new ‘Ten Point Plan for a Green Industrial Revolution’ The company’s shares are listed on the London Stock Exchange and are freely tradeable.

ESG

NESF invests with a view to holding its solar assets until the end of their useful life. NESF are committed to all ESG (Environmental, Social and Governance) principles and responsible investment. They are on a mission to generate a more sustainable future by leading the transition to using more clean energy. They believe that solar is the key technology for the transition away from fossil fuels towards a greener economy. By generating clean energy, NESF avoid 307,500 tonnes of CO2 emissions per annum while powering homes sustainably. Their ESG policy re-enhances their commitment to tackling climate change. You can read further into NESF’s ESG policy online at www.nextenergysolarfund.com/esg

Historic Performance

*Source – Financial Express


Guardcap Global Equity Strategy

August 2020

Fund Size                            €1.46 billion

AMC                                      0.8%

Trading Currency               Euro

Liquidity                             Daily

Income                                 No

For this Fund in Focus, we have selected the Guardcap Global Equity Strategy, which has been a longstanding core pick for our clients looking to gain exposure to global equities. This fund is a concentrated, bottom-up strategy, managed by GuardCap Asset  Management, a specialist firm located in London,  which is part of the Guardian Capital Group. The GuardCap Global Equity team is distinguished by its highly focused long-term thinking, which enables its strategies to harness a sustained long term outperformance against global equity markets.

The fund seeks to invest in companies with strong balance sheets and who offer the genuine prospect of delivering long term growth. For Guardcap’ managers, very few companies meet their  exacting criteria. This no compromise attitude towards stock picking is backed by a highly rigorous and detailed investment process, with in-depth written reports and models prepared on each company considered for inclusion. The net result is a highly concentrated strategy offering unique exposure to the potential arising from sustainable, long-term growth companies. Most importantly, it has been a consistent outperformer over a long period. The fund size is €1.46 billion and holds c.25 stocks.

Geographic and Sectoral Exposures

where to invest my pension fund
Source Financial Express
Where to invest my pension fund
Source – Financial Express

Historic Performance

The fund has been a consistent outperformer over a sustained period and while the price fell sharply in March 2020 along with equity assets across the globe, it recovered very quickly and ahead of world markets.

Where to invest my pension fund
Source Financial Express

Updated – August 2020

womens wealth

Women and Wealth – Securing your financial freedom

Around the world, women’s wealth and income are growing faster than ever. It is hugely positive that women’s financial strength and independence is increasing due to demographic, economic and technological changes. Recent research suggests that women in Western economies may soon control the majority of household wealth. This is due to in part to the coming wave of intergenerational wealth transfer from baby boomers to succeeding generations, but also the growing participation of women in Professional and senior roles in the workforce.

With all of this growing economic influence, you might expect women to feel confident about their financial future but unfortunately, that’s not the current case. 

Research shows that women are much more likely than men to experience financial anxiety and to feel stressed when considering their finances; but we can all play a part and turn the tide on these feelings through education, goal-setting and planning.

Planning for the Challenges Women Face

Generally speaking, women face five different challenges through their financial life journeys, compared to men: the gender pay gap, the need for flexible working conditions, maternity leave, longer life expectancy, and a lower risk tolerance.

Women provide a disproportionate amount of caregiving in Ireland which is generally unpaid and also can lead to a reduction in income.  For instance, we may put our careers on hold or reduce our working hours to care for children and/or aging parents.

Spending less time in the workforce can have far-reaching financial effects, in some cases reducing participation in pension schemes, or preventing a smooth career trajectory and the pay increases that come with it.

On average, in Ireland women live about five years longer than men,meaning many of us outlive our male partners. Because of the career interruptions I just mentioned, that means many women are living longer on less income.

Finally, women may not be taking full advantage of the investment opportunities at their disposal, or the potential for their assets to grow, as they are more likely to take a conservative approach to money.

Setting and Meeting Goals

Through thoughtful planning, women can secure financial freedom to pursue their personal goals, have stability of income in retirement and handle the inevitable obstacles life throws in their path.

There are some simple steps to get started on this pathway.

First, define your goals. Ask yourself what being financially comfortable means to you. Even if it seems far away, you should begin to think about what an ideal retirement will look like, whether it’s traveling the world or just continuing to enjoy your current lifestyle.

The next step is to come up with a saving and investment plan that will get you there, keeping in mind that it may very well change over time. For many women, working with a Financial Advisor is a great way to get help with creating and implementing a financial plan that takes your specific goals and circumstances into account at each stage of your financial journey. They will not only help you plan for the expected but also for the unexpected curveballs life throws at us. This could be illness, death of a partner or spouse, loss of employment or divorce. With good planning these life events need not have a significant impact on your long-term financial goals.

Who will hold you Accountable?

After you have set your financial goals and put in place the savings and investment plans to achieve them, you need to make sure you stay on track. The journey to financial freedom is a long road and it’s important to have regular reviews with a trusted advisor who will help you to prioritise your own needs when you come up against competing demands and who will nudge you back on track when you fall behind schedule.

Armed with a plan and a trusted Financial Advisor, you can feel more confident about your financial goals and your pathway to achieve them.

Should you have any queries or the above or wish to speak to a financial advisor please contact us on 01 2375500 or email jusask@harvestfinancial.ie

Investing in Times of Crisis

 

investment portfolio

Options for Investing a Lump Sum

Savings of over €12bn were built up by Irish households in 2020 during Covid-19 lockdowns. As the impact of the pandemic wanes this should support consumption growth but for those who are looking at longer term investment, what are the options in a low interest rate environment? We have looked at some options for investing a lump sum taking three hypothetical investors at three different life stages.

Determining Your Risk Profile and Investment Objective

Firstly, it is important not to look at any investment in isolation, but rather to consider it in the context of an investor’s overall financial position. Your attitude to risk, liquidity needs, and the importance of capital security should all be explored before any investment takes place. Rather than a focus on asset classes or fund options; your investment needs and objectives should drive the final recommendation.

Your understanding of investment risk and reward is critical. While a number of factors should be taken into account in setting the appropriate level of investment risk, the overriding influence from a purely objective standpoint is your investment time horizon. For example, a 30 year old investor can often afford exposure to considerably more risk than a pensioner seeking advice for investment of their life savings.

Diversifying your investment among the major asset classes will also help to achieve an degree of balance – the allocation to each asset class within your portfolio will have a significant impact on the eventual investment return that you might hope to receive.

So lets look at three investor profiles

Singleton in their 30’s with a long term investment horizon – Equity Exposure and ESG Investments

An investor with a long term time horizon can afford to take on more investment risk and exposure within their portfolio to more volatile assets such as equities, once this is in line with their objectives. We also find that younger investors are becoming more aware of the impact of their investments on society; although this is not limited to this particular group. A focus on making your money matter is understandable when your investments (from investing in fossil fuels to tobacco companies) might sometimes contradict your own values.

ESG Investing (the ESG acronym stands for Environmental, Social and Governance) has now become mainstream – around 40% of assets managed by European investment managers involve some kind of approach to sustainable investing, and legislative developments will continue to make ESG investment prevalent.

For long term investing a multi asset investment portfolio will facilitate investment across a broad range of asset classes in line with your risk profile and for a younger client with a long term investment horizon their investment portfolio may look like an Adventurous Investment Portfolio.

investment portfolio

Young Couple with a medium term investment horizon – Balanced Investment, Regular Payments

Couples will generally have a specific investment goal in mind, whether that is saving for future education costs or planning for their eventual retirement. A balanced portfolio with a moderate allocation to higher risk assets such as Shares and Property might be appropriate depending on the couple’s objectives. You can also spread your investment over a period of time by investing in a structure that allows you to make regular payments rather than one lump sum – this reduces the overall risk of investing, and helps stress levels when watching the market and trying to decide when to invest!

Person in their 60s, a couple of years off retirement (short time horizon) – Cautious Portfolio & Investing for Income

Older clients often have more of a focus on Income when considering their investment options. In this age bracket you may be looking to invest in a portfolio that will provide you with a source of regular income distributions to supplement any private or State pension income you’re expecting to receive once you retire. Income is a real measure of value  – we find that clients close to or in retirement can take a degree of comfort from their accumulating investment income, particularly when markets are somewhat volatile.

It’s worth bearing in mind that as a 60 year old your investment time horizon might still be long-term –  is possible to invest in portfolios that are designed to produce returns as a combination of income distributions and long-term capital growth, assuming you have the ability to take on the investment risk required.

Whatever stage in life you are at, it is important to determine your investment objectives, risk tolerance and capacity for loss before you make any investment decisions. Whether you’re new to the investing or a sophisticated investor our Advisors are ready to speak to you about an investment portfolio that suits your needs. Talk to us at justask@harvestfinancial.ie or call our team on 01 2375500.

Investing in Times of Crisis

financial markets 2021

Financial Markets Feb 2021

Month in Review

Following on the highly eventful year for markets that was 2020, a year that culminated in a highly contentious US election and a far from smooth handover of power, many expected 2021 to be a bit calmer. So far that has not been the case. Apart from the ebb and flow of optimism around the Covid vaccines, we have seen extreme volatility in Bitcoin prices, a sharp spike in silver prices and a number of US hedge funds suffer massive losses on short positions in a struggling retailer called GameStop. All these events had one thing in common, namely they were driven by armies of small retail investors coordinating their purchases on low cost investment platforms. GameStop was trading at less than $20 per share at the start of the year but was driven all the way to $350 per share before crashing back down. So far, the evidence would suggest that while a small number of investors profited very handsomely from these trades, the vast majority are nursing losses.

The Gamestop Rollercoaster in January

financial markets 2021

Markets

Equity markets have trended positive since the beginning of the year, albeit not markedly. The UK stands out among the major regions as still being some 14% behind where it was a year ago. Leading the field are China and Japan, both of which are ahead of where they were at the beginning of 2020 in strong double digits and which are both seen to be ahead of the Covid curve in global terms.

Market*Perf. Jan 2021*Perf. 1 Year*
Ireland-4.4%+2.2%
UK+0.4%-13.7%
Japan+0.6%+12.6%
Europe-1.1%+1.9%
US-0.3%+6.4%
China+6.8%+19.2%

*Source: Financial Times, Financial Express 

Investment Outlook

Whatever about the rights and wrongs of the GameStop and related episodes in January, they do indicate to us a level of irrationality present in some market pockets which underpins our case that equity investors are well advised to tread cautiously going into 2021. There is little doubt that valuations in some areas of the stock market look very stretched and that these excessive ratings could be a cause of market volatility during the course of this year. However, it is not accurate to say that all companies, or even most companies, are currently overvalued. We continue to believe that there is value to be had in equities so while our short-term stance is somewhat cautious, we are positive on equities over the medium to long term. That said because of the disconnect between some valuations and economic realities, we believe that strong active managers will have opportunities to outperform over the next couple of years. For that reason, we have added several such funds to our Recommended List in recent months. We cover one such fund, the 2X Midcap Library Fund, in this update. Elsewhere, matters are not improving for cash depositors as more financial institutions signal the introduction of negative rates for all depositors. While all of us need to keep a certain amount of cash on deposit, we would encourage all our clients to seek out income paying opportunities as a replacement for a part of their liquid deposits.

Fund in Focus for February 2021

Our Fund in Focus for February 2021 is 2X Midcap Library Fund – see more details here.

If you have any queries in relation to the above, please contact Harvest on 01 2375500 or email justask@harvestfinancial.ie.


Financial Market 2021 by Terry Devitt – Head of Investment

Investing in Times of Crisis

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Tel: +353 (0) 1 237 5500, Fax: +353 (0) 1 237 5555. Email: justask@harvestfinancial.ie