All Change Please
Usually a change of manager at a fund is flagged well in advance: young managers are brought up through the ranks, trained in the strategy and wheeled out to investors over a series of months or even years to raise their profile. That means, when the switch finally happens, there is no surprise and investors don’t jump ship.
Not so at the Fundsmith Emerging Equities Trust. Terry Smith surprised this week with the announcement that he will be stepping back from the day-to-day running of his emerging markets trust (though he will still be chief investment officer). The fund manager apologised to investors as he admitted “it didn’t quite work as we thought it was going to work”. Performance of the trust has been lacklustre since launch in 2014, but Smith insists it is “still a very rescuable proposition”.
So, what does the change mean for investors? Well a cut in the annual management fee, first and foremost, which is no bad thing. The strategy of the trust is also unlikely to change under new managers O’Brien and Patodia as they have worked on the investment team since launch.
But this may well be the problem. Smith had hoped he could replicate the incredible success of his Fundsmith Equity fund by following his mantra – buy good companies, don’t overpay, do nothing – in a different region. It’s a simple strategy that has worked wonders in the flagship fund, but one that has proved not so easy to export, as other star managers have found out before.
But it seems a shame that Smith isn’t staying on to try and turn the ship around. Any change at the helm of a fund requires investors to assess whether the fund still has a place in their portfolio, and this is particularly true when you’re talking about a star manager with a distinctive investment style.
Smith’s strong track record, charisma and easy-to-understand investment approach have likely earned him the benefit of the doubt from investors who might otherwise have ditched the underperforming trust before now. But fans of Smith may not be so forgiving to the two relative unknowns taking over. Still, if investors pile out and the trust falls to a discount, there might be a bargain to be had.
Leave the Risky Stuff to Cabbies
The old adage goes that when a cab driver starts giving you tips on an investment, it’s probably time to sell. That’s where we got to with cryptocurrencies at the end of 2017, when Bitcoin’s value soared to £14,000.
And where investors’ money goes, scammers are usually quick to follow. So, it was no surprise to see the Financial Conduct Authority issue a warning about the dangers of investing in cryptocurrency assets this week. The regulator says a whopping £27 million was lost in crypto and foreign exchange scams last year – on average, victims lost £14,600 each.
Innovation in currency is most likely a good thing and it’s also inevitable – in 50 years’ time this stuff is going be mainstream. But that doesn’t make it a viable investment. Trading currencies is a risky game that most professional investors don’t even bother with because it is such a volatile and unpredictable asset.
If you want exposure to the world’s most exciting innovations, put some money in a tech fund and leave Bitcoins for buying beers.
Sorry to be Boring, But…
Theresa May has announced she will resign as Prime Minister on June 7 and the first question on investors’ lips will be: what does this mean for me?
Well, at the risk of being boring, nothing.
I realise this isn’t a very imaginative stance but the best thing most investors can do when there’s a political or economic surprise really is absolutely nothing. It’s easy to panic when the stock market tumbles and to get carried away with the euphoria when it rises, and it’s tempting to try to buy and sell to make short-term gains. I would suggest trying to resist.
Why are you investing? It’s probably for retirement, to ensure you have enough money for long-term care in the future or perhaps to save for a house deposit. The point is, if you don’t need your money for five, 10, or even 40 years (and if you need it sooner you really shouldn’t be investing) then what happens on the stock market today is entirely irrelevant.
Keep your money in the market, top it up with small amounts regularly and maybe even be brave enough to add some more if the FTSE falls. Now for the really boring bit: it’s not timing the market, it’s time in the market that counts.
