This fund is one I have been familiar with for some years, in fact since it launched in 2008. It has had the same fund manager throughout. He is an India specialist with obvious credentials but the fund has not done well relative to its benchmark over the last 2 years after great results in 2016. Most of the damage has been in the last 12 months. I commented on Indian funds in mid 2018, but newer subscribers may not see those posts and other readers may like an update. People tend to focus on the funds in their portfolios with the largest negative numbers!
March Watching Brief now published
My latest cogitations are now available for members to read. As always feedback is welcome. Here is a link
[Read more…] about March Watching Brief now publishedNew ‘How to’ article on ethical investment
I am drafting what will be a longish comprehensive article on investing in line with your conscience.
Ethical investment, sustainable investment and the quality of corporate governance are overlapping issues that make headlines quite often. The BBC published a piece on the subject on their web site just this week. I have been selecting or avoiding investment funds on ethical grounds for myself and a small number of my clients (when I was an IFA) for many years.
In my experience if someone is asked in a questionnaire if they want to invest ethically, a large majority say ‘yes’, but when the implications are properly explained many change their mind or say ‘as long as I will still make money’.
It IS possible to invest in ways that line up with your conscience (up to a point) but you need to understand what the consequences of constraining your choice mean and why in a capitalist world there is bound to be a tension between getting good returns and the trading methods of the investee business.
The topic is worthy of a book and I suppose several have been written on the subject. My objective as ever is to write enough to give you a good overview as an intelligent reader, but not bore you to tears.
I would welcome any questions or suggestions for aspects that ought to be covered as I work on the article or for adding in later.
Over commitment? (m)
Politics – let’s do the splits
Political risk is always something investors have to take into account. In the UK it was traditionally an easy call for newspaper columnists – Tory governments are pro business and aligned with the interest of investors; Labour are socialist and so bad news for investors.
Actually, markets are not sensitive as to who is in government, even in the UK, in any direct sense. Markets in the long run reflect economic conditions and in the short run human psychology (which may be influenced by news and published opinion, so is correspondingly susceptible to political events).
Furthermore, a Labour party of the Blairite style was undoubtedly good for many business because it adopted an expansive public spending programme but gave nearly all the work to the private sector. Also, if there are more workers employed and spending money, it really does not matter if they are in the private or public sector: national income will grow.
Why am I delivering this little homile? Because the UK is engaged in a process (Brexit) that has descended into chaos because of the entrenched positions at the edges of the two main parties – the Right of the Tory party and the Left of the Labour party. This descent into chaos is manifestly going to be bad for the country and probably bad for investors in the UK and Europe.
So the emergence of a small group of people who suggest that something more centrist is intelligent could just be good news for investors. In France a change to centrist pro business policies is causing unrest, but they started from a different point. Where your blogger lives a major change to a centrist, mildly green pro technology party has seen solid economic growth and inwards investment.
Of course, we remember the SDP and one of our psychological biases says nothing will come of this independent breakaway group. As an investor, I rather hope it does trigger some modernisation in British politics. We could do with a few less dinosaurs, whether they be from Eton or CND.
Pump and Dump?
If the title of this post is a mystery to you, let me explain:
A pump and dump operation is a fraudulent manipulation of asset prices, usually individual shares, to make a large profit from naïve investors.
Essentially, the fraudster will buy a large number of shares that are cheap because the investee business is practically worthless. They then use a variety of illegal or shady methods to increase the price. These will usually include a hard sell over the telephone to vulnerable investors with a fake story attached, placing sales with friends who will sell out later and inventing news. As demand for the shares increases and the price starts to move rapidly because the fraudster may own a large part of the total shares available for sale but only actually sells a moderate amount at this stage, more and more greedy participants can be persuaded to enter the market.
When the fraudster has unloaded enough shares to drive the price up to an implausible level, he or she and friends will rapidly sell off the large remaining stock they have. A drop in the share price initially as liquidity improves may even make unwise buyers think they are now getting a bargain!
The fraudsters bank a large profit and the share price collapses very fast, leaving many inexperienced investors with shares that are almost impossible to trade and therefore worth very little.
I mention this now because it feels to me like global stock markets are operating such a wheeze right now, albeit collectively and without a fraudulent intent.
I suggest this because global equity markets, those investing in company shares, have risen to levels last seen in the mid Autumn and seem to be heading relentlessly up. But there is no change in the global economic climate to justify this. In fact most real news is negative and many of the underlying risks are actually greater.
Many commentators are struggling to explain what element of the combined human psyche is responsible. Some say that the US and China are bound to do a good trade deal. Others say that the likelihood of the UK crashing out of the EU is reduced (although for the life of me, I can’t follow their logic). Others say that although profits are beginning to shrink and dividends might slip back, this is only happening slowly and basically ‘everything is all right’. Some point to central banks being rather worried, so potentially slowing rate rises (that is good news?!)
My feeling is that we have a situation that might be equated to the mindset of a gambling football supporter betting on his or her usually top flight team winning a major competition when they have managed to make it through the early rounds, even though the manager has just been sacked, the best players sold off and until a recent cup run, this year’s league results have been pretty rubbish. Because such a person needs a boost to justify their support, they will bet on the win. The idea of a loss after several years of glory is just too depressing. I think many stock market participants are talking up the market because the alternative is just too gloomy to contemplate.
This is worrying, because if there is a correction back to a new harsher reality, the big players will take their money off the able in a flash, at their pumped up prices, and we small investors will be left holding a lot of assets that have just been dumped. Time to increase cash weightings further? Personally, I think that would be prudent for anyone who does not cope well with short term volatility – and that will be most people.