Comment and opinion for retail investors in the UK
Sorry, there was no way I could make the title of this piece snappy!
The topic is perhaps one that will not be widely covered, if at all, in the mass media, but it is raising serious alarm bells in the investment industry outside of the USA, and may well have implications for American investors too, as I will explain.
This month I want to offer a primer on the topic of what are loosely called ‘private equity’ and ‘private credit’.
These terms describe rather generally forms of investment that do not fit easily within the framework of existing UK legislation and regulation for retail investors but which forms of investment are currently available to retail investors indirectly, by being included in the assets of products we recognise like pension funds and investment trusts, and which may become more widely available in the near future..
There is definitely something building by way of a story or even a campaign, with vested interests acting a cheerleaders, which narrative might be summarised as suggesting that this form of asset is the new ‘next great opportunity’ and retail investors ought not to be locked out of such a great opportunity by the ‘nanny state’.
As an indication of how the subject is highly topical, especially in the USA, I would refer you to a very recent comment from a Goldman Sachs AM spokesman saying that he could “even see a world where we stop using the phrase public and private; we just say great companies or great credit”.
Now that sounds like a salesman pushing a new product line to the sceptic in me. Such is the general tone of the trade media coverage I am seeing.
I recently watched a webinar from Columbia Threadneedle, the main purpose of which was to promote their UK Equity Income skills, a market segment where the firm has always had a decent reputation with advisers. Columbia is the US based owner but Threadneedle has been around right back into my childhood when my father worked for the then privately owned insurer Eagle Star and Threadneedle was its investment management arm. It went through ownership by British American FS, Allied Dunbar and then Zurich before ending up with Columbia.
The webinar was presented by Jeremy Smith and Dominic Younger and a fair part of it explained their investment philosophy and process which is very much ‘bottom up’. They listed a number of holdings and I was broadly impressed, but this note is not about their fund.
I will publish a new informal ‘at the whiteboard’ style video talk at midday UK time today. There is a return to the Daly Telegraph Guide to Investing from the 1980s and some high-level guidance on the techniques of portfolio diversification.
Here are some of the most interesting points I gleaned from a Morningstar presentation last week, taking a look at prospects for European markets in the second quarter. Although the focus was Europe, the head of global equity strategy was on the call, so the macroeconomic content of the call was actually quite broad.
Naturally the message running through all the commentary was, stick of rock like, Trump’s tariffs. I actually thought it was quite bold of Morningstar (MS) to even offer a forward-looking commentary, and the European lead had to admit that he had needed to redo several of his charts in the days approaching the call, which was at the end of last week, and by today had already been overtaken to a certain extent by further vague prognostications from members of the US administration.