The quarterly market and portfolio updates will provide some thoughts around markets and what is happening. In the monthly spotlight I wanted to spend some time on why the investment side makes us different.

April Spotlight

“An investment in knowledge pays the best interest.”

– Benjamin Franklin

In January I shared some insight into what I do; in this update I want to carry on that thread.

The above quote is really powerful, and something I hold fast to. Recently I was talking about my role and the work I do. The person I was talking to asked why I don’t share this. I guess the answer is that it is not natural for me to “blow my own trumpet”. So, with this in mind I want to share my thinking and hopefully provide a reason why what we do is so important, but often not fully understood.

In recent years it is has become clear that a role like mine is a dying breed. On paper it seems a simple process: find funds, build a portfolio and away you go. But it is more complicated. We are regulated and everything we do comes under scrutiny. If we invest money we need to justify what we do. The research behind building and running portfolios is a full-time job. It means for a company to invest in one person to do this it is an incredible expense because that person does not tangibly contribute to the business.

If I take that a step further, with many financial planning businesses my role would be combined with a role of a financial planner and therefore the financial planning aspect justifies their role. The problem is that to do the two is almost impossible.

More and more financial planners can see this and outsource the management to a third party. This in turn brings in extra costs, and not always the benefits you would expect. Clients end up paying up to 1% for the financial planning advice a year plus up to 1% for the management of the funds. Then on top of this are platform and fund charges.

It may sound cheesy, but this business was founded with the client at the heart of the business. That means that we want to control as many elements of the process as we can. So, our fees of 1% include the financial planning, the investment side and everything else. This would only change if we believed that there was something that was better, and as yet we haven’t found that.

Focusing on the quote, every day is a school day!!! I spend a lot of time meeting fund managers, reading and educating myself. We strongly believe that research and analysis is the only way to make good investment decisions.

I want to take one example to leave with you. Over the last two years there has been an increased focus on responsible investing. It means we are getting more calls from fund managers wanting to meet us and talk about their offering.

It is a bit like the emperors’ new clothes: everything is shiny and new, and the danger is to misunderstand what is on offer. We were fortunate that in 2014 we had a client who wanted us to build an Ethical Portfolio. At the time it was hard to find appropriate strategies, but we were able to build a portfolio.

Over the last eight years, we have met managers, fine-tuned the portfolio, and renamed it our Balanced Positive Impact Portfolio. Two years ago, when responsible investing started becoming the latest buzz word, we were already six years ahead of the game. We are real advocates of responsible investing. There is no doubt that elements of it are the new tech of the future. But we have built a good performance track record and we want to protect that.

There is a lot more choice in the market but it doesn’t mean it is good. There are many fund houses launching new funds because it is right for them, and not necessarily right for the client. We are also seeing some of the incumbents struggle because they haven’t been challenged up to this point.

We talk a lot about responsible investing, not because it is the latest buzz word but because we have a credible proposition. Building up a knowledge bank over eight years has been really helpful, but we know some of the holdings may not fit into the mainstream portfolios, especially social and homeless housing investment trusts. But we concluded that the “new tech” funds have a place in some of mainstream portfolios.

We believe that there is a misunderstanding of impact funds which invest in companies that deliver solutions, whether to improve the planet or society. The fascinating thing is that these companies are profitable, they tend to be niche and leaders in their areas and small or mid-cap. This means many of these of companies could be household names of the future. More importantly many of the names are not in global funds and so investing before others come to this conclusion offers a massive advantage.

In conclusion, having a dedicated investment team within a financial planning practice is getting rarer. It is clear that this is becoming outsourced, bringing additional costs to clients and often without the benefits. We have always believed that this is wrong. A fee covers everything unless we find something that can truly add additional value. That bank of knowledge and constant learning sometimes places us ahead of the game. It also challenges us, as we said in the last update. We don’t always get it right, but we hope we are humble enough to admit that and make changes when this happens.

And here is an offer from me. Every day I feel privileged to do this job and I am more than happy if you are ever in the office and would like to get a glimpse of what we do, to share that with you…..just give me some warning to tidy my office!!!

Tracking the market

Bitcoin has made a slight recovery but is still down this year. Oil remains the big stand out performer! The S&P 500 and Stoxx Index have recovered but remain negative and the FTSE100 has moved slightly positive. Gold has continued to rise and the Hang Seng has fallen further.

 1 January 202231 March 2022Increase
Bitcoin USD47,686.8145,538.68-4.50%
Crude Oil76.08100.28+31.81%
S&P 5004,796.564,530.41-5.55%
Stoxx Index489.99455.86-6.97%
FTSE 1007,505.207,578.80+0.98%
Hang Seng23,374.7521,996.85-5.89%

Sources of data: CNBC, Yahoo Finance & Reuters

What is in, and what is out?

Nine of the top ten funds over 12 months are commodity based, in the top twenty it is seventeen! The top two are unchanged – Oil and Gas Exploration and Production +79.0%, and iShares S&P 500 Energy Sector +73.60%. At number three is GS North America Energy and Energy Infrastructure Equity Portfolio +64.30%.

The bottom ten is a mix but includes four Eastern European Funds and three emerging market funds. The bottom three are Liontrust Russia Fund -57.2%, BlackRock GF Emerging Europe Fund -54.3% and HAN Global Online Retail UCITS ETF -50.1%.

The data from the Investment Association is up to the end of January. Europe ex UK had outflows of £157 m, North America outflows of £735 m, UK All Companies outflows of £1,351 m and Mixed Bond outflows of £217 m.

Short term money markets saw inflows if £838 m, mixed assets inflows of £370 m and volatility managed £325 m. So, it seems during January there was a move to safer havens and profit taking in areas like the US.

Net sales were negative in January at -£642 million. Responsible investments were positive but again falling from previous months.

In summary, there are clear signs that in January investors were taking profits and moving to safer havens. Commodities remain the big winner this year with Emerging Markets especially, Emerging Europe suffering the most.

Sources of data: TrustNet, Investment Association

Talking shop with fund managers

We have completed around 45 meetings this year. Additionally, we have had various economic updates. Below we share some thoughts from these meetings, some may contradict as these are views from different managers:


Below are thoughts from JPMorgan, Invesco, and Allianz:

  • When confidence is low it is a good time to get into equities, when things start to feel right markets will rally fast
  • Markets are likely to be choppier, so it is about taking advantage of opportunities as they arise
  • Oil supply constraints are not as bad as markets are pricing in
  • One of the greatest risks to markets is that they are not pricing in China siding with Russia. Other risks that markets are not pricing in are a China slowdown and a global recession


These are thoughts from JPMorgan and Invesco:

  • China is not dependent on Russia as a trade partner
  • The logistics are not there to buy in bulk oil and gas from Russia. They have an agreement to buy gas from Eastern Russia, but it will take many years to build the pipelines needed
  • China knows the damage sanctions do, and they don’t want to alienate themselves from the rest of the world
  • The economic progress over the last 30 to 40 years has kept the communists in power, why would they damage that

Ukraine / Russia

These are thoughts from First State, JPMorgan, and Invesco:

  • Putin is stuck as to how he saves face; his only option is to bomb cities and civilians to force a resolve
  • Whatever the outcome the main beneficiaries will be Latin American and Middle Eastern countries
  • The longer this continues the more likely Europe will fall into recession
  • The US is unlikely to fall into recession due to its self sufficiency on oil and gas
  • This conflict alongside COVID has united Europe in ways we have not seen before
  • Conflicts are terrible for markets in the short term, but they do tend to see through regional conflicts in the medium to long term

General disclaimer: The data has been sourced from external sources and although we have looked to ensure this is as accurate as possible, we are not responsible for data they supply. The view on markets is written in a personal capacity and reflects the view of the author, it does not necessarily reflect the views of LWM Consultants. Equally the views under talking shop are those of individual fund managers. Individuals wishing to buy any product or service because of this blog must seek advice or carry out their own research before making any decision. The author will not be held liable for decisions made because of this blog (particularly where no advice has been sought). Investors should also note that past performance is not a guide to future performance and investments can fall as well as rise.