www.sandwdfm.com Smith & Williamson The use of investment companies in an RDR world David Amphlett-Lewis Mickey Morrissey Citywire New Model Adviser Retreat 10 – 12 th September 2014 September 2014 Defaqto is an independent financial research and software company specialising in rating, comparing and analysing financial products and funds. It provides an independent, unbiased mechanism for helping people instantly understand where a product or proposition sits in the market, based on the features and benefits it offers. The 5 Star Rating represents an excellent product with a comprehensive range of features and benefits.
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www.sandwdfm.com
Smith & Williamson The use of investment companies in an RDR world David Amphlett-Lewis Mickey Morrissey Citywire New Model Adviser Retreat 10 – 12th September 2014
September 2014
Defaqto is an independent financial research and software company specialising in rating, comparing and analysing financial products and funds. It provides an independent, unbiased mechanism for helping people instantly understand where a product or proposition sits in the market, based on the features and benefits it offers. The 5 Star Rating represents an excellent product with a comprehensive range of features and benefits.
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Contents
• Introduction to Smith & Williamson
• Investment Companies Sector
• S&W Outsourcing Options
• Appendix
• Performance & Awards
• Contact us
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Funds under management and advice
* Other includes accounts or portfolios not split out in the categories in the above table, and allows for the overlap between private clients and pooled funds. ** FCA regulated/recognised. Please note there are both private client and institutional portfolios included in some of the categories in the above table. Source: Smith & Williamson Investment Management (unaudited) as at 30.06.14
Investment offices in London, Glasgow, Bristol, Birmingham, Dublin and Belfast
Dedicated to supporting Independent Financial Advisers
Model Portfolio Service Capability
Wide range of investment instruments including Investment Trusts
Smith & Williamson Investment Management
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• Boards of Directors
• Discounts and Premiums
• Gearing
• Buybacks and Issuance
• Revenue Reserves
What are Investment Trusts?
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Market Cap £102bn, Net Assets £109bn
Universe by asset class (£m market cap)
Source: Numis Securities Investment Companies Research, as at 31.12.13
Developed equity
Asia/Emg Mkts
Sector Specialist
Infrastructure
Property
Private Equity
Hedge Funds
Debt
44,265
11,934 7,600
6,391
10,375
11,179
4,725 5,166
Access to a wide range of asset classes
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Capital Returned by Year Since 1999
Source: Numis Securities Investment Companies Research/ Morningstar, as at 31.12.13
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ITs v OEICS
0.2%
0.7%
1.1%
1.4%
1.5%
1.8%
2.0%
2.3%
2.3%
2.3%
2.5%
2.5%
2.8%
3.2%
4.1%
4.2%
5.6%
6.0%
6.5%
7.2%
0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0%
JPMorgan Indian
Polar Capital Technology
Henderson Far East Income
Fidelity European Values
Edinburgh Dragon
Ruffer Investment Company
Impax Environmental
Murray International*
JPMorgan European Smallers
Aberforth Smallers
Merchants
JPMorgan Emerging
Baring Emerging Europe
Aberdeen New Dawn
Lowland
Temple Bar Investment Trust
Templeton Emerging Markets
Jupiter European Opportunities
BlackRock World Mining
Aberdeen Asian Smallers
Source: Canaccord Genuity as at 31.12.13 (Annualised figures). *3-years to 31.12.13.
• Neil Woodford / Mark Barnett • Hugh Young • Richard Plackett • James Henderson • Alexander Darwall • Alastair Mundy • Evy Hambro • John Bennett • Paul Causer, Paul Read • Robin Parbrook
High profile managers
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How to access Neil Woodford
Edinburgh IT v Invesco Perpetual Income Source: Bloomberg, as at 19.06.14
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How to access Hugh Young
Aberdeen New Dawn v Aberdeen Asia Pacific Source: Bloomberg, as at 31.07.14
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• Investment trusts routinely trade at a discount or premium to underlying asset value
• Opportunity to generate alpha by exploiting discount movements
• Discount control mechanisms
Discounts
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Gearing
Scottish Mortgage v MSCI World Source: Bloomberg, as at 31.07.14
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Research & investment process
Tactical Asset Allocation
Portfolio Construction
David Amphlett-Lewis Head of ETF Research
James Burns Head of Investment Companies Research
Security Selection
Nick Marshall EM & European Open-Ended Analyst
Genevra Banszky von Ambroz Investment Companies Analyst
Exchange Traded Products Open Ended & Unit Trusts Investment Trusts
Distribution Technology Risk Graded Smith & Williamson Research
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• Assess a wide range of investment vehicles within each asset class
• Includes closed-ended funds, open-ended funds, ETFs and direct fixed interest securities
• In-house sector specialists analyse sector performance and relative valuations, using quantitative research
• Assess risks, opportunities and themes for the sector, and specific characteristics of individual investments such as price, value and style
• Qualitative assessment involves meetings with company management (typically hold over 500 meetings with management every year)
Investment selection
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Asset allocation house view Asset Class Asset Allocation Product Allocation
S&W Stance Notes Passive Open Closed
Fixed Income
Sovereign = Low returns expected to persist in an environment of financial repression, an important hedge against potential deflation outcomes
Corporate -
Additional returns for accepting credit / default risk have become very low as the hunt for yield continues, we have a become more cautious in high yield, and correlations with equity markets may be higher than some investors expect
Alternative
Property - Retains attractive income characteristics, especially in regional commercial property investments, and in spite of positive price momentum in recent years. Also vulnerable to rising interest rates
Alternative Alpha +
Poor returns from many hedge strategies, combined with weaker demand picture for many commodities. An increase in volatility would be likely to favour the sorts of managers we favour at this time.
Equity
UK +
Attractive valuations in UK large cap, with mid and small cap valuations reliant on continued strong economic growth in the UK to be justified. We favour modest increase in our passive exposure in the current environment
Developed =
Valuations in North America become less compelling following strong price performance, we continue to favour modest overweights in Europe drive by valuations and Japan in expectation of continued structural reforms
Developing -
Positive Neutral Negative
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Product mix
Source: Smith & Williamson Investment Management and StatPro as at 31.07.14
• Increase of outsourcing over recent years, de-risking your business
• Wide range of investment vehicles including IT’s, demonstrates an awareness of the relevance of different types of investment as defined in FCA rules
• Increase the value of your business
Conclusion
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Appendix
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AIM Portfolio
AIM Portfolio Service
Outsourcing options
Model Portfolio Service
Ascentric
Novia
Verbatim
Discretionary Fund Management
Bespoke portfolios
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Cost isn’t everything (I)
Source: Bloomberg, as at 31.07.14
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* Distribution technology – Asset allocation update – October 2013. Benchmark: Composite Novia Benchmark. ** Launch date as at 30.09.2012 *** Smith & Williamson Investment Management (unaudited), Bloomberg and Morningstar as at 31.12.13. All figures capital only. **** Novia portfolio expense estimate (%) as at 30.06.14.
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S&W Range activity highlights – 2014 to date
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Name Reasons for trade Rationale Driver
Jan Reduced Blackrock Smaller Companies Trust Switching out of UK Smaller Companies in favour of whole index passive exposure.
Switch style Valuation
Jan Bought SSGA SPDR FTSE All Share ETF Introducing additional UK broad market tracker at the expense of UK Smaller Companies.
Mar Sold Schroder European Alpha Plus Z inc Exiting position following poor performance of high-quality growth focused active manager.
Switch style Macro Mar Bought IFDS Argonaut European Alpha
Increasing exposure to peripheral European economies given our expectation of more pro-active ECB policy.
Mar Reduced Axa Framlington UK Select Opps Reducing UK equity active overweight, following good performance. Allocation Macro
Mar Increased Cash Increase in cash, from UK equity given increasing geopolitical risks.
Apr Sold Threadneedle American Sold in favour of passive exposure following the departure of respected manager Cormac Weldon.
Switch passive Manager Apr Bought Vanguard US Equity Index New holding added on the basis of disciplined
physical replication and low cost.
Note: The above is representive of transactions widely executed across the S&W range and should not be construed as comprehensive of all transactions in all models. Individual holdings changes in specific S&W strategies may therefore not be detailed. Those shown will be those which have been applied across more than one of the S&W strategies and seek to capture the direction of travel of asset allocation of the S&W range over the period shown. Source: Smith & Williamson Investment Management as at 30.06.14
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Q2 2014 Investment review
Source: Smith & Williamson Investment Management as at 30.06.14. All figures capital only. Launch date 30.09.12. Benchmark: Composite Novia Benchmark.
S&W Balanced Income (DT5) Capital only performance
Portfolio Benchmark
-10 0 10 20 30 40 50 60
Total
UK Equity
North America Equity
Europe Equity
Japan Equity
Pacific Basin ex Japan Equity
Emerging Equity
UK Index Linked Bonds
UK Corporate Bonds
Overseas Bonds
Alternatives/Property
Cash Calendar year 2013
-10 0 10 20 30 40 50 60
Total
UK Equity
North America Equity
Europe Equity
Japan Equity
Pacific Basin ex Japan Equity
Emerging Equity
UK Index Linked Bonds
UK Corporate Bonds
Overseas Bonds
Alternatives/Property
Cash Year to date 2014
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Performance & awards • Defaqto 5 Star rating for DFM (Managed Portfolio) • Citywire Weath Manager Awards 2013: Winner of Steady Growth Portfolio, Shortlisted as Aggressive Portfolio and Best Large Firm • Citywire Wealth Manager Awards 2012, 2011 & 2010: Winner of Best Large Firm • Portfolio Adviser Wealth Manager Awards 2014 & 2013: Winner of Gold Award (Large) for Absolute Return Portfolio, Gold Award (Large) for
Balanced Portfolio, Platinum Award (Large) for Balanced Portfolio and Gold Award (Large) for Aggressive Portfolio • Citywire Wealth Manager Awards 2012: Winner of Steady Growth Portfolio • Spear’s Wealth Management Awards 2012/13 – Winners Winner of Asset Management Firm of the Year for High Net Worths • Citywire Wealth Manager Awards 2011: Best Balanced portfolio and Best Aggressive portfolio • Investors Chronicle and FT Wealth Management Awards 2011: Winner of the Best Balanced Wealth Manager and shortlisted as Best Growth
Wealth Manager and Best Cautious Wealth Manager. • PAM Awards 2011: Winner of Investment Performance – Absolute Returns Portfolios. • Spear’s Wealth Management Awards 2010 – Winners Winner of Asset Management Firm of the Year for Ultra-High Net Worths • STEP awards 2009/10, 2010/11 and 2013/14: Winner of Investment House of the Year
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London investment team biographies
David joined Smith & Williamson in 2010 as a Director from Deutsche Bank where he was an Investment Manager. David began his career with Societe Generale Investment Management in 1999 where he was involved with establishing a portfolio management service for individual and company pension schemes. A Member of the Chartered Institute for Securities & Investment, David is also a graduate of the Economics Department of Birmingham University. Direct line: 020 7131 4791 [email protected]
James joined Smith & Williamson in September 1999 and started working on the investment trust desk in January 2001. He is now head of the Multi-Manager desk, managing the Smith & Williamson MM Global Investment Fund and Smith & Williamson MM Cautious Growth Fund (both funds of investment trusts), and is co-manager of the Smith & Williamson MM Endurance Balanced Fund (a fund of open-ended funds). James sits on the Asset Allocation Policy Committee and also co-ordinates the investment trust recommended list for the Private Client department. James graduated from the University of St. Andrews in 1998 with an MA (Hons) and is a Chartered Member of the Chartered Institute of Securities & Investment. Direct line: 0207 131 4714 [email protected]
David Amphlett-Lewis - Partner James Burns - Partner
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Sales & Sales support
For further information, please visit: www.sandwdfm.com
Note: On 7 May 2013 Smith & Williamson Investment Management Limited became a Limited Liability Partnership (LLP). Former Directors of the limited company became Partners of the new LLP.
Julian joined Smith and Williamson Investment Management in November 2011 as Head of Broker Desk. He began his career in Financial Services in 1997 at Credit Lyonnais Rouse working in Commodity Derivatives before transferring to Laing and Cruickshank and managing Private Client portfolios. He has also worked at UBS Wealth Management before joining Close Asset Management in 2009 establishing their Discretionary Portfolio Management service for Independent Financial Advisers. Julian has a BA Honours degree in Politics and Social Psychology from Loughborough University and a Diploma in Management Studies from the University of Westminster. He is a Chartered Fellow of the Chartered Institute for Securities and Investment. Direct line: 020 7131 4628 [email protected]
Julian Polnik - Head of Broker Desk Mickey joined Smith & Williamson in December 2012 as Head of UK IFA Sales and was appointed Head of Distribution in July 2014. He is responsible for growing intermediated sales into the DFM, Managed Portfolio Service and MultiManager business lines. Previously Mickey was Head of Distribution at Liontrust Asset Management for ten years and prior to that worked at Merrill Lynch Investment Managers for 12 years. Mickey was commissioned into the Irish Guards where he served for 12 years before joining the investment management industry in 1989. Mickey is a partner of Smith & Williamson Investment Management LLP and is a Fellow of the Chartered Institute for Securities & Investment. Direct line: 020 7131 4693 [email protected]
Mickey Morrissey – Head of Distribution
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Important information Risk warnings • Investment does involve risk. The value of investments can go down as well as up. The investor may not receive
back in total the original amount invested. • Past performance is not a guide to future performance. • Rates of tax are those prevailing at the time and are subject to change without notice. Clients should always
seek appropriate tax advice from their financial adviser before committing funds for investment. • When investments are made in overseas securities, movements in exchange rates may have an effect on the
value of that investment. The effect may be favourable or unfavourable. • Investing in alternative assets involves higher risks than traditional investments and may also be highly
leveraged and engage in speculative investment techniques, which can magnify the potential for investment loss or gain.
• Investments in emerging markets may involve a higher element of risk due to political and economic instability and underdeveloped markets and systems.
• Please note that bond funds may not behave like direct investments in the underlying bonds themselves. By investing in bond funds the certainty of a fixed income for a fixed period with a fixed return of capital are lost.
• Shares in AIM companies are likely to be high risk and volatile. Their value, and the income arising from them, may go down as well as up, and there is the possibility that investors could lose their entire investment. Shares in an AIM company may be illiquid and it may be difficult or impossible to sell them. Investors should take independent investment and taxation advice regarding AIM investments and qualifying tax relief, which can be provided by Smith & Williamson.
• In relation to any guided architecture investment options, Smith & Williamson Investment Management (SWIM) is unable to assess or provide advice on the suitability of any product or service for individual circumstances. No consideration has been given to the suitability of any investment or service for the particular needs of any recipient. SWIM will not be responsible to any other person for providing the protections afforded to retail investors or for advising on any investment as a result of using this service.
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Disclaimer This document contains information believed to be reliable but no guarantee, warranty or representation, express or implied, is given as to their accuracy or completeness. This is neither an offer nor a solicitation to buy or sell any investment referred to in this document. Smith & Williamson Investment Management documents may contain future statements which are based on our current opinions, expectations and projections. Smith & Williamson Investment Management does not undertake any obligation to update or revise any future statements. Actual results could differ materially from those anticipated. Appropriate advice should be taken before entering into transactions. No responsibility can be accepted for any loss arising from action taken or refrained from based on this publication. The officers, directors and employees of Smith & Williamson Investment Management, and affiliated companies and/or their officers, directors and employees may own or have positions in any investment mentioned herein or any investment related thereto and may trade in any such investment. Issued by Smith & Williamson Investment Management which is a trading name of NCL Investments Limited and Smith & Williamson Investment Management LLP. Authorised and regulated by the Financial Conduct Authority (LLP registration number is 580531). ARC Private Client Indices (“PCI”) are based on historical information and past performance is not indicative of future performance. PCI are computed using a complex calculation and the results are provided for information purposes only and are not necessarily an indicator of suitability for your specific investment or other requirements. ARC does not guarantee the performance of any investment or portfolio or the return of an investor’s capital or any specific rate of return. ARC accepts no liability for any investment decision made on the basis of the information contained in this report. You should always complete your own analysis and/or seek appropriate professional advice before entering into an agreement with any PCI Data Contributor. The content is the property of ARC or its licensors and is protected by copyright and other intellectual property laws. Use of the information herein is governed by strict Conditions of Use as detailed on www.assetrisk.com/pci Ref: xxx/2014/db
