What you missed over the summer
You’ve sorted through thousands of emails, the tan is starting to fade and thoughts are starting to turn to Christmas…okay so maybe not yet.
But a summer of sport – the UEFA Euro 2012 tournament in Poland and Ukraine, the London 2012 Olympics, the Paralympics and Wimbledon – may have kept you somewhat distracted and led to many of us perfecting our procrastination skills.
So here’s a quick summary of what’s been going on in the financial and investment world over the past few months.
If you are one to believe in the old adage of “sell in May and go away, come back again on St Ledger’s Day” then you would have missed some surprising gains in Western world indices.
From 31 May to the close of markets on 3 September investors drew strength from central banks’ attempts to ease market concerns.
Over the period the FTSE 100 rose 8.2%, the FTSE EuroFirst 300 rose 12.1% and the S&P 500 was up 7.3%.
This is quite a dramatic contrast to last year, when the FTSE 100 fell 10.9%, the FTSE EuroFirst 300 dropped 19.5% and the S&P 500 fell 11.2% from the end of May to 5 September 2011.
Ian Stewart, Deloitte’s chief economist in the UK, noted that global equity markets have returned 11% this year compared to a virtually flat return from government bonds, despite investors’ desire for ‘safe haven’ assets in the form of UK, German and US sovereign debt.
Lower quality debt has also delivered strong returns, he said. UK junk bonds have returned 21% this year, more than twice the returns for top-rated corporate bonds.
Stewart said the euro crisis eased after the European Central Bank president Mario Draghi vowed to “do whatever it takes” to save the 17-member bloc.
Draghi’s comments also saw 10-year borrowing costs for the Spanish and Italian governments, which hit a euro-era high of 7.5% on 23 July and a 2012-high of 6.6% on July 25 respectively, begin to fall back to more sustainable levels.
Aside from markets, in the UK the Office for National Statistics caused shock with its first estimate of Q2 GDP, reporting a contraction of 0.7%, later revised down to 0.5% on the second estimate.
The stalling economic recovery in the UK led the Bank of England (BoE) to boost its quantitative easing programme by £50bn in July, with Monetary Policy Committee minutes showing a cut in interest rates was also discussed.
In its Inflation Report last month the BoE slashed the UK’s growth forecast for 2012 to close to zero, due to the continuing crisis in the eurozone.
The Bank revised its previous estimate of 0.8% growth in 2012 – predicted just three months ago – and said the outlook for UK growth remained “unusually uncertain”.
Meanwhile, UK inflation headed closer to the Bank of England’s target of 2%, falling to 2.4% in June before a small jump in July up to 2.6%.
The most high profile activity over the summer on the regulatory front was undoubtedly the FSA fining Barclays £59.5m for manipulating LIBOR.
But the regulator also had its eye on retail investment, confirming a ban on cash rebates to consumers and payments from product platforms, expanding its probe into wealth manager practices and proposing to ban the sale of UCIS to retail investors.
Latest IMA figures may show retail investors continue to pour money into corporate bonds, but concerns over market liquidity led the FSA to ask questions of asset managers at the start of the summer.
The regulator has asked groups to stress test corporate bond portfolios and explain how they would deal with potential redemption requests.
The FSA also censured a number of banks for the mis-selling of swaps, another low point in a dark summer for leading UK financials that encompassed LIBOR investigations and US-levied fines for HSBC (anti-money laundering failings) and Standard Chartered (dealings with Iran).
Over the page: Fund launches and people moves
Fund launches were thin on the ground over the summer, but here are a few that you may have missed.
Aberdeen announced plans to launch a global small-cap equities fund for Stephen Docherty in late September.
HSBC Global Asset Management is to launch an Indian bond fund, giving UK retail investors access to the market for the first time.
Meanwhile, Schroders launched its first emerging market debt funds for retail investors, managed by recently recruited co-heads of fixed income James Barrineau and Rajeev de Mello.
In July Franklin Templeton launched a Brazilian Opportunities fund targeting a total return from Brazilian equity, fixed income and currency markets, while Smith & Williamson Investment Management announced it was to add to its fixed income range with a Medium-Dated Corporate Bond fund for Ian Kenny.
Groups also continued to roll out lower-risk offerings in the belief such vehicles will prosper once the Retail Distribution Review comes into force next year.
Neptune unveiled a Defensive Managed fund for Harriet Grieve, M&G introduced a Defensive offering to its rebranded ‘Episode’ multi-asset range and Jupiter announced the launch of a new Merlin product, the Merlin Conservative portfolio, for John Chatfield-Roberts and team.
Some groups took steps to limit inflows into some of their most popular offerings as they continue to swell in size.
M&G said it would “explore ways” to stem flows into Richard Woolnough’s corporate bond funds, while First State closed Angus Tulloch’s Asia Pacific Leaders offering to new platform business.
With their UK Opportunities fund approaching its £1bn capacity, JOHCM launched a Global Opps fund for Ben Leyland and John Wood.
Elsewhere, Newton said its new Emerging Market Income fund will act as a complement to Jason Pidcock’s existing Asia Income fund, which remains open to new investment.
Movers & Shakers
People moves within investments were almost as thin on the ground as fund launches but there were some high profile departures.
Charlie Porter left F&C, with Mike Warren stepping up to become head of retail business, while Threadneedle vice chair Sarah Arkle swapped her position on the group’s board for a non-exec role at Henderson.
At Jupiter, fixed income head John Hamilton is to retire after almost 25 years of service, with Miles Geldard heading the group’s newly-combined fixed interest and multi-asset team, while Schroders head of credit, Adam Cordery, left the group to pursue other opportunities.
Bestinvest has recruited Jason Hollands as managing director with responsibility for business development and communications. Bestinvest’s Adrian Lowcock, meanwhile, is to move to Hargreaves Lansdown.
Last month Scottish Widows Investment Partnership (SWIP) appointed William Low as director of equities following a restructure of its equities strategy.
Former Ardevora partner Rob Page joined Hermes Fund Managers as head of marketing and communications, as the institutional house pushes into the UK wholesale market for the first time.
Martin Currie hired a North American specialist manager, in a bid to turnaround performance of its flagship fund which has slumped to the bottom quartile of the IMA North America sector.
The group appointed Penny Kyle from the Kuwait Investment Office as a co-manager alongside Tom Walker on its North American portfolios.
Other notable moves included the departure of AXA European high yield head Andrew Wilmont and BlackRock’s decision to appoint Roland Arnold as co-manager on Richard Plackett’s UK Special Situations fund.