Investment

[fletchsmile]

In the context of active managed funds vs trackers/ETFs I thought the following article was interest on M&G's American Fund. HL highlight a "dearth" of managers consistently able to add value in the US market. Much of the research done as mentioned above, on active vs ETF/tracker debate is from developed markets - particularly the US..

Secondly Hargreaves Lansdown's Wealth 150 is another tool I use when evaluating funds and fund managers when doing research. Some very useful info on Fund Management houses as well as fund managers and an opinion on which they think are best in the UK. As Thailand opens up, some of the funds sold here actually are feeders into overseas funds, so it can be relevant from that persepective too.

Specifically someone wanting to read about Aberdeen could look at the following and compare fact sheets to the funds sold in Thailand

http://www.hl.co.uk/funds/fund-discounts,-prices--and--factsheets/search-results?investment=aberdeen&x=-547&y=-181

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http://www.hl.co.uk/funds/fund-discounts,-prices--and--factsheets/search-results/m/m-and-g-american-class-x-accumulation/research

Our view on this Fund

The M&G American Fund and M&G Global Leaders Fund have been removed from the Wealth 150 list of our favourite funds across the major sectors.

The funds are managed by Aled Smith who applies the same process and principles to each portfolio. His approach means decisions are based on the prospects of individual companies, rather than his outlook on the wider economic environment. Yet since the onslaught of the financial crisis in 2008, the economic picture has dominated US and global markets, which hasn't suited his approach.

An important theme of the funds is 'corporate recovery'. Aled Smith searches for companies that he feels are misunderstood because of a chequered history, but are in the process of reinventing their business models. In his view, the valuations of these companies don't reflect their full potential and he believes he can find outstanding value in those companies investing for the future. He recognises it can take time for reinvested capital to translate to larger profits. However, investors are often focused on short-term company earnings and in many cases his favoured companies have lagged those viewed as more stable by investors. If he is correct, and the market is underestimating the potential of global companies undergoing restructuring, the funds could produce good long-term returns.

In relation to the M&G American Fund, there are few managers in the US market that have consistently outperformed across the market cycle. Many have succeeded only in outperforming for short periods, when conditions suit their approach, and this certainly applies to Aled Smith. We prefer to highlight managers who can consistently add value, but there is a dearth of these investing in the US market.

Around 50% of the M&G Global Leaders Fund is also invested in the US market. Given the similarities with the American fund, this portion of the portfolio has not been beneficial to performance. Indeed, according to our analysis, the manager's stock selection in both funds has been weak for a number of years, affecting performance.

We are firm believers that investors should take a long-term view when investing with active fund managers. Unfortunately, it is over longer periods where fund managers investing in larger US companies seem to struggle. We will continue to look for funds investing in this area that we believe can add value against the market. In the meantime, we feel it is prudent to remove the M&G American Fund from the Wealth 150. Furthermore, due to similarities with the M&G Global Leaders Fund and the higher conviction we hold in other funds in the Global sector, this fund has also been removed.

We would stress that this is not a suggestion to sell either fund. We believe each represents a reasonable choice in their sector, however we feel they are unlikely to deliver significant outperformance over the long term.

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Edited March 10, 2013 by fletchsmile

[topt]

In the context of active managed funds vs trackers/ETFs I thought the following article was interest on M&G's American Fund. HL highlight a "dearth" of managers consistently able to add value in the US market. Much of the research done as mentioned above, on active vs ETF/tracker debate is from developed markets - particularly the US..

Secondly Hargreaves Lansdown's Wealth 150 is another tool I use when evaluating funds and fund managers when doing research. Some very useful info on Fund Management houses as well as fund managers and an opinion on which they think are best in the UK. As Thailand opens up, some of the funds sold here actually are feeders into overseas funds, so it can be relevant from that persepective too.

Specifically someone wanting to read about Aberdeen could look at the following and compare fact sheets to the funds sold in Thailand

http://www.hl.co.uk/funds/fund-discounts,-prices--and--factsheets/search-results?investment=aberdeen&x=-547&y=-181

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Hi Fletchsmile - I have used HL for a long time and whilst I think there platform is great I do think you have to be a little careful with their choice of funds especially on the Wealth 150. Not sure if you have seen it but a lot of negative comments on various boards about "hidden" rebates from fund providers skewing the selection. Certainly some smaller good performing funds don't seem to get on there and they have never advocated Investment Trusts until very, very recently. I do agree though they are also a good source of info but I always try (now) to cross reference it.

Be interesting to see if RDR changes anything......

[fletchsmile]

In the context of active managed funds vs trackers/ETFs I thought the following article was interest on M&G's American Fund. HL highlight a "dearth" of managers consistently able to add value in the US market. Much of the research done as mentioned above, on active vs ETF/tracker debate is from developed markets - particularly the US..

Secondly Hargreaves Lansdown's Wealth 150 is another tool I use when evaluating funds and fund managers when doing research. Some very useful info on Fund Management houses as well as fund managers and an opinion on which they think are best in the UK. As Thailand opens up, some of the funds sold here actually are feeders into overseas funds, so it can be relevant from that persepective too.

Specifically someone wanting to read about Aberdeen could look at the following and compare fact sheets to the funds sold in Thailand

http://www.hl.co.uk/funds/fund-discounts,-prices--and--factsheets/search-results?investment=aberdeen&x=-547&y=-181

---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Hi Fletchsmile - I have used HL for a long time and whilst I think there platform is great I do think you have to be a little careful with their choice of funds especially on the Wealth 150. Not sure if you have seen it but a lot of negative comments on various boards about "hidden" rebates from fund providers skewing the selection. Certainly some smaller good performing funds don't seem to get on there and they have never advocated Investment Trusts until very, very recently. I do agree though they are also a good source of info but I always try (now) to cross reference it.

Be interesting to see if RDR changes anything......

Hi topt,

Yes interesting comments you raise. I've been a client of HL in various forms for twenty years or so, and think thery're one of the best in their field.

On the Wealth 150, I agree you should supplement this with your own research. From time to time there are funds in there I disagree with and some not in there I think should be. So I use it as one factor. If included on W150 is a plus, if not I need to justify more why. No system is perfect and there's always a lot of different variables.

While I think they make a lot of effort to be objective, and better than most, I sometimes feel in reality that they sometimes include some funds so that they can ensure a wider representation of fund managers. That's a personal view. One example Bill Mott's PSgima Income fund. I rate the fund manager, this fund under this fund management house though has been pretty mediocre. 4 out of 5 years as at today slightly under the total return for the sector UT UK Inc, and cumulatively slightly under for all periods shown up to 5 year. I sort of feel it's in there just so a PSigma Fund can be included, and because its Bill Mott. I also invested in that near the start, but switched out a couple of years back due to mediocre performance which has continued that way.

On unit trust vs investment trust, in the early years I used to deal with HL they did more on investment trusts than now. They even used to run articles comparing unit trust vs investment trusts, and even where similar funds by the same fund management house and highlight pricing differences. I also remember them helping promote investment trusts as new issues. What happened there I think is that investment trusts have largely become less popular over the years, and the open ended model of unit trusts has become much more popular. Also the difficulty with investment trusts is they often trade at a discount to NAV. Close ended funds are more suitable in my view to things like property where you can't easily liquidate for redemption in an open ended fund. So, that they focus more on unit trust than investment trust is more a reflection of the markets today.

[fletchsmile]

Hi Fletchsmile - I have used HL for a long time and whilst I think there platform is great I do think you have to be a little careful with their choice of funds especially on the Wealth 150. Not sure if you have seen it but a lot of negative comments on various boards about "hidden" rebates from fund providers skewing the selection. Certainly some smaller good performing funds don't seem to get on there and they have never advocated Investment Trusts until very, very recently. I do agree though they are also a good source of info but I always try (now) to cross reference it.

Be interesting to see if RDR changes anything......

On the W150 while I think occasionally they may try and give all fund managers some representation and "spread it around" so to speak, one control in place is that if they regularly put poor funds in people lose faith and it loses its validity. Their business model focuses a lot on retaining long term clients, so I'd say they genuinely try and identify the best for the most part.

That leads into the RDR question.

My view is I think a lot has been overhyped in the media, and in my own and HL's case it's a step in the wrong direction, as follows:

> In HL's case the rebates are much less hidden. In fact they even tell you and explain about it. The only thing they don't give is exact numbers. In my view that's fair enough, as it's a bit like any other industry declaring its price of every single customer and supplier.

> What they also do, in addition to telling you about it is actually give you some of that "hidden rebate" back to you as a loyalty bonus. I can tell you that for companies that don't do this, they just keep it all for themselves. As an example. ABC fund has an annual charge of 1%. They keep say 0.5% and pay 0.5% to HL. HL then give you say 0.15% as a loyalty bonus. For companies that give no loyalty bonus they simply keep 0.5% all to themselves, there is no saving to you.

> So it's the companies that keep the whole amount, don't tell you there's a rebate and keep it all to themselves that are worst. HL tells you and even shares some with you.

> If you go direct to the fund manager. The fund manager in that case just keeps the whole 1% to themselves.

So in my view there's a good chance the RDR just results in customers like me getting less. No loyalty bonus on annula fees, and the fund manager making exactly the same as before, so cost to me doesn't change and no loyalty bonus

OK the risk is that some brokers tout only the most lucrative funds for themselves and don't tell you why. For these companies the retail investor may be better off.

For HL:

> They give you initial discounts. Often negotiating so youpay no initial charge

> They tell you about the rebates they receive and share it with you as a loyalty bonus

> They deal with almost all the major players not just a select few. About 2,400 I believe. The total fees are all there to see and compare, and they offer almost all companies. As long as I get the best deal for me, I'm less bothered what they earn. eg I'd rather it cost me 1% pa and HL earned 0.5% along the line. Than cost me 1.4% and HL earn only 0.1%.

>The annual charge rebate fits with a long term business model. Like HL. Without this there's a risk company's charge you a one hour fee and don't care whatsoever what they well you.

So unfortunately I think the RDR will lump the good and bad guys together, and the media simply jump on the band wagon with a story that will sell. i,e all financial institutions are bad, as bad news sells.

Bit like the financial crisis, the media deligt in all the negative news as it sells. I view that as a factor in 2008 in adding to the panic and uncertainty. More balanced reporting wouldn't have sold their programs, although would have reduced uncertainty.

Those are my views anyway. It comes back to educating yourself, and knowing the best person to manage your money if you do so is yourself. Other people like HL can help and in my view are one of the good guys. Not perfect, useful to understand that, but far more reliable than most. Including watchdogs, regulators and definitely the press

Cheers

Fletch

Edited March 11, 2013 by fletchsmile

[topt]

In the context of active managed funds vs trackers/ETFs I thought the following article was interest on M&G's American Fund. HL highlight a "dearth" of managers consistently able to add value in the US market. Much of the research done as mentioned above, on active vs ETF/tracker debate is from developed markets - particularly the US..

Secondly Hargreaves Lansdown's Wealth 150 is another tool I use when evaluating funds and fund managers when doing research. Some very useful info on Fund Management houses as well as fund managers and an opinion on which they think are best in the UK. As Thailand opens up, some of the funds sold here actually are feeders into overseas funds, so it can be relevant from that persepective too.

Specifically someone wanting to read about Aberdeen could look at the following and compare fact sheets to the funds sold in Thailand

http://www.hl.co.uk/funds/fund-discounts,-prices--and--factsheets/search-results?investment=aberdeen&x=-547&y=-181

---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Hi Fletchsmile - I have used HL for a long time and whilst I think there platform is great I do think you have to be a little careful with their choice of funds especially on the Wealth 150. Not sure if you have seen it but a lot of negative comments on various boards about "hidden" rebates from fund providers skewing the selection. Certainly some smaller good performing funds don't seem to get on there and they have never advocated Investment Trusts until very, very recently. I do agree though they are also a good source of info but I always try (now) to cross reference it.

Be interesting to see if RDR changes anything......

Hi topt,

Yes interesting comments you raise. I've been a client of HL in various forms for twenty years or so, and think thery're one of the best in their field.

On the Wealth 150, I agree you should supplement this with your own research. From time to time there are funds in there I disagree with and some not in there I think should be. So I use it as one factor. If included on W150 is a plus, if not I need to justify more why. No system is perfect and there's always a lot of different variables.

While I think they make a lot of effort to be objective, and better than most, I sometimes feel in reality that they sometimes include some funds so that they can ensure a wider representation of fund managers. That's a personal view. One example Bill Mott's PSgima Income fund. I rate the fund manager, this fund under this fund management house though has been pretty mediocre. 4 out of 5 years as at today slightly under the total return for the sector UT UK Inc, and cumulatively slightly under for all periods shown up to 5 year. I sort of feel it's in there just so a PSigma Fund can be included, and because its Bill Mott. I also invested in that near the start, but switched out a couple of years back due to mediocre performance which has continued that way.

On unit trust vs investment trust, in the early years I used to deal with HL they did more on investment trusts than now. They even used to run articles comparing unit trust vs investment trusts, and even where similar funds by the same fund management house and highlight pricing differences. I also remember them helping promote investment trusts as new issues. What happened there I think is that investment trusts have largely become less popular over the years, and the open ended model of unit trusts has become much more popular. Also the difficulty with investment trusts is they often trade at a discount to NAV. Close ended funds are more suitable in my view to things like property where you can't easily liquidate for redemption in an open ended fund. So, that they focus more on unit trust than investment trust is more a reflection of the markets today.

Hi Fletchsmile,

Thanks - your mileage is greater than mine unfortunately as I wish I had known more about Investment Trusts a long time ago but interesting that they were there. Now of course HL charge a platform fee to hold them but they are a business and have to make their returns somehow (and as you say next they are up front about it so no complaints) and I don't think they (the trusts) pay any commission.

Re PSigma Income - I had almost exactly the same experience as you and HL were/are still pushing it recently

[topt]

Those are my views anyway. It comes back to educating yourself, and knowing the best person to manage your money if you do so is yourself. Other people like HL can help and in my view are one of the good guys. Not perfect, useful to understand that, but far more reliable than most. Including watchdogs, regulators and definitely the press

Cheers

Fletch

I agree 100% - definitely the key.

[fletchsmile]

Topt

I'd add on the RDR and HL, another reason I'm comfortable with HL's model is a couple of decades back I used to audit some of the larger fund managers: Henderson, Newton etc for unit trusts, investment trusts, other funds etc - not HL though.

As a result of this I got to understand fully how the whole cycle works from a customer investing money, initial charges, discounts, pricing the fund, annual changes, rebates, commisions etc. With this understanding I find it reasonably transparent. The problem is it's a bit of a specialised area that your average retail investor never gets given a full understanding of how it all works and fits together.

Ideally would be better if retail investors fully understood how it all fits together. Also the media who often just jump on a story and pick the bits that suit them. Then you have the politicians doing what is popular and trying to be seen to be doing good regardless of if they are. Unfortunately though some of the financial advisors and intermediaries do understand things better and just rip people off....

[nong38]

I am assuming that theAberdeen we are talking about is the one I was familiar with in the UK Aberdeen Asset Management? I invested in their Asia Pacific ex Japan for some time then changed to First State funds which have done well for me, but, this based in the UK, I dont know if First State are around in Thailand, but I would not hesitate to invest with Aberdeen they have a long and good track record, certainly in the UK, As has been said the past is not a guide to the future, things can go doen as well as up, so you need to be aware, keep and eye performance and be prepared to move your investment if that is what is required, also be aware that there might be an intial fee up tp 5% and there is an annual management charge which could be 1.5% upwards. Many investment houses in the UK will waive the initial investment charge, not sure what the rule is here, but if your lawyer friend introduces you to the fund he may get a fee from the company, there is also a trailing % which is paid out to who is looking after your investment usually .5% as well so you need to be aware of what is going on, my guess is that things are not as transparent here as in the UK and they have been a bit cloudy there about the trailing commission as well, good luck with your deliberations.