Latest news with #ChelseaFinancialServices
Telegraph
21-03-2025
- Business
- Telegraph
The trick investors are using to profit from Trump's bonkers tariff war
Darius McDermott is managing director of Chelsea Financial Services and FundCalibre. He has written about the future of US stocks under Trump, how to Rachel Reeves-proof your investment portfolio, and how to maximise your Isa savings under Labour. The markets are on a knife-edge, lurching from one global flashpoint or policy shift to the next. Investors today must contend with what we like to call Tilt, or Trump-induced liquidity turbulence – a world in which one tweet, one tariff, or one interest rate surprise can send markets reeling. With inflation still lurking in the background and interest rates and geopolitical uncertainty keeping everyone on their toes, we think investors need to engage with their portfolios a little more to make sure they are not caught out. In this complex macroeconomic backdrop, we believe long-term, thematic investing, combined with safe haven assets, can allow investors to capture the upside without suffering too much of the downside. Thematic investing essentially means aligning capital with long-term structural shifts and ignoring the short-term macro noise – it also means going against the grain until the herd (eventually) catches up. From British small caps and global infrastructure to sustainability and hard assets, we think it is time to get ahead of the trends shaping tomorrow's markets. The first port of call in our Tilt investment strategy brings us to Europe. Despite the usual chorus of US-centric pessimists decrying the lack of verve in the European economy, innovation is booming and a number of funds are harnessing this trend. Liontrust European Dynamic fund, for example, zeroes in on resilient, high-growth businesses, proving that the 'old Continent' still has plenty to offer beyond political wrangling. Back Britain for small cap gems For all the doom-mongering about the UK economy, there could be real opportunity for re-rating, if you know where to look. Although global fund flows have receded from Britain's shores, this country's small and mid-cap sector is a hotbed of underappreciated potential, and funds like VT Downing Unique Opportunities and Schroder British Opportunities are dedicated to unearthing these hidden gems. With strong balance sheets and serious growth prospects, these companies are well-placed to thrive over a longer horizon. While European businesses deserve attention, global diversification remains crucial. Morgan Stanley Global Brands provides exposure to world-class companies with serious pricing power – the kind of companies that weather storms and keep customers coming back, recession or not. Elsewhere, infrastructure is a sector that never goes out of fashion and remains one of the great multi-decade themes. The First Sentier Global Listed Infrastructure fund taps into essential services like transport, utilities and energy – sectors that will keep growing no matter who's in power. Sustainable investing is no longer just a nice-to-have, it's where long-term capital is being deployed. Indeed, in the long run, it is smarter investing, not just virtue signalling. For example, the Regnan Sustainable Water and Waste fund focuses on companies tackling the global water crisis and waste management challenges, sectors that are only set to grow as populations rise and regulations tighten. With Trump the ringmaster of daily volatility, investors will need some ballast in their portfolios, and bonds can do just that. For example, Invesco Bond Income Plus delivers steady income streams while insulating against wild market swings. Tangible assets should provide a complementary hedge, particularly given central banks' penchant for flip-flopping on rates, and inflation refusing to stay buried. Jupiter Gold & Silver offers exposure to precious metals and mining equities, ensuring a portfolio isn't entirely at the mercy of central bank indecision. Fortune favours the well-informed This isn't the time to sit on the sidelines. Thematic investing isn't about chasing fads or timing the market – it's about positioning capital in the right sectors before everyone else catches on. In a world where Trump-induced liquidity turbulence can turn markets upside down overnight, the winners will be those who look past the noise and focus on the bigger picture. And don't forget to add protection.
Telegraph
17-03-2025
- Business
- Telegraph
The cash-strapped councils eyeing up your life savings to cover net zero bills
Cash-strapped councils are asking taxpayers to invest their savings in projects to help them meet their net zero targets. Bristol and Hackney, which have both warned of severe funding shortfalls, have become the latest councils to launch investment schemes to help fund their environmental initiatives. The schemes invite taxpayers to invest in exchange for 4.2pc annual interest across a five-year term. But experts said the deals risked 'clear trade-offs' in terms of returns and protection for investors. So far, 238 taxpayers have collectively saved £175,750 in the Bristol Climate Action Investment. Green-led Bristol, which has warned of a £52m funding gap, said the money raised would help fund heat pump installations, solar panels and energy improvements in its own offices. Meanwhile, 103 have invested £128,345 in Hackney Council's green projects, including funding energy efficiency improvements at a local school. Hackney councillor Robert Chapman, said the scheme provided a 'cost-efficient way for councils to finance climate action'. In total, 15 councils have launched the investment products, according to Abundance Investment, the financial provider. The schemes are advertised as 'low risk' as there are legal controls in place to prevent councils defaulting on their debt. No council has ever failed to repay their loans, according to Abundance Investment, including those who have issued Section 114 notices, effectively declaring themselves bankrupt. Abundance Investment says on its website: 'If a council did have financial difficulties, it's possible it may result in a delay to repayment, but this is unlikely to result in any failure to pay the interest owed.' But investors could face issues getting their money back if the council did run into trouble. This is because the investment is a peer-to-peer loan, and is therefore not eligible for the Financial Services Compensation Scheme (FSCS), which can protect up to £85,000 of your deposit if the provider goes under. Savers could also lose money if they decide to sell up. Investors must sell on a secondary market, and there is no guarantee they will find a buyer. Darius McDermott, of financial advisers Chelsea Financial Services, said: 'While these schemes may appeal to those who want to make a direct local impact with their money, they come with clear trade-offs in return, protection, and liquidity. If you want to invest in renewable infrastructure, investment trusts are a much stronger option. 'Renewable infrastructure investment trusts offer higher yields, are fully regulated by the FSCS and FCA and, crucially, are extremely liquid. If you need access to your money, you can sell your shares at market price, whereas these council schemes lock up your cash for five years.' Mr McDermott also said that a 4.2pc return was 'underwhelming' considering interest rates currently stand at 4.5pc. Abundance Investment also said a number of investors had chosen to give their interest back to their local council in order to further support their work. Jason Hollands, of investment platform Bestinvest, said: 'While some people may simply relish the idea of helping their local council out with funding green projects, as an investment these schemes aren't tempting. 'The principle of caveat emptor – buyer beware – certainly applies here as these schemes have a five-year term and you may not be able to access your capital prior to that. There is also the potential for losses too.' Net-zero funding shortfalls As many as 300 councils have declared a climate emergency, despite their significant role in helping the Government meet its net zero carbon ambitions by 2050. Under the Paris Agreement, emissions must drop by about 45pc by 2030 and reach net zero by 2050 in order to limit global warming. However, last year, a poll from the Local Government Association found that two thirds of councils were not confident in hitting their climate targets, often citing bureaucracy around securing government funding. Many councils have signalled they will increase council tax this year by 4.99pc, the maximum without triggering a referendum. Bristol Council has warned it faces bankruptcy if it does not plug a £52m funding gap over the next five years. Meanwhile, Hackney was forced to draw £10m from its reserves to fund services this year. Abundance Investment said it carries out credit checks to avoid arranging a loan for a council that might issue a Section 114 notice, leaving the investor at risk of a loss. It said this process had resulted in several councils not proceeding to issue loans. Councillor Martin Fodor, chair of Bristol Council's Environment and Sustainability Committee, said: 'Bristol was the first UK city to declare a climate emergency and to set a city-wide ambition to be carbon neutral by 2030. This is a complex task and an ambitious vision that needs large amounts of investment in our homes, buildings and energy infrastructure.' But the TaxPayers' Alliance (TPA) campaign group described the council's attempt to use taxpayer cash as 'desperate'. Elliot Keck, of the TPA, said: 'Bristol council's desperate attempt to tap up taxpayers to fund their ruinous net zero drive paints a humiliating image of just how badly things are going wrong at that town hall. 'This is the same council that until recently was considering moving to four-weekly bin collections, a move that would have made life miserable for their residents.' Councillor Robert Chapman, cabinet member for Finance, Insourcing and Customer Service at Hackney Council, said the scheme would help the council deliver on green projects. He said: 'We know many residents share our ambitious climate goals and want to help us deliver local climate projects for a greener, healthier Hackney. This framework provides a cost-efficient way for councils to finance climate action and for local people to invest in green projects that bring tangible benefits to the environment and their community. 'Like all local authorities, rising costs and increasing demand on services like social care and housing mean we face difficult decisions as we manage competing priorities, but we remain financially resilient.' But Mr Hollands of Bestinvest urged investors to proceed with caution. He said: 'Unlike a cash savings account from a UK bank, investments made into these schemes are not covered by Financial Services Compensation Scheme, which provides some protection for depositors in the event of a collapse. 'For what is fundamentally an illiquid scheme, the return on offer – an interest rate of 4.2pc per annum – is also lower than the current 4.30pc yield available from five-year Gilts. A Gilt will also be much more tax efficient than these loans, as much of their 'yield' will represent a tax-exempt capital gain if held to maturity.' A spokesman for Abundance Investment said investors are aware of the risks and are given a two week cooling-off period in which they can change their mind. A statement said: 'Abundance Investment works hard to make sure investors understand both the benefits and risks of these types of investments. 'Community Municipal Investments can play a valuable role in a portfolio providing an Isa-eligible investment that offers a competitive stable income and a positive impact in a community that is relatively low risk. 'Our investors understand that in these challenging times both nationally and globally putting their money to work to help communities in the UK is a powerful thing to do.'
Telegraph
10-03-2025
- Business
- Telegraph
‘I made £18k by sheer luck – how can I grow my pot for a house deposit?'
Receive personalised tips on how to improve your financial situation, for free. Here's how to apply or fill in the form below. Like many his age, the idea of buying his first home weighs heavily on Calum Webb. The 27-year-old currently lives in a rented houseshare with three others in east London, but he dreams of buying a home in his native Scotland. 'London is fun but it's not homely and I don't relate to most people. I also won't be able to afford the nice bits,' he admits. 'Scotland is home, really, and Edinburgh is so nice.' According to the Office for National Statistics, the average house price in Edinburgh is £334,000 – far higher than the national average across Scotland. Assuming a deposit of 5pc, Webb's total Isa savings of around £70,000 already put him in the right ballpark. Webb is a diligent saver, having stashed away £4,000 a year in his lifetime Isa. Thanks to the government top-up of up to £1,000 a year, and the returns on his investments, his savings in this Isa have grown to £17,000 in three years. In a second stocks and shares Isa, he has deposited £37,000, with half in an S&P 500 tracker fund, 15pc in Vanguard Lifestrategy 80pc Equity Fund, 15pc in a FTSE 100 tracker fund, 10pc in European Index and, in his words, 'some other stuff'. This has since grown to £53,000. In total, he has made returns of £18,000, but a theme underpins his investment choices. 'I had no idea what to get, so I just bought random stuff to spread the risk as I didn't want to go all in on anything,' he says. 'I basically bought £1,000 of a bunch of random 'recommended hedge funds'. To be honest, the performance has been mediocre, with some of them even losing me money.' Webb hopes to buy a home within five years. But before then, he wants to get his Isas in working order. 'I'm finding it hard to save in London, but I can't stay in Mile End forever,' Webb says. 'I'm willing to take the existing money I have and put it in high-risk investments as I'm not looking to spend for a few years.' Webb also chooses to maximise his pension contributions, as well as his company share scheme. 'I'm not focussed on dividend yield or anything – mainly just growth.' Darius McDermott, managing director at Chelsea Financial Services With £71,000 already saved and invested at 27, Webb is off to a strong start in his investment journey. He clearly understands the power of compounding and is making smart use of the tax-free benefits of Isas. The first key consideration is his investment timeframe. Webb's goal is to buy a house, and with a solid deposit already saved, timing is crucial. If he plans to buy within the next six months, now could be a good time to take some money off the table. A sudden downturn could hit his savings at the worst possible moment. He has said he wants to buy in a few years, so his investment decisions should reflect that. His decision to allocate a large portion of his savings to the S&P 500 has been a winning strategy over the past three years – well done for backing the world's top-performing stock market. However, US megacaps dominate the index, with 37pc concentrated in just 10 stocks. These are now trading above historical valuation averages, exposing him to significant concentration risk in an expensive part of the market. Taking some profits and diversifying into cheaper markets with greater upside potential could be a prudent move. For example, US small caps look like better value and could benefit from a Trump-driven 'America First' policy agenda and potential corporate tax cuts. The T. Rowe Price US Smaller Companies Fund is a strong option in this space. While index funds have generally outperformed active managers, certain markets present compelling opportunities for active stock picking. UK equities, in particular, are deeply undervalued relative to US counterparts, making the market ripe for skilled managers to uncover overlooked companies that are poised for growth. Actively managed funds like Artemis UK Select have outperformed the UK market significantly, beating the index threefold over three and five-year periods. UK small caps, in particular, present exceptional value. M&A activity is growing and we continue to see companies buy back their shares, which is a sign that they believe their own businesses are cheap. In this space, we like Premier Miton Tellworth UK Smaller Companies and Unicorn UK Smaller Companies. Given his risk appetite and medium investment horizon, there is little need for fixed income in his portfolio. Instead, he could focus on markets with higher growth potential. Asia Pacific ex-Japan is historically a high-risk, high-reward market, making it ideal for patient investors, but for a more targeted high-growth opportunity, consider India. A youthful, expanding workforce is driving India's 'demographic dividend', supported by strong growth tailwinds and political stability. However, these fundamentals take time to translate into stock market returns, making India a compelling long-term investment. A standout fund is the Ashoka India Equity Investment Trust. Backed by a deep research team covering companies of all sizes, the trust has consistently outperformed its peers since its inception. For a broader Asia Pacific allocation, Baillie Gifford Pacific remains one of the top funds for investors seeking high-growth opportunities in the region. While its volatility can be high, its long-term approach to identifying durable growth companies has led to strong historical performance. Rob Morgan, chief analyst at Charles Stanley Direct I think Webb needs to go back to first principles. It appears that he has built this collection of investments ad hoc over the years by buying somewhat randomly. That's very common and I see it a lot. He should try to flip that around and think about what his portfolio should look like given his objectives and likely time horizon. I think he has got a lot of the right ingredients for a diverse portfolio, just not necessarily in the right proportions. Webb could use the asset allocation of a balanced fund as a starting point – for example, Vanguard LifeStrategy 80pc Equity, which he already holds. He could just hold a few of these 'multi-asset' funds to effectively do the hard work for him. Alternatively, Webb could go for a 'core and satellite' type of approach, with the lion's share in broad funds that encompass a variety of asset classes, with more specialist funds in smaller positions around the edge. In doing so, he should try to avoid overlap and duplication. For instance, there is no benefit in owning both the L&G UK 100 index and Vanguard FTSE100. Gradually migrating to a more diverse portfolio that includes some lower-risk areas such as bonds and cash would be a prudent strategy over the next three to four years to the point he wants to buy a house. The last thing he wants is a market crash taking a chunk out of his deposit in the months leading up to his purchase. Fortunately, there are some very easy ways to help gradually 'de-risk' an Isa portfolio for when you deem it right to start moving into that consolidation phase. Money market funds such as Blackrock ICS Sterling Liquidity aim to consistently produce a return close to the Bank of England base rate, and should offer a solid return close to the best bank interest rates available – although they are not protected or guaranteed like a bank account.
