Latest news with #DariusMcDermott
Daily Mail
4 days ago
- Business
- Daily Mail
Income investors back cheap passive funds to save on fees - but are they missing out on returns?
Investors are increasingly shifting their holdings towards passive funds as low fees continue to drive inflows. Active UK fixed income funds across all sectors saw outflows of £15.87billion between January 2022 and the end of March 2025, while inflows into passive fixed income holdings saw inflows of £14.29billion, according to data from Rathbones. More recently, active fixed income funds saw outflows of £1.99billion in the first quarter of 2025, while passive funds again saw inflows of £878.33million. Choosing passive funds means investors will be saving money on their management fees, with passive fund fees generally significantly cheaper than active counterparts. However, it may also mean that they are sacrificing returns over the long term. Darius McDermott, managing director at Fundcalibre, said: 'Many "cautious" passive strategies ended up losing investors more than half their capital. 'Even when long-duration Government bond yields turned negative for a period of time, these strategies kept buying, simply because the index told them to. 'Everyone knew it was irrational. It shows why active is still very important.' Which passive funds are outperforming? Despite outflows, gross sales for active funds in the first quarter – that is, how much money they generated over the period – were £9.95billion, compared with £5.78billion for passive funds during the same period. Bryn Jones, head of fixed income at Rathbones Group, said: 'Assets under management in passive fixed income funds have held up despite there being significant underperformance in general and the significant difference in flows recently is really striking. He added: 'Too many clients are focusing on price when they select fixed income funds, with the result that they opt for underperformance while not fully understanding the option they are taking.' Rathbones says its Rathbone Ethical Bond Fund (ongoing charge: 0.66%) outperformed well-known passive funds in the IA Sterling Corporate Bonds sector by more than ten per cent over the past five years. Over the past ten years, the fund's growth was a third higher than bonds in popular passive funds. Even then, the Rathbones fixed income fund in question delivered a six per cent return over the past five years according to Trustnet data. Meanwhile, the M&G Short Dated Corporate Credit Bond fund (ongoing charge: 0.25%) returned 17.9 per cent, while the AXA Sterling Credit Short Duration Bond fund (ongoing charge: 0.408%) returned 13.9 per cent over the same period. Where does active pay off? McDermott says fixed income markets have had a rocky few years. He told This is Money: ' Inflation shocks, aggressive rate hikes and shifting central bank rhetoric have all made it a challenging environment for backward-looking passive bond strategies to keep up. 'In contrast, active managers have been able to adapt their positioning, taking advantage of opportunities and managing risk more effectively.' To benefit from an active approach, McDermott tips GAM Star Credit Opportunities (ongoing charge: 1.55%) and Liontrust Monthly Income Bond (ongoing charge: 1.03%) for their experienced managers. GAM, he says, 'leans into subordinated financial debt where yields are attractive, while Liontrust takes a macro-driven, defensive approach that has helped it protect capital during volatility.' McDermott also tips Nomura Global Dynamic Bond fund (ongoing charge: 0.7472%). He said: 'As a strategic bond fund, it has the freedom to move across the entire fixed income spectrum, and the manager has consistently delivered in terms of both income and capital return across different market conditions.' Leah Bramwell, investing expert at Canaccord Wealth, also tips two strategic bond funds, Jupiter Strategic Bond fund (ongoing charge 0.71076%) and Aegon Strategic Bond fund (ongoing charge 0.5844%). Bramwell said: 'In fixed income, active management can add significant value over passive options in some areas. 'By design, fixed income indices allocate higher weightings to the largest bond issues/issuers. Whilst this makes sense in the context of equities – investors are allocating to the companies with the largest market caps – it is less appealing when considering debt. 'In an ideal world, an investor would prefer to have higher exposure to companies with lower debt loads, as this should imply stronger balance sheets and less likelihood of default.' Bramwell tips Man GLG Sterling Corporate Bond (ongoing charge: 0.6185%), the manager of which she says 'employs a bottom-up approach with equity-like analysis on his positions. She adds: 'In all cases, investors should be clear on what risks they are taking around credit and duration, and how much they are being compensated for those risks through a higher return.' IA Sterling Corporate Bond fund performances Fund Name Yield (%) 1Y (%) 3Y (%) 5Y (%) M&G Short Dated Corporate Bond I GBP 4.54 6.5 16.1 17.9 AXA Sterling Credit Short Duration Bond Z Gr Acc 4.51 6 12.9 13.9 BlackRock Sterling Short Duration Credit D Acc 4.1 6.8 12.2 12.8 Fidelity Short Dated Corporate Bond W Acc 4.33 5.9 11.9 12.8 WS Canlife Short Duration Corporate Bond C Acc GBP 0 5.9 12.7 12.7 Royal London Inv Grade Short Dated Credit Z Inc 4.9 6.8 12.8 11.9 L&G Active Short Dated Sterling Corp Bond I Acc 4.2 5.9 10.7 11.7 abrdn Short Dated Corp Bond Institutional Acc 5.06 6.4 12.4 10.9 Schroder Sterling Corporate Bond Z Acc 5.72 6.7 7.3 10.9 iShares Corp Bond 0-5yr UCITS ETF GBP 0 5.9 11.8 10.9 CT Sterling Short Dated Corporate Bond Ini GBP 4.54 5.8 12.2 10.7 IFSL Church House Inv Grade Fixed Interest Inc 4.66 5.3 11 10.5 L&G Short Dated Sterling Corp Bond Index I Acc 4.5 6.2 11.8 10.4 Royal London Corporate Bond M Acc 5.18 6.7 10.8 9.9 Artemis Corporate Bond I Acc GBP 5.37 5.3 8.3 8 Royal London Sterling Credit M Acc 5.09 7 10.2 7.9 Vanguard UK Short-Term Inv Grade Bond Index Acc GBP 4.11 6.3 10.2 7.6 M&G Strategic Corporate Bond I Acc GBP 4.47 4.1 8.6 7.4 EdenTree Short Dated Bond B 3.24 5.1 9 7.1 abrdn Short Dated Sterling Corp Bond Tracker B Acc 4.53 5.9 9.4 6.9 Liontrust Sustainable Future Monthly Income Bond B Gr Inc 5.78 4.8 6.3 6.3 Rathbone Ethical Bond Fund I Acc GBP 5.1 5.3 8.6 6 SVS Sanlam Fixed Interest B Inc 4.43 7.1 9.4 5.5 BNY Mellon Global Credit W Hedged Acc GBP 3.39 6.2 11.1 5.5 Rathbone High Quality Bond Fund I Acc GBP 4.2 5.5 9.6 5.4 Premier Miton Corporate Bond Monthly Income C Inc GBP 5.2 6.3 9 5.3 Invesco Corporate Bond (UK) Z Acc 4.38 4.2 8.3 5.2 BlackRock Corporate Bond 1 to 10 Year D 4.54 6 8.9 5.1 Source: Trustnet Are equity investors also too keen on passive funds? The US has dominated global equity markets in recent years, with the S&P 500 delivering healthy returns in recent years. As a result, many retail investors have shifted their holdings towards cheaper passive funds from active alternatives. In 2024, passive funds recorded $1.4trillion of inflows, compared to $1.2trillion of inflows for active funds. Bramwell warns: 'It has been a challenging environment for active managers over the last decade. 'An increasingly concentrated US, and therefore global, equity market, combined with growing levels of passive ownership, have coincided with a sustained period of underperformance for active management. However, she added: 'Active investing shows its worth particularly in inefficient markets. These are markets that are perhaps less liquid, less deep, featuring less or little analyst coverage, or in economies exposed to pressures that distort the market – such as the chronic net outflows seen in the UK causing a mispricing of assets.' Bramwell tips Fidelity Special Situations fund (ongoing charge: 0.92%), SPARX Japan (ongoing charge: 1.03%) and Pacific North of South (ongoing charge: 0.83%). Bramwell also tipped Polar Capital Global Insurance (ongoing charge: 0.8366%) for its 'consistently strong performance, and said specialist infrastructure funds such as FTF Clearbridge Global Infrastructure (ongoing charge: 0.8187%), and Lazard Global Listed Infrastructure (ongoing charge: 0.91%), have 'protected well on the downside versus passive benchmarks.' 'For more efficient markets, like the large cap US space, the data shows a clear inability of active managers to 'earn their fee' and consistently outperform their benchmark indices,' Bramwell added.
Business Mayor
05-05-2025
- Business
- Business Mayor
I'm an investment manager – this is the recession proof company I'd hold shares in for 10 years
Each month, we put a senior fund or investment manager to task with tough questions for our I'm a fund manager series to find out how they manage their own money. In this instalment, we spoke to Darius McDermott, investment manager of the VT Chelsea Managed Funds at Chelsea Financial Services. When we question fund managers, we want to know where they'd invest for the next year – and next 10 years – and what pitfalls to avoid. We also quiz them about Nvidia, gold, and bitcoin and their greatest ever investing mistake. Darius McDermott heads a team that manages a range of multi asset funds. The funds were launched in 2017 to offer clients a one-stop shop to invest, with funds to suit different circumstances and risk appetite. The four funds are VT Chelsea Managed Monthly Income, VT Chelsea Managed Cautious Growth, VT Chelsea Managed Balanced Growth and the VT Chelsea Managed Aggressive Growth. In the hot seat: We quiz Darius McDermott on the companies he backs, whether Bitcoin and Nvidia are worth it and what his greatest investing mistake was If you had asked me at the start of the year, it would have been Assura plc, which owns a portfolio of GP surgery properties. However, it has since agreed a takeover by private equity giants KKR and StonePeak. Therefore, I would instead go for Primary Health Properties plc (PHP). Like Assura, PHP owns GP surgeries which have their rents guaranteed by the NHS. It's boring but reliable, completely recession proof, and offers a yield of over 7 per cent, making it the perfect stock to own for a long-term income investor. SDCL Energy Efficiency Trust (SEIT). It is trading on a massive 49 per cent discount and yielding almost 14 per cent. It has been lumped in with the renewable energy sector, but this ignores the fact that two of its biggest investments are tied into US steel making and manufacturing – sectors receiving strong backing from the current US administration. Last year, SEIT successfully sold one of its biggest positions, UU Solar, at 4.5 per cent above its net asset value, and it is in process of selling more assets. If it can achieve more sales, we think the market will not be able to ignore how cheap the trust is. Renewable infrastructure investment trusts. These trusts have been hammered by the market – since interest rates rose in 2022, sector-wide premiums of 20 per cent have turned into 30 per cent discounts. Yet, they offer huge yields – often over 10 per cent – with reliable dividends backed by government guaranteed cash flows. In our opinion, the share prices are just too cheap. We also continue to like the defence sector. Given the fundamental shift in international relations, we can only see defence spending going one way over the next few years. We think this trade is still just getting started. Trust in renewables: McDermott says renewable infrastructure investment trusts are trading on big discounts and offer huge yields China – although it's a subject of debate in the team. Geopolitical tensions with the US have made China increasingly difficult to invest in. It is now seen as a major strategic rival, becoming a world leader in manufacturing and a number of other technologies, which has caused US President Donald Trump to impose the harshest tariffs. China's ambitions over Taiwan only heighten the investment risk. In this environment, foreign investors could end up as collateral damage. We're also cautious on pharmaceuticals, with tariffs set to be introduced on this sector for the first time in years. Yes, especially smaller companies. Years of capital flight have left many UK stocks trading at bargain valuations. UK smaller companies have suffered one of their worst periods of relative performance to large caps in history. However, over most long-term timeframes, history shows small caps outperform large caps. A succession of headwinds – Brexit, Covid, rising inflation and constant technical selling – has left high quality companies in the UK small cap space looking like great value. Too risky: Geopolitical tensions with the US makes China increasingly difficult to invest in, according to McDermott We've been gradually increasing our exposure to alternative investment trusts, taking advantage of the continued sell-off that has driven them to better and better valuations. We remain cautious on equity markets, particularly US equity markets given the high valuations until recently. We've also been wary of low credit spreads in the bond market which fail to compensate for current risks. It's been a challenging period to allocate capital, but we've used it as an opportunity to top up positions in compelling asset classes that have been sold off. It's hard to predict with Trump, who could reverse a policy in an afternoon. However, it seems that a higher baseline of tariffs is here to stay – and that is bad news for the global economy and global stocks. The longer this uncertainty drags on, the more it impacts confidence and eventually feed through to the real economy. We will likely see some lasting impact. Stock pick: McDermott says Primary Health Properties plc (PHP) is a great choice for a long term investor because it is completely recession proof, and offers a yield of over 7 per cent I would be cautious about writing off the US. Tariffs will impact the rest of the world too – Europe and China in particular, as export orientated economies, could really suffer. The US is still home to many of the world's best companies, including the global leaders in AI, while a weaker dollar would boost earnings for US multinationals. We are still believers in its potential. We still like Nvidia. In our view, the potential of AI is being massively underestimated by the market and the general population. Companies and states are locked in an arms race to achieve Artificial Superintelligence first and they will pay any amount to get there. Nvidia's chips are essential to this effort, and the demand for computing power is only going to keep rising. Nvidia's moat, both in terms of its chips and software, still seems very strong. Boom or bust: McDermott believes AI is being massively underestimated by the market and thinks Nvidia will play an essential role in AI evolution Both. Betting everything on one style will hugely increase your volatility. It's always wise to maintain a balance between growth and value to ride out the sharp swings from when they fall in and out of favour. We think it is very foolish to become dogmatic one way or the other. There are many passive zealots, but they often underestimate the risk they are taking. For example, we saw a number of cautious multi-asset passive funds inflict heavy losses on investors when government bonds sold off. There are many great active managers who genuinely add value, but you must be selective. Several trends have recently shifted in favour of active management. First, fees across the board have become much more competitive with passive options, which benefits all investors. Second, as more of the market moves into passive, the more inefficient it becomes – creating more opportunities for active managers to outperform. Passive strategies are inherently backward-looking. Today, the concentration risk in passive indices is striking: the 'Magnificent Seven' now account for 32 per cent of the S&P 500's market cap and make up over 20 per cent of the MSCI World Index. This means many portfolios aren't just overweight in the US, but also highly concentrated in a small number of companies. If we are entering a period where US exceptionalism fades, active management could be much better placed to navigate what comes next. Don't be a fundamentalist and keep an open mind. Market situations always change. The Donald factor: The longer uncertainty around tariffs drags on, the more it impacts confidence and eventually this will feed through to the real economy, says McDermott Put simply, we have the ability to avoid doing very stupid things. Passive funds, by design, have no choice but to buy whatever the index dictates – such as long-dated government bonds with 0 per cent or even negative yields, many of which have since lost 50 per cent or more of their value. For years it was fine – until it wasn't. We welcome passive investors: they are forced buyers and sellers, which often creates opportunities for active managers like us. Since launch nearly eight years ago, our monthly income fund – sitting within the IA Mixed Investment 20-60 per cent sector – has outperformed the largest and best-known 40 per cent equity passive fund by 28 per cent. UK house prices have been artificially inflated by governments for decades. An artificial supply shortage – largely due to the difficulty of obtaining planning permission – combined with massive demand from higher immigration and decades of low interest rates has driven valuations exceptionally high relative to people's wages. This is unsustainable. The good news is that post Covid, higher inflation, and more importantly higher wage inflation, has helped to correct this. Wages have gone up whilst house prices haven't because of higher interest rates making it harder to borrow. UK house prices are still very overvalued, but a crash looks unlikely unless we see a massive increase in unemployment. This is because there is still a major structural shortage of homes. As long as the structural imbalance exists, house prices are likely to remain high for the foreseeable future. Overvalued but not about to crash: While house prices are too expensive, according to McDermott, he says there is unlikely to be a crash without a big uptick in unemployment Yes, in our view it always has a place in a portfolio. Gold is a proven store of value and a useful hedge against a collapse in the global financial system. The US and the US dollar has dominated the financial system, but that era may be coming to an end. Markets are starting to lose faith in both the US dollar and US treasuries as safe havens. The US is very heavily indebted, running massive fiscal deficits, and faces growing political uncertainty with a maverick president in charge. The trouble is there is no obvious replacement: the euro, yen and yuan don't really cut it. The only true safe have is gold. This question is an article in itself. Broadly, we believe crypto has potential. Whilst we don't like Bitcoin, we can see how it could do very well in a scenario where confidence in central banks and fiat currencies collapses. The ongoing geopolitical tension between the US and China. The unipolar era, where the USA dominated the world in terms of military and economic power, is over. Unfortunately, this leads to a less stable world with much greater potential for conflict. Always remember that, in times of uncertainty, states prioritise security over prosperity. It depends on your age and personal circumstances. If you have a time horizon of 20 years or more, I would invest it in global equities and not touch it. Let the market do its job. Doric Nimrod Air Two. A little aircraft leasing investment trust that owned a fleet of Airbus A380s leased to Emirates. We added to our position during Covid and made about 600 per cent when the world realised these aircrafts would be needed again. At the end of December 2022, when it became clear that inflation was sticky and that interest rates were heading higher, we had too much growth exposure. Whilst we reduced our growth positions a little, we should have sold a lot more. Growth went on to underperform significantly over the next 18 months.
Daily Mail
05-05-2025
- Business
- Daily Mail
I'm an investment manager - this is the recession proof company I'd hold shares in for 10 years
Each month, we put a senior fund or investment manager to task with tough questions for our I'm a fund manager series to find out how they manage their own money. In this instalment, we spoke to Darius McDermott, investment manager of the VT Chelsea Managed Funds at Chelsea Financial Services. When we question fund managers, we want to know where they'd invest for the next year - and next 10 years - and what pitfalls to avoid. We also quiz them about Nvidia, gold, and bitcoin and their greatest ever investing mistake. Darius McDermott heads a team that manages a range of multi asset funds. The funds were launched in 2017 to offer clients a one-stop shop to invest, with funds to suit different circumstances and risk appetite. The four funds are VT Chelsea Managed Monthly Income, VT Chelsea Managed Cautious Growth, VT Chelsea Managed Balanced Growth and the VT Chelsea Managed Aggressive Growth. 1. If you could invest in only one company for the next 10 years, what would it be? If you had asked me at the start of the year, it would have been Assura plc, which owns a portfolio of GP surgery properties. However, it has since agreed a takeover by private equity giants KKR and StonePeak. Therefore, I would instead go for Primary Health Properties plc (PHP). Like Assura, PHP owns GP surgeries which have their rents guaranteed by the NHS. It's boring but reliable, completely recession proof, and offers a yield of over 7 per cent, making it the perfect stock to own for a long-term income investor. 2. What about for the next 12 months? SDCL Energy Efficiency Trust (SEIT). It is trading on a massive 49 per cent discount and yielding almost 14 per cent. It has been lumped in with the renewable energy sector, but this ignores the fact that two of its biggest investments are tied into US steel making and manufacturing – sectors receiving strong backing from the current US administration. Last year, SEIT successfully sold one of its biggest positions, UU Solar, at 4.5 per cent above its net asset value, and it is in process of selling more assets. If it can achieve more sales, we think the market will not be able to ignore how cheap the trust is. 3. Which sector do you think people should be most excited about? Renewable infrastructure investment trusts. These trusts have been hammered by the market – since interest rates rose in 2022, sector-wide premiums of 20 per cent have turned into 30 per cent discounts. Yet, they offer huge yields – often over 10 per cent - with reliable dividends backed by government guaranteed cash flows. In our opinion, the share prices are just too cheap. We also continue to like the defence sector. Given the fundamental shift in international relations, we can only see defence spending going one way over the next few years. We think this trade is still just getting started. 4. What sector would you be avoiding? China – although it's a subject of debate in the team. Geopolitical tensions with the US have made China increasingly difficult to invest in. It is now seen as a major strategic rival, becoming a world leader in manufacturing and a number of other technologies, which has caused US President Donald Trump to impose the harshest tariffs. China's ambitions over Taiwan only heighten the investment risk. In this environment, foreign investors could end up as collateral damage. We're also cautious on pharmaceuticals, with tariffs set to be introduced on this sector for the first time in years. 5. Is the UK market good value for money? Yes, especially smaller companies. Years of capital flight have left many UK stocks trading at bargain valuations. UK smaller companies have suffered one of their worst periods of relative performance to large caps in history. However, over most long-term timeframes, history shows small caps outperform large caps. A succession of headwinds – Brexit, Covid, rising inflation and constant technical selling – has left high quality companies in the UK small cap space looking like great value. 6. How are you positioning your funds to cope with the market turmoil? We've been gradually increasing our exposure to alternative investment trusts, taking advantage of the continued sell-off that has driven them to better and better valuations. We remain cautious on equity markets, particularly US equity markets given the high valuations until recently. We've also been wary of low credit spreads in the bond market which fail to compensate for current risks. It's been a challenging period to allocate capital, but we've used it as an opportunity to top up positions in compelling asset classes that have been sold off. 7. Will Trump's tariffs be a short term blip for markets or will something more long lasting result from it? It's hard to predict with Trump, who could reverse a policy in an afternoon. However, it seems that a higher baseline of tariffs is here to stay – and that is bad news for the global economy and global stocks. The longer this uncertainty drags on, the more it impacts confidence and eventually feed through to the real economy. We will likely see some lasting impact. 8. Are the US glory days behind us? I would be cautious about writing off the US. Tariffs will impact the rest of the world too – Europe and China in particular, as export orientated economies, could really suffer. The US is still home to many of the world's best companies, including the global leaders in AI, while a weaker dollar would boost earnings for US multinationals. We are still believers in its potential. 9. Nvidia - do you think it will ultimately boom or bust? We still like Nvidia. In our view, the potential of AI is being massively underestimated by the market and the general population. Companies and states are locked in an arms race to achieve Artificial Superintelligence first and they will pay any amount to get there. Nvidia's chips are essential to this effort, and the demand for computing power is only going to keep rising. Nvidia's moat, both in terms of its chips and software, still seems very strong. 10. Should investors focus on growth or value stocks? Both. Betting everything on one style will hugely increase your volatility. It's always wise to maintain a balance between growth and value to ride out the sharp swings from when they fall in and out of favour. 11. What about active or passive investing? We think it is very foolish to become dogmatic one way or the other. There are many passive zealots, but they often underestimate the risk they are taking. For example, we saw a number of cautious multi-asset passive funds inflict heavy losses on investors when government bonds sold off. There are many great active managers who genuinely add value, but you must be selective. Several trends have recently shifted in favour of active management. First, fees across the board have become much more competitive with passive options, which benefits all investors. Second, as more of the market moves into passive, the more inefficient it becomes – creating more opportunities for active managers to outperform. Passive strategies are inherently backward-looking. Today, the concentration risk in passive indices is striking: the 'Magnificent Seven' now account for 32 per cent of the S&P 500's market cap and make up over 20 per cent of the MSCI World Index. This means many portfolios aren't just overweight in the US, but also highly concentrated in a small number of companies. If we are entering a period where US exceptionalism fades, active management could be much better placed to navigate what comes next. Don't be a fundamentalist and keep an open mind. Market situations always change. 12. Why should investors choose your funds over cheaper passive alternatives? Put simply, we have the ability to avoid doing very stupid things. Passive funds, by design, have no choice but to buy whatever the index dictates – such as long-dated government bonds with 0 per cent or even negative yields, many of which have since lost 50 per cent or more of their value. For years it was fine – until it wasn't. We welcome passive investors: they are forced buyers and sellers, which often creates opportunities for active managers like us. Since launch nearly eight years ago, our monthly income fund – sitting within the IA Mixed Investment 20-60 per cent sector – has outperformed the largest and best-known 40 per cent equity passive fund by 28 per cent. 13. Is the property market 'safe as houses' or due a crash? UK house prices have been artificially inflated by governments for decades. An artificial supply shortage – largely due to the difficulty of obtaining planning permission – combined with massive demand from higher immigration and decades of low interest rates has driven valuations exceptionally high relative to people's wages. This is unsustainable. The good news is that post Covid, higher inflation, and more importantly higher wage inflation, has helped to correct this. Wages have gone up whilst house prices haven't because of higher interest rates making it harder to borrow. UK house prices are still very overvalued, but a crash looks unlikely unless we see a massive increase in unemployment. This is because there is still a major structural shortage of homes. As long as the structural imbalance exists, house prices are likely to remain high for the foreseeable future. 14. Should gold form part of everyone's portfolio? Yes, in our view it always has a place in a portfolio. Gold is a proven store of value and a useful hedge against a collapse in the global financial system. The US and the US dollar has dominated the financial system, but that era may be coming to an end. Markets are starting to lose faith in both the US dollar and US treasuries as safe havens. The US is very heavily indebted, running massive fiscal deficits, and faces growing political uncertainty with a maverick president in charge. The trouble is there is no obvious replacement: the euro, yen and yuan don't really cut it. The only true safe have is gold. 15. What about bitcoin? This question is an article in itself. Broadly, we believe crypto has potential. Whilst we don't like Bitcoin, we can see how it could do very well in a scenario where confidence in central banks and fiat currencies collapses. 16. What do you consider the biggest geopolitical threat to global stock markets this year? The ongoing geopolitical tension between the US and China. The unipolar era, where the USA dominated the world in terms of military and economic power, is over. Unfortunately, this leads to a less stable world with much greater potential for conflict. Always remember that, in times of uncertainty, states prioritise security over prosperity. 17. You inherit £100k tomorrow. Where would you invest the money? It depends on your age and personal circumstances. If you have a time horizon of 20 years or more, I would invest it in global equities and not touch it. Let the market do its job. 18. What's your greatest ever investment? Doric Nimrod Air Two. A little aircraft leasing investment trust that owned a fleet of Airbus A380s leased to Emirates. We added to our position during Covid and made about 600 per cent when the world realised these aircrafts would be needed again. 19. What's your greatest ever investing mistake? At the end of December 2022, when it became clear that inflation was sticky and that interest rates were heading higher, we had too much growth exposure. Whilst we reduced our growth positions a little, we should have sold a lot more. Growth went on to underperform significantly over the next 18 months. Compare the best DIY investing platforms Investing online is simple, cheap and can be done from your computer, tablet or phone at a time and place that suits you. When it comes to choosing a DIY investing platform, stocks & shares Isa, self invested personal pension, or a general investing account, the range of options might seem overwhelming. > This is Money's full guide to the best investing platforms Every provider has a slightly different offering, charging more or less for trading or holding shares and giving access to a different range of stocks, funds and investment trusts. When weighing up the right one for you, it's important to to look at the service that it offers, along with administration charges and dealing fees, plus any other extra costs. We highlight the main players in the table below but would advise doing your own research and considering the points in our full guide to the best investment accounts. Charles Stanley Direct * 0.30% Min platform fee of £60, max of £600. £100 back in free trades per year £4 £10 Free for funds n/a More details Etoro* Free Stocks, investment trusts and ETFs. Limited Isa, no Sipp. Not available Free n/a n/a More details Fidelity * 0.35% on funds £7.50 per month up to £25,000 or 0.35% with regular savings plan. Free £7.50 Free funds £1.50 shares, trusts ETFs £1.50 More details Freetrade * Basic account free, Standard with Isa £5.99, Plus £11.99 Stocks, investment trusts and ETFs. 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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.'
