Where do you invest now? Equity markets are very volatile, Government Bonds are increasingly risky, Cash deposit rates are low and Gold looks like it may be entering bubble territory? Most advisors are still recommending Capital Guaranteed 'Structured products', but they are expensive, have long investment periods and often don't give better than cash returns.

If I had one piece of advice for my friends and clients, it would be to ignore the Irish media and look at CNBC or other reputable international media outlets for your business and economic news. As the Irish Times continue to spread doom and gloom with that 2 page spread on Nama debt today, here is some positive, well thought out and non-sensationalist discussion from CNBC about Irish situation. Enjoy

video.cnbc.com/gallery/

CSO Launch new House Price Index

I noticed in the Irish Times today a small piece noting the launch of a new Independent House Price Index from the Central Statistics Office. The first index level will be announced on Friday 13th May. Whoever picked that date in the CSO has a dark sense of humour!  This has been badly needed for a long time and will replace the usual PTSB and Daft indices that are being used by the media at the moment. Everytime I hear new data from either index I feel they are not accurate and the reality seems different. The Daft indices in particular is limited and doesn't seem to mirror the wider market. The new CSO index will use data from 8 banks, gathering mortgage drawdown figures to estimate the average price for each particular unit type (Apartment, Semi D, Detached etc). The first index will show data going back to 2005 and will be issued monthly from May onwards. This will finally allow us to get a more accurate estimate of property prices and a reliable regular and independent monthly trend.

One downside of all this good information is its usefullness for the government if/when they introduce property taxes.

 

Link to article in Irish Times (28th April 2011, Property Supplement)

We regularly use the idea of Human Capital to help our clients establish and monitor their investments, pensions and general financial position. In a recent article published in ‘The Professional’ magazine, I set out the theory of Human Capital and how to apply it to your every-day finances. I put forward the notion that we often look at our financial position in isolation, and that we should really consider our future earnings (Human Capital) together with our investments and pensions (Financial Capital) and make sure they are compatible. This includes considering your employment stability when looking at the risk in your investment portfolio. For example, owners of filling stations should not really be invested in oil companies!

Read full article on Human Capital and Integrated Financial Planning.

The ‘Professional’ magazine is published quarterly and distributed to over 8,000 individuals in the finance and banking sector.

Its very encouraging for long term investors to see such a quick and dramatic bounce in equity markets over the past 2 weeks. Since the lows of mid March after the Japanese Earthquake and Libya 'troubles', the FTSE, DOW and Dax are all approaching new 2011 highs. This is a real sign that there are huge volumes of cash sitting on the sidelines. These investors feel they have missed the recoveries from March 2009 and are now waiting for any dip which offers value before getting into the markets. This gives me great comfort for the year ahead, which will be extremely volatile but should trend upwards as more cash enters the market.

Following on from my regular update on Irish investment fund performance, here are the top and bottom performing funds so far this year (6 weeks). As always, these updates really just go to show that markets are extremely unpredictable, and in my view, low cost, long term and well diversified portfolios tend to always do best. Trying to chase the latest investment trend, such as Gold, or Indian equities, towards the end of 2010 worked out very badly. European Equities have performed best led by Germany who are continuing to surge ahead economically. Emerging Markets and India in particular have performed very poorly, with significant loses in January. Emerging market equity falls recently can be explained by higher than expected inflation figures in those countries, and the fact that their central banks are now raising interest rates agressively to curb these upward price moves. Higher interest rates tends to slow company and economic growth rates and hence equities fall in value. Gold has also performed badly over the past few months after very steady upward movement in 2010, as the global economy stablises and investors move away from safe haven investments somewhat. There is an interesting comparison within the two lists with European Commercial property continuing to recover well, whereas Irish Property is still falling. The Friends First Insight Property Fund, dominated by European Property is up 9.05% so far, whereas the Friends First Corinthian Property fund, made up of a number of Superquinn units around Dublin, was down 12.22%

Top Ten Funds in Ireland - 2011 Year to Date

Ark AIB Euro Financials Pn C	16.35
New Ireland Geared Financials T2	11.96
Friends First Insight Property 5	11.35
Ark AIB Geared European Commercial Property	9.05
Quinn Life Euro Freeway	8.44
New Ireland Eurostoxx 50	8.21
BOI Smart Eurostoxx 50	8.21
New Ireland Euroland Equity S8	7.9
BOI Smart Euroland Equity	7.72
AXA Financial BlackRock Euro Equity Index	7.57

Bottom Ten Funds in Ireland - 2011 Year to Date

Irish Life Fidelity EMEA EUR	-6.92
Irish Life Fidelity China Pn V	-8.05
Quinn Life Latin America Freeway Investments	-8.08
AXA Financial BlackRock Gold & General	-8.22
AXA Financial JPM Global Emerging Markets Equity	-9.71
Aviva IRL Blackrock Gold Gr	-10.05
Friends First Corinthian Property	-12.22
Irish Life Fidelity India China	-12.91
Eagle Star India Equity Gr	-17.87
Stan Life Synergy Indian Equity Pn S9	-19.51

 

Source - Best Advice / Financial Express Life Funds Gross Performance YTD

 

WARNING - INVESTMENTS CAN FALL ASWELL AS RISE IN VALUE.

This list of funds should not be taken as investment advice, and always seek the advice of a regulated fee based financial planner before proceeding with any investment decision.

 No, this is not a misprint. Pramit Ghose did mean 2012 in his commentary this morning. I really enjoy reading Pramit Ghose's weekly 'snippets' which he emails on Fridays. In his latest issue he mentions something I have been commenting on recently more and more. He expects massive inflows into his Equity funds in 2012. Why?

 

Investors still remain very nervous, understandably, given the crash between 2007 and 2009. However, we have already had 2 years of double digit positive returns in the equity markets in 2009 and 2010, and almost everyone expects 2011 to be the same. Emerging Market economic growth is expected to be over 8% and global growth over 4.4%. In the latest 'snippet', Bernard Murphy, a senior fund manager at Bloxham, with nearly 40 years experience managing equities is quoted on investor sentiment 'after a bear market, investors need to see three years in a row of positive performance before they return to equity markets'

 

With a huge volume of Irish investors still sitting in cash, it is very possible that we make the same mistakes all over again, and over commit to one asset class. Between 2000 and 2009 we held too much of our wealth in property. Now we are over exposed to cash just as inflation returns and global growth is stablising at positive levels. There is a danger that all this cash is invested back into equities too late in 2012 just when they hit new peaks and we come to the party late. Try and avoid this by having a properly diversified investment position. Diversification is the key to successful investing, and trying to make non-emotional decisions with the help of an independent advisor. I personally buy and hold good quality, low cost equity funds, for any funds with a long investment time frame. This is particurly true for pension funds. Making short term investment decisions is a trecherous pastime, as is following the latest investment trend.

Quotes taken from Bloxham Asset Management 'Snippets' email, 28th January 2011. Please seek professional independent advise before making any investment decision.

 

WARNING - INVESTMENTS CAN FALL AS WELL AS RISE IN VALUE

 

Fitzpatrick Morris Financial Services, trading as investwise, is regulated by the Central Bank of Ireland

Dave

Commentary on the current Irish Soveriegn and Banking crisis

by Oliver Gillvary (Head of Research at Dolmen Securities)

 

Good morning

Please find below an interesting commentary by Oliver Gillvary (Head of Research at Dolmen Securities) on the current Irish Soveriegn and Banking crisis. (edited slightly by me where jargon crept in)

Basically my interpretation of what he is saying is that the EU Bank Bailout will be a good thing for the economy as it will free the banks to lend more, and will free the government (state) from covering deposits through the deposit guarantee. This will lower our bond yields and allow us to borrow again next Spring to cover the budget deficit. The only people to suffer in the short term will probably be Bank Shareholders and Bond Holders.

Article in Full below...

Continued speculation continues over the scale and size of the deal to be done for Ireland. The best is to look at what is relatively well know or at least accepted by the market at the moment along with the potential scenarios facing the Irish banks.  

·       The bailout seems to be focused towards the domestic banking system with figures of €50-88bn being spoken about in the media, but no detail is being provided on what shape this fund will have or its intended uses. This involves the EU loaning these amounts to the main Irish Banks to shore up their capital problems.
 
·        Comments from Irish Government Ministers indicate that any deal will not involve the Irish Government Bonds, but no denial of any deal for the banks is given.
 
·       Therefore if we accept the bailout is focused on the banking system what is the impact on the banks and in particular their shares and bonds
 
·       Under the first scenario the ECB along with the Government nationalise the entire banking system with Irish Life, BOI and AIB taken into state control. Equity and some bonds in such a situation would be wiped or in the case some of the bonds, heavily discounted. The bailout funds from Europe would then be used to provide funding for the banks in the case of deposit outflows along with recapitalising them and allowing a re-listing after a set period.
 
·       Such a scenario in our view will be difficult for Europe to undertake as it would highlight significant problems with European Stress tests as both AIB and BOI passed these. Also BOI raised capital from the private market backed by discussions with Europe and following an Irish stress test supported by Europe. A similar situation exists for Irish Life & Permanent which passed the Irish PCAR test a number of months ago.
 
·       A wipe out of equity in BOI after a rights issue will raise questions over other European banks that passed stress tests and bring into questions Europe’s treatment of the banking issue.
 
·       We see it as unlikely Europe will force a nationalisation of the whole system due to contagion impact it will have on other Europe financials.
 
·       Under the second scenario, the bailout funds are provided solely as liquidity for the banking system, allowing the State to remove itself from providing guarantees to the domestic banks. This will remove this responsibility from the State Balance sheet allowing it to distance itself from the banking issue, resulting in bond yields to fall and reduce pressure on other peripheral Euro-Zone economies.
 
·       This would be positive for bank equity and junior debt for the domestic banks as the funding will allow them to fund themselves more cots effectively and take more control of their destiny.
 
·       In the case of BOI and IPM it will allow funding to drop to more normalised levels as the banks in more difficult circumstances remain reliant on the bailout fund.
 
·       The fund in this scenario may also be used in part to recapitalise AIB, EBS , Anglo and Irish Nationwide.
 
·       A difficulty with this scenario is that no pain is being passed onto the private market. Equity holders remain whole along with bond holders. It is difficult to see how European Government could sell such a deal.
 
·       The final scenario is for a mixture of the previous two. The fund is part liquidity and partly for recapitalisation of the banks.
 
·       Under this case, recapitalisation is undertaken for AIB, EBS and potentially Anglo and Irish Nationwide from the fund.
 
·       Reducing the exposure of the Government to the banking system. Part of the fund is used to provide liquidity to the weaker members of the Irish system in the hope that BOI and IPM will be able to raise from private sources in a timely manner.
 
·       Capital could be used for both IPM and BOI to increase capital ratios also with dilution for existing shareholders.
 
·       Some bonds in the banks would be under threat in particular AIB in this scenario. I believe BOI will muddle through with no forced restructure, but there is a risk of further capital being injected as part of the whole scheme.

Conclusion     
 
·       The outcome of the discussions at EcoFin in coming days will determine the structure of the plan for the bailout for Ireland and/or Irish banks.
 
·       From the different scenarios we have outlined above, we believe the last is the most likely at the moment.
 
·       The greatest risk is to AIB bond and equity holders
 
·       I still believe BOI will get through and their bonds will continue to be serviced due to its capital raise. In the case of AIB I would sell the exposure ahead of any bailout announcement.
 
·       Similar for equity, the risk is to at least further dilution in the case of BOI and IPM, and I would recommend reducing exposure in part or in full ahead of the announcement.

Continuing my regular analysis of fund performance in the Irish Fund Market, here are the figures for the top 10 best performing funds in Ireland for the first 9 months of 2010.

There are some surprises and some funds that have been a regular feature all year. Indian Equity Funds have been on this list consistently, with the Irish Life Fidelity India, and Standard Life India Fund the best of them. Some may be surprise to see the Bank of Ireland UK Geared Property Fund at the top, but UK Property has been performing well, particularly around London. The fund is geared which significantly increases its risk profile (borrowing supplements any initial investment, which caused a lot of the problems we saw with investment funds over the past 5 years.) and was launched in Sept 2009. A bigger surprise is the Irish Life Property Portfolio Fund which had 33% exposure to Ireland and is still doing well. This fund is still down over 40% still from its peak though. Finally, it is interesting to see Axa Financial starting to show on the list. They are very new to the market here and have a very good investment platform, with low management fees due to the fact that they don't pay commission to intermediaries. This is an innovative approach, and if their fund performance is even close to the others, it will be an attractive option, given costs and flexibility will be far more competitive than the traditional investment firms in Ireland.

( ps-We are one of only a handful of advisors who work with Axa, which is to be expected given they don't pay commissions so most advisors won't recommend them!)

 

Bank of Ireland Geared UK Property     39.31%

Friends First Insight Property                  39.01%

Irish Life Fidelity India                            38.63%

Standard Life UK Smallers Companies   34.97%

Irish Life Property Portfolio                     27.78%

Standard Life Indian Equity                     27.14%

Eagle Star Indian Equity                          27.14%

Irish Life Fidelity India China                   25.69%

Irish Life Fidelity EMEA                         22.90%

Aviva Blackrock Gold                            22.49%

Axa Financial Blackrock Gold & Gen     21.21%

 

Source - Best Advice /  Financial Express  Oct 5th 2010

 

WARNING - INVESTMENTS CAN FALL AS WELL AS RISE

PAST RETURNS ARE NOT A RELIABLE GUIDE TO FUTURE RETURNS

 

To continue on my regular update on fund performance and investment trends, here are the latest figures showing the performance of the best ten funds and worst ten funds in Ireland for the first 6 months of 2010. If you have been following these updates regularly, there is a very obvious trend with Indian equity funds continuing to perform very strongly and consistently, but also show less volatility than China or other emerging markets. Property funds also continue to make strong recoveries, particularly those invested in the UK Commercial property sector.

Fund Name                                            YTD %
BOI / New Ireland UK Geared Property     44.97%
Friends First Insight Property                    28.13%
Irish Life Fidelity India                             27.60%
Irish Life Property Portfolio                      24.42%
Stan Life Synergy UK Smaller Companies 23.63%
Irish Life Fidelity India China                   19.39%
Friends First Insight Property                   19.22%
Canada Life SEI Japanese Equity              19.06%
AIB SP Japan Equity Indexmaster             18.38%
Stan Life Synergy Indian Equity                18.05%

 

The bottom 10 funds are dominated by European Equity and Property funds. The Eurostoxx 50 index has underperformed and European Property, which had held up relatively well compared to Ireland and the UK, has finally seen more falls in 2010.

 

Fund Name                                                  YTD %
Ark AIB Euro Financials                                -19.92%
Aviva IRL Blackrock World Energy                -15.25%
Aviva IRL Blackrock World Mining                 -13.83%
Quinn Life Euro Freeway                              -12.43%
BOI / New Ireland Smart Eurostoxx 50         -11.78%
Irish Life Indexed Europe                            -11.42%
New Ireland Alternative Energy                    -11.21%
Friends First Pan European Insight Property    -9.52%
Irish Life Indexed Ireland                              -9.34%
Friends First Corinthian Property                    -8.98%

 

WARNING - PAST PERFORMANCE IS NOT A RELIABLE GUIDE TO FUTURE RETURNS.

WARNING - THIS REPORT IS FOR ILLUSTRATION AND INFORMATION ONLY AND DOES NOT CONSTITUTE INVESTMENT ADVICE

 

 

The government guarantee on all deposits in specified Irish Banks was due to expire at the end of September but this afternoon they received approval from the European Central Bank to extend it to the end of December.

In summary, all amounts on deposit with the main Irish banks will be fully guaranteed now until December 31st 2010

Excerpt from Irish Times online this afternoon:

The European Commission has extended until the end of December the State’s guarantee over the liabilities of Irish banks.

The Commission said today the scheme was “an appropriate measure of remedying a serious disturbance in the Irish economy”. The scheme was due to lapse on September 29th and the Government had been seeking to extend it at least until the end of the year. The guarantee was first issued for some €400 billion of bank liabilities at the height of the credit crisis in September 2008.

The guarantee, which was originally for two years, was amended last year to give banks scope to issue debt with maturities of up to five years, but still with a 2010 issue deadline and periodically reviewed by Brussels.

Minister for Finance Brian Lenihan welcomed the decision to extend the guarantee. “This scheme will continue to support the funding needs of the financial system so it can assist in the economic recovery, through providing credit to protect and create jobs,” he said.

Retail deposits of up to €100,000 are unaffected, and are protected under the deposit guarantee scheme, which has no end date.

Our latest recommendation is directed at clients who are worried about capital security, but want access to potential returns higher than deposit accounts or the national sovereign bond for example. The New Ireland Secure Advantage Fund, now in its 10th series, has the double attraction of a 5% fixed rate on part of the fund.

Click HERE for my summary document.

If you feel the stock market has the potential to grow by more than 3% per annum average over the next 5 years then you will see the benefit of our latest recommendation.

The investment is split into two parts

25% of your money is invested in a one year fixed deposit account with Bank of Ireland at 5% fixed.

75% of your money is invested in 5 of the main equity indices for 5 years. There is no cap on returns.

(S&P500, Nikkei, Eurostoxx, MSCI Emerging Markets and FTSE)

 

I would be happy to discuss it further with anyone who would like to know more. Minimum investment amount is €5,000.

Dave

WARNING - This is a 5 year investment, and early encashment may result in a loss of some of your capital. The capital guarantee on the investment portion only applies at the end of the investment period.

I have been offered, just this morning, very limited access to the latest tranche of an Autocallable Bond investment from Global Reach (www.globalreach.ie). I have a lot of confidence in this particular bond, and previous clients experience with this provider and product has been extremely positive. This is the second tranche as the firsts one sold within four days of opening. This tranche is for €1million, launched last Friday to catch the over spill from the previous tranche and it is 80% filled straight away. It is closing next Monday but likely to be full well before that date. Autocallables have been very popular with our clients and work as follows.

1) Coupon:  14% annual coupon. This will be paid if all 3 indices are equal or greater than strike price (next Monday) at any annual anniversary date.

2) Invests 33% in each of the following Indices:  DJ EuroStoxx 50, DJUBS Commodity Index, Heng Seng China Enterprise Index.

3) Capital Protection: 100% Guarantee once the indices don’t fall below 50% soft protection barrier. (ie unless any index breaches 50% of the purchase price clients funds are 100% secured by Bank of America/Merrill Lynch – Last time it was Citi Bank).

4) If it doesn’t call in year one, it rolls on to year two and the coupon is cumulative, ie 28% in year 2, and so on for 5 years.

The history so far on Autocallables with Global Reach is:

1) Issued Nov  2008 (25% Coupon)  - Paid out First year

2) Issued  April 2009 (20% Coupon) – Currently bid 118cent on secondary market, Likely to pay out next month

3) Issued May 2009  (18% Coupon)  - Currently bid 110 cent ( 100cent = par). Looks likely to pay in May.

4) 2 Autocallables issued since Sept 2009 – to early to tell – but heading the right direction.

If you are interested in finding out more can you let me know today or tomorrow so I can reserve a slot before it sells out.

• Warnings: The underlying structure means that if you wish to encash your investment before the anniversary or Maturity Date, you may lose some or all of the money you invested.
• Warning: The value of your investment may go down as well as up. If you invest in this product you may lose some or all of the money invested.
• Warning: Past performance of these indices is not a reliable guide to future performance.
• Warning: This document is based on our understanding of current revenue law and practice which is subject for change without notice.
• Warning: The value of investments may fall as well as rise and your attention is specifically drawn to the section ‘Risk Factors’ in this document and in the Base Prospectus. Prospective investors should be able to bear the economic risk of an equity investment and be able to withstand a total loss of some or all of their equity. This product is not guaranteed in certain circumstances and some or all of your capital may be lost.

 

 

 

 

I am constantly reading business and investment books, I can't get enough of them. At the moment I'm reading Peter Lynch's 'Beating the Street' for the second time. I would highly recomend it for anyone interested in investing. He managed the Fidelity Magellan Fund in the 90's and was considered the worlds number 1 fund manager at the time.

In the book he passes on some of his ideas and principles, what he calls 'Peters Principles', which although they seem very simple, are actually very insightful. They seem even more relevent today than back in 1994, when the book was written. There are 21 in total but here are some examples,

Never invest in any idea you can't illustrate with a Crayon. What he is getting at here is that you should understand the company or fund you are investing in fully, and it should make basic business sense

You can't see the future through a rearview mirror. This one is simple, past performance is not a reliable guide to future returns. What did well last year, may not do well this year.

Everyone has the brainpower to many money in equities, not everyone has the stomach. This has been proven over the past 2 years, with massive panic selling in 2008, and a massive rebound in the markets in 2009, which only those who stayed in benefited from.

 

As part of my continuing updates on fund performance in Ireland, here are the latest figures as at the end of February. In January it was property funds which led the way. The top fund again in February is the Insight Property Fund, promoted by Friends First but run by UK independent fund managers Insight Asset Management. This is European focused property fund, and any property funds with Irish holdings are still performing very poorly. There is a very different look to the rest of the top ten this month.

Most of the international stock markets fell in February as investors became more nervous about strength of the economic recovery. However, the Japanese stock market performed better than expected and hence the number of Japanese equity funds in the list. Quinn Life appear on this blog for the first time with their Biotech and Japanesse funds. The list is closed out by the Fidelity EMEA (Emerging Markets, Eastern Europe and Africa) fund which continues to perform very well so far this year.

Fund Name                                                           YTD
Friends First Insight Property                                 20.42%
Stan Life Prosperity Japanese Equity                      20.12%
Stan Life Prosperity North American Equity           14.50%
BOI / New Ireland Smart UK Geared Property     12.58%
Quinn Life Biotech Freeway                                   10.61%
Canada Life SEI Japanese Equity Pn Ind                10.43%
Quinn Life Japan Freeway Investments                    8.15%
BIAM Indexed Japan Equity                                   7.54%
Stan Life Inv Japanese Equity Multi-Manager           7.26%
Irish Life Fidelity EMEA                                          7.14%

 

For more information on funds available in the Irish Market and assistance with your investments give us a call.

 Warning - Past Performance is not a reliable guide to future performance.

Warning - The value of your investment may go down as well as up. You risk losing some or all of your initial investment.

It is very interesting to see economist and market commentators shift their attention from Greece to the UK this week. The UK economy seems to be slipping slowly into serious trouble, not that we have anything to be shouting about in Ireland! The Budget defecit over there is almost as bad as ours but they are much closer to a general election, and therefore can't make the kind of sweeping cuts to public spending and public sector pay that has already occured here. Whether you agree with our government or not, at least they are doing something. There is a lot less happening in the UK.

Evidence of growing trouble over the Irish Sea is backed up by the Euro V Pound exchange rate which has rallied from .86 to .88 this month, and big worries about the UK consumer not spending. UK economic weakness would have big knock on effects for Ireland.

Interestingly, since my last fund update in early January, the top ten performing funds in Ireland for the first month of 2010 are now dominated by property funds. This is to be expected as property has been lagging equities significantly since the equity markets started to recover in March 2009. 7 of the top 10 funds in January were property related, with the other 3 being the Friends First Protected Equity fund, Canada LIfe Japanese Equity Fund and Irish Life EMEA Fund (Emering Europe, Middle East, Asia). January was a flat month for the equity markets with some uncertainty creaping back into the markets. The markets are now questioning the capability of corporates to continue to show strong earnings growth, and there is growing concern about the US Trade Deficit in particular. Chinese growth has been the main driver for economic recovery and even they are starting to worry about the chinese economy over-heating, particularly their property market.

 

Fund Name                                                               YTD %
Friends First Insight Property                                      16.73
Aviva IRL Geared European Commercial Property        11.97
Friends First Insight Property Fund                              10.17
BOI Smart UK Geared Property Fund                            8.8
New Ireland Geared Property Fund                               8.8
Irish Life Property Portfolio Fund                                  7.11
Friends First Protected Equity Fund                               7.03
Canada Life SEI Japanese EquityFund                          6.83
Irish Life Fidelity EMEA Fund                                        5.96
Stan Life Synergy European Smaller Companies Fund   5.91

Warning - Past performance is not a reliable guide to future returns and your investment value can fall as well as rise. This article is not meant as an investment recommendation and you should seek professional investment advice before making any investment decision.