Citywire printed articles sponsored by:
View the article online at http://citywire.co.uk/wealth-manager/article/a666683
Personal Assets: there's panic in the air (but it's the wrong kind)
by Sarah Miloudi on Mar 18, 2013 at 13:49
Investors are in a panic over markets - but they are fearing the wrong risks, the team at Personal Assets has warned.
Before news from Cyprus hit equities, investors were rushing to buy in as the FTSE's rally extended, however Personal Assets' respected team believes they should be focusing elsewhere.
'At this stage in the market, more risk is being taken than investors admit to, or perhaps even realise, and there is panic in the air ― not panic about the level of the markets, which would make sense, but panic to invest cash at any price,' said Robin Angus, chair of the investment trust.
Even those initially sceptic of the rally have been 'throwing in the towel' and joining in, Angus said, but they stand to get little in return despite the high entry price.
Investors could also be giving up their capital to gain access to income streams that are far too meagre, in part because of the near-zero interest rates and fast-eroding yield on income-paying stocks, but also because of the unwarranted divide in their minds between sources of capital and income and the need to have a foot in both camps.
Angus said: 'If I want income, I have to buy a bond or an equity share that produces it; and in today’s markets I will almost certainly have to pay more for a stream of income than it is objectively worth.'
He added: 'In other words, because I need a particular kind of return categorised as "income", I have to deploy my capital inefficiently.'
Angus made the comments to shareholders writing in Personal Assets' latest quarterly review.
The popular trust is managed by AA-rated Sebastian Lyon (pictured), which over the three years to the end of December has grown its share price by 29.9% and its net asset value (NAV) per ordinary share by 32.98%, while the FTSE World has risen 29.8%.
In keeping with their 'uneasiness' about valuations, Angus said Personal Assets investors were more likely to see the trust trim its equity positions further rather than making additions to the portfolio.
Slightly ahead of Invesco Perpetual's Neil Woodford, Lyon decided to sell the trust's entire Vodafone holding, a trade he executed in January. Lyon also cut back on drinks maker Diageo, leaving just under 40% of shareholders' funds in blue chips.
News sponsored by:
Today's top headlines
More about this:
Look up the shares
Look up the fund managers
More from us
Aberdeen Live supplement: Fundamentals point to ongoing flows and solid returns from EMD
After a record year for inflows and market-leading performance in 2012, emerging market debt has taken a large step towards the mainstream. Our recent debate covers the outlook for the asset class this year and where opportunities can be found.
On the road
J.P. Morgan Elect on investment growth, income and cash. More information on J.P. Morgan investment trusts.
by Emma Dunkley on May 23, 2013 at 14:09