Wellian Weekly


  • 19th October 2020
    Wellian Weekly

    As the government prepares to impose tougher local lockdown rules, the UK unemployment rate has surged to its highest level in over three years as the pandemic continues to hit jobs as many businesses are forced to close. In the three months between June and August, an estimated 1.5 million people were unemployed as the unemployment rate grew to 4.5% compared with 4.1% in the previous quarter, while redundancies rose to their highest level since 2009.

    Since the pandemic began there has been a sharp increase in those out of work and overall employment is down by about half a million, with young people aged 16-24 in particular who seem to have been the most affected group as they represent around 60% of those now out of work, with a large number of redundancies had been focused on sectors such as hospitality, travel and recruitment. Meanwhile, the number claiming work related benefits hit 2.7 million in September, an increase of 1.5 million since the beginning of the crisis in March.

     

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    Wellian Weekly

  • 12th October 2020
    Wellian Weekly

    Last week brought a slew of announcements from businesses, underlining the pressure the economy is under as a result of the coronavirus crisis. The second postponement of the new James Bond film was the last straw for Cineworld, which will completely shut its cinemas for months, sending a ripple of anguish through leisure parks, where restaurant visits are reliant on filmgoers.  Easyjet has announced it will lose money for the first time in its 25-year history in 2020 and while the headlines focused on the size of the loss (the airline expects to notch up a loss of over £800m) management expects to be operating at 25% capacity in 2021, reaffirming that this will be the biggest challenge to the travel industry that we have seen. Pub operator Greene King has announced job losses and clothing retailer Edinburgh Woollen Mill has called in the administrators. For all these businesses the covid crisis has fundamentally challenged revenue generation and it’s not surprising that companies in these sectors are among the first casualties. The concern is that what were otherwise healthy businesses will struggle to survive this crisis even with government support - after all, we are far from the end of this crisis. The risk here is not solely within equity markets but penetrates all asset classes in some way. For example, in alternatives half of the businesses owned by private equity are estimated to have been affected by covid, with 10% seriously impacted. Going forward the industry expects higher deal prices and low interest rates will be a headwind to generating strong returns. 

     

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    Wellian Weekly

  • 5th October 2020
    Wellian Weekly

    We recently wrote a piece relating to a global index where we looked back at six years’ worth of monthly data and focused predominantly on the top 10 stocks. In looking at this data, we noted how on a monthly basis they have changed, and how, being as the index is a market capitalisation weighted one the allocations to these top ten has also been affected. The point of the article was to note how the index of today is not the index of six years ago and there are risks associated.  It is very easy to buy an index thinking you’ve got one thing, when in fact, as time progresses, what you have is actually very different.

     

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    Wellian Weekly

  • 28th September 2020
    Wellian Weekly

    The total amount of UK debt has now passed £2 trillion for the first time in history after the UK government borrowed a further £35.9bn in August, as tackling the economic fallout of the pandemic has taken its toll on the public finances, official figures from the Office for National Statistics (ONS) have shown. The figure, the difference between spending and tax income, was £30.5bn more than it borrowed in August last year and has taken the total amount of borrowing between April and August to £173.7bn, also a record, and £249.5bn more than the same time in 2019.

     

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    Wellian Weekly

  • 21st September 2020
    Wellian Weekly

    2020 for all its very many negatives, has given us a glimpse of how the environment can show signs of recovery when human activities are curtailed. Memorable footage of fish swimming in Venice’s turquoise canals symbolised nature’s ability to bounce back, taking advantage of lockdown to reclaim space usually overrun with people. As governments attempt to reignite economic activity, we have seen foot on the floor acceleration in the shape of vast fiscal stimulus, but with short term restrictions to manage rising covid risks akin to hitting the breaks. With the devastating loss of economic activity this year, has come a small positive in the form of lower CO2 emissions.

     

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    Wellian Weekly

  • 14th September 2020
    Wellian Weekly

    This profession of ours never stops fascinating me. I absolutely learn something new every day and I am eternally grateful to be able to get access to some of the finest investment minds in the world. As investment analysts and managers using third-party funds to construct our models and portfolios, we have the ability to talk with analysts, strategists, economists, fund managers and specialists. We also benefit from reading their latest thoughts and attending (albeit virtually at the moment) investment conferences to keep us all up to date with the comings and goings of the capital markets.

     

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    Wellian Weekly

  • 24th August 2020
    Wellian Weekly

    The UK Direct Property sector hasn’t been open to investors for five months now, and you would be forgiven for thinking there may not be much to report back during this time, but property managers’ efforts are now beginning to bear fruit. 

    As the summer has progressed, we have seen growing signs of the property market opening up again, with property deals beginning to come through. This is a welcome development for the UK commercial property sector as a growing body of transactions is what is needed to underpin the valuations attached to individual properties and give greater confidence in the pricing on property funds. The entire sector suspended (with the FCA’s blessing) in March when the impact of the coronavirus restrictions hampered the functioning of the market, with property valuers unable to assign values to properties with the usual level of confidence. Since then we have seen some property deals complete, mostly in those sectors least affected by the virus, and a gradual reopening as the ‘material uncertainty clause’ has been removed on a sector by sector basis. 

     

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    Wellian Weekly

  • 17th August 2020
    Wellian Weekly

    In the last couple of weeks, the regulator has released the snappily titled, although aptly titled consultation paper “CP20/15 – Liquidity mismatch in authorised open-ended property funds.”

     

    As is the case with all FCA papers I’ve read, there is generally a lot to read and digest and this one is no different. In the 70 odd pages of text within CP20/15 there are a lot of open-ended questions. I also felt there were contradictory points and parts of the system seemed to be completely overlooked which would have added value to the whole process.  Although not a critique (I would not want to write a paper such as this as there is SO much to consider) here are some of my thoughts relating to property funds.

     

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    Wellian Weekly

  • 10th August 2020
    Wellian Weekly

    Economies and stock markets across the globe have seen a major shake-up this year, and the UK was no exception. The coronavirus crisis has impacted all parts of our daily lives – from the way we work to the way we communicate with friends. However, the impact on UK businesses was profound, with most unable to operate over the period.

     

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    Wellian Weekly

  • 3rd August 2020
    Wellian Weekly

    As Donald Trump turned his attention to the November elections and his own bid for re-election, on Friday he vowed to ban TikTok in an announcement that asserted the Republican party’s line on the US’s relationship with China. Rounding off a week which had been a diplomatic disaster, as a Chinese consulate closed in the US and vice versa in Chengdu, hostilities between the US and China look set to run until at least the end of the year.  

     

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    Wellian Weekly

  • 27th July 2020
    Wellian Weekly

    In a previous article I wrote about how frustrating it is and long it takes for a fund of funds manager with an outsourced ACD to get an account set up and ultimately be able to trade in collective investments. On the other hand, if I wanted to buy an Investment Trust or ETF then this deal can be completed as soon as the deal ticket was completed and sent and this is a major risk for the unit trust / OEIC industry.  I’m sure we’ve all seen the charts showing that “x” years ago the average investor stayed invested in the same fund for “x” years, whereas today the average investor stays invested for “x” months. If it is difficult to get access in the first place due to admin backlogs, why keep trying?

     

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    Wellian Weekly

  • 20th July 2020
    Wellian Weekly

    The coronavirus outbreak has sent a shockwave through the finances of millions of people in the UK. The effect has not been universal, nor has it been equal. Your age, your job, where you live, and the pre-virus state of your finances will all make a difference to how well you can cope. For a start, there has been the effect on income. For those who work, the amount of money coming in depends mostly on their wages.

     

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    Wellian Weekly

  • 13th July 2020
    Wellian Weekly

    As the UK began to ease back on its lockdown restrictions, the date that seemed to attract most interest was the day on which pubs would once again open their doors. A milestone on the long road of “getting back to normal”, the day was symbolic as much as a reflection of the nation’s love of food and drink. One week on from “Super Saturday”, figures suggest the public were not knocking down the doors of their local eateries and sales were half the pre-covid levels over the opening weekend. 

     

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    Wellian Weekly

  • 6th July 2020
    Wellian Weekly

    The very first unit trust was launched by M&G in 1931. At approaching 90 years old, they have a history to be proud of. As a portfolio manager that builds models using collective investments, unit trusts are pretty central to our business and there is hardly a day goes by when we do not interview a unit trust manager. Discounting income and accumulation shares, and different classes due to charging structures, there are over 3,000 / Open Ended Investment Companies on offer which collectively have in excess of £1.3 trillion of assets under management. Unit trusts are still being launched, so they are still obviously considered a suitable home for capital and relevant for investors and fund managers alike – after all, in the world we live in today, if they weren’t considered appropriate, why would they pass scrutiny from a product committee, compliance department, marketing and sales teams?

     

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    Wellian Weekly

  • 29th June 2020
    Wellian Weekly

    Inflation in the UK fell to a four-year low last month. Year-on-year prices as measured by the Consumer Prices Index rose by just 0.5%. Sounds like inflation is something we don’t need to worry about right now.  However, a study that came out the other week that suggests it could end up being a much bigger problem that we might expect.

     

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    Wellian Weekly

  • 22nd June 2020
    Wellian Weekly

    Since the shock of the coronavirus crisis brought markets to their bottom in March, equities have risen sharply, with global equities up 30%, prompting some commentators to query if markets had run ahead of themselves. Most countries are just reopening after lockdown, yet stock markets are around / above levels recorded at the start of the year, when the world was a very different place. Has optimism overshot reality? Is this just a reflection of the tsunami of liquidity that has been unleashed by governments and central banks in the western world?  

     

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    Wellian Weekly

  • 15th June 2020
    Wellian Weekly

    Investing is not easy. No matter what anybody says. One of the main reasons is there is not one measure of success. The goal posts constantly change.  For instance, if my portfolio has achieved 10% (let’s say the portfolio is constructed of UK large cap stocks) and the benchmark index (a very relevant FTSE 100) has achieved 5% then you could argue that my portfolio has done well. But, if my 10% was achieved with 20% volatility and the index only achieved 10% volatility, have I done as well?  What if my 10% was achieved with 8% capital and 2% income, whereas the benchmark was 1% capital and 4% income and I was an income seeking investor (selling capital gains and using them as income aside).  There are so many “what ifs” when you use more than one measure of success.  Measuring David Beckham for his abilities as a footballing midfielder in reference to pinpoint accuracy on crosses or free kicks, or rallying the team as a captain is one thing. Measuring him for defending, tackling, kicking the ball with his left foot or heading the ball is another. So, overall, is he good or bad?

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    Wellian Weekly

  • 8th June 2020
    Wellian Weekly

    Three months ago, investment firm Janus Henderson published its usual quarterly global dividend review and judged 2020 looked set to deliver a fifth consecutive year of record dividends, with global payouts totalling $1.48 trillion expected, some 3.9% higher than 2019. But that was then.

    Three months on, the more sober assessment of 2020 contained in the firm’s latest global dividend review is a great deal more downbeat. Its best case scenario sees a decline in global dividends of 15% this year to $1.21 trillion, a drop of $213bn. Its worst case scenario sees a decline of 35%, $933bn.

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    Wellian Weekly

  • 1st June 2020
    Wellian Weekly

    The years since the global financial crisis did not see the return of strong global trade and economic growth rates of the early noughties, but with Donald Trump’s election as US president, protectionist rhetoric evolved into a full trade war with China. Although equity markets were optimistic about the signing of a Phase One deal in January, Covid-19 has given rise to practical and political issues that make the outlook for global trade look questionable. Lockdowns have led to dramatic falls in demand and brought the travel and leisure industry to a stop, clipping the wings of an industry that had been a bright spot for growth. The WTO has warned that it expects a significant rise in costs associated with extra border checks and extra time in transit as a result of travel restrictions that have been put in place. 

    To read the full article please click on the link below:


    Wellian Weekly

  • 18th May 2020
    Wellian Weekly

    As a multi asset manager, I have the privilege to spend lots of time talking to lots of fund managers about lots of different asset classes. I also have the ability to talk to economists and strategists about the macro environment.  Many managers I talk with are specialists, many are generalists. Investment styles and philosophies are discussed, as are portfolio construction techniques and many other conversations are held.  It’s not surprising that I write a lot of notes when talking to managers as the amount of information and data that is sent my way is massive.  On top of that, markets are constantly changing, the investment landscape is always reacting to different stimulus and the same stimulus can affect one industry completely differently to another.

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    Wellian Weekly

  • 11th May 2020
    Wellian Weekly

    The Bank of England has warned that the UK economy is heading towards its deepest recession on record as the impact of the coronavirus has meant the economy would shrink by 14% this year, based on the lockdown being relaxed in June. Scenarios drawn up by the Bank to illustrate the economic impact said Covid-19 was dramatically reducing jobs and incomes in the UK.

    Bank of England governor Andrew Bailey has said there would be no quick return to normality and described the downturn as unprecedented and that consumers would likely remain cautious of their own choice even when lockdown restrictions are lifted, suggesting that it wouldn’t be until next summer that activity comes fully back.

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    Wellian Weekly

  • 4th May 2020
    Wellian Weekly

    The magnitude of the threat to the economy that covid-19 represented was unforeseen in financial markets. Emerging first in December 2019, reports of covid-19's spread in Wuhan appeared in the press in January. The speed at which both the health crisis and the resultant economic and financial market crises have unfolded was at a far greater pace than we have seen before. Starting in mid-February, markets entered a month of intense pressure with both equity and bond markets falling, in a sell-off that affected all irrespective of geography, asset class and market capitalisation. As the size of the problem became evident, governments were prompted to respond very quickly, and on a larger scale than during the 2008 global financial crisis. Markets have reacted favourably to government measures and volatility levels have fallen from peak levels but remain elevated. During times of extreme stress assets can become very correlated to each other and March was no exception.

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    Wellian Weekly

  • 27th April 2020
    Wellian Weekly

    Having worked from home now for several weeks, I have been considering what the world will look like and act like when we are released from our self-isolation. I fear this might last a couple of months and our outlook on investments, the economy, the way we interact with our companies and many other factors will change. Potentially forever.

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    Wellian Weekly

  • 20th April 2020
    Wellian Weekly

    For income investors it’s been a torrid time; the ‘perfect storm’ doesn’t even begin to describe the situation we are going through. Across the board, dividends are being cancelled – with some yanked just days before payment. As you’d expect, the FTSE 100 is doing slightly better than the UK-focused FTSE 250, but only slightly.

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    Wellian Weekly

  • 6th April 2020
    Wellian Weekly

    In the last few weeks equity markets have stolen the headlines with some dramatic movements in share prices that have rivalled those of the GFC. Also, in common with that period, we have again seen the suspension of property funds - although this time around managers are at pains to point out that it’s not for want of liquidity. 

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    Wellian Weekly

  • 30th March 2020
    Wellian Weekly

    Exhibit A – Daily performance of the L&G UK Mid Cap Index Fund year to “date” (with “date” being 26 March 2018).

    Exhibit B – Daily performance of the L&G UK Mid Cap Index Fund year to “date” (with “date” being 26 March 2019).

    Exhibit C – Daily performance of the L&G UK Mid Cap Index Fund year to “date” (with “date” being 26 March 2020).

    To download the full report please click on the link below:


    Wellian Weekly

  • 23rd March 2020
    Wellian Weekly

    Last week a long-term client got in touch after reading the last piece we put out (https://www.wellian-is.com/53/572/wellian-weekly-16032020) questioning whether it was maybe a bit complacent in relation to what has been happening in the capital markets over the last couple of weeks.

    My initial response was “no, I didn’t think we were”. After all, we had written about the Coronavirus for the past two weeks - here (https://www.wellian-is.com/53/318/wellian-weekly-09-03-2020) and here (https://www.wellian-is.com/53/568/wellian-weekly-02032020) but maybe, in retrospect, we should have written again. So, for the third week in four, here goes.

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    Wellian Weekly

  • 16th March 2020
    Wellian Weekly

    I am a full believer in the cases put forward by climate scientists in relation to carbon emissions, global warming, climate change and the potential devastating effects that will befall our planet if we don’t do something and do it quickly.  I’m doing my bit – solar panels have been on our roof for almost a decade; we drive a hybrid car; we recycle; we compost; our red meat intake has been curtailed massively; I walk lots of places; the use of public transport over taxis is the default option and so on, every little helps.  But, wouldn’t it be great if these 2050 targets were achieved BEFORE 2050? it feels a little like when I was at school – rapidly rushing my homework on a Sunday night for handing in on the Monday morning…  although 30 years away, this time will fly by. It is often said that the best time to make this change was 20 years ago; with the second best time being today.

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    Wellian Weekly

  • 2nd March 2020
    Wellian Weekly

    In a meeting with an emerging market equity manager a few weeks ago, the manager took some time to carefully explain all the shares he had not been buying since news of the spreading coronavirus had begun to unfold in the media. The manager was eyeing some consumer discretionary names, but had not seen valuations reach a point that reflected the impact that coronavirus would have on businesses. After the last ten days, we suspect that he will be taking another look at some of the names on his wish list.

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    Wellian Weekly

  • 24th February 2020
    Wellian Weekly

    We have previously discussed the returns from 2019 along the lines of which asset classes performed well, which surprised and so on, but this article is to take those numbers for the main asset classes and try and put them into a different context.

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    Wellian Weekly