I know that many financial advisers will no longer entertain the use of active fund management in perpetuating the long-term wealth of their clients. But I think this country’s investment industry remains a real force for good – a shining light in what is a rather grim looking economy, darkened by the storm clouds that Brexit brings our way.
Rather than knock active fund managers all the time as some do, we should herald the best of them while acknowledging the fact that artificial intelligence will play an ever-increasing role in investment management. All these investment services and ‘techniques’ – active, passive, discretionary management, and fund platforms – have a pivotal role to play in building future personal wealth. Let’s embrace them all.
In recent weeks, we have witnessed some of the best names in asset management launch investment trusts. Mark Mobius has launched the £100m Mobius Investment Trust – shares in the fund began trading at the start of October – while Fundsmith’s Terry Smith is treading into smaller company territory with the launch of Smithson.
Before the month is out, AVI Japan Opportunity will be listed on the London Stock Exchange, with Merian Chrysalis following afterwards.
Exciting times, although some sceptics will no doubt take a different line, stating that the four new trusts are a sign of stock market hedonism before an almighty fall – as in early 2000, just before the bursting of the technology market bubble.
The doubters may well be right in believing markets are heading for a fall but I bet you my pension that over the next 10 years, these new trusts will all make solid, long-term investment returns for investors prepared to stay the course.
I have had the privilege in the past couple of weeks of interviewing three of the investment managers behind these new launches – Mr Smith, Mr Mobius and Joe Bauernfreund of Asset Value Investors. Intimidatory though they may be – Mr Smith especially – you cannot knock their investment record. They are living proof that active fund management can deliver stellar investment results.
Of course, there is no guarantee that their outstanding investment streaks will continue. But I would rather have my money (if I had any) with them than with a bank, or tucked away in a fund dutifully performing in line with the FTSE 100 or FTSE All-Share indices – slightly under-performing when charges are taken into account.
Mr Smith has built a fantastic business on the back of the success of Fundsmith Equity, a fund launched nearly eight years ago with him at the helm. Through fastidious research (a Smith trait), investing in a tight portfolio of quality stocks and refusing to get caught up in short-term noise, he has delivered an annualised rate of return since November 2010 of just short of 20 per cent.
A return twice that from investing in a fund tracking the performance of the FTSE All-Share index. Not surprisingly, the vehicle has now swelled in size to £17bn.
While the Smithson trust will be run by underlings that Mr Smith has brought in from investment bank Goldman Sachs, there is no doubt he will be all over it like a rash. He will ensure the fund is a long-term success, irrespective of any temporary stock market derailments.