There is a group of financial journalists out there – call them equity virgins – that actually does not believe in investments.
It is cash all the way for them. The pervading view being that investing is just a massive racket run by the industry.
You can see why they would come to that conclusion. So many funds underperform, the fees are still far from transparent, and the wealth in the industry so great that you can wonder whose benefit the whole thing is for.
Then there are those that are total converts to the cause, who unquestioningly follow the star stock pickers and hang on every single move they make.
Fund managers need to start talking today about the value they have achieved – that only comes through openness and transparency.And there are those who do not like active managers at all, and think the future lies in portfolios of low-cost exchange traded funds. This has proven to be a fine strategy in our 10-year bull run – let us see how it lasts when that ends.
And then there is the final group, for those like me, who believe in the ability for well-run actively managed funds to create value, but who think the entire industry is ripe for change.
But I also believe that total transparency should extend to full stock selections.
Over here, the only requirement on fund management companies is that lists of full holdings are published once a year.
They do not even need to be that recent when they do publish, so when I looked last week, the most recent list of holdings for one of Britain’s most popular funds was for August 2017 – it was 15 months out of date.
We all know what is included in fund fact sheets, and these are updated regularly – but that is just a snapshot of what really is going on in a fund.
How do we know what is actually happening? How do we know if the manager has not suddenly changed his style or asset allocation?
This might not be evident in the headline figures or performance for some time.
The argument against publishing regularly is that these are commercially sensitive decisions being made. But that is hokum.
Everyone in the industry knows what is going on, it is just the public that is being kept in the dark. And in the US they publish full lists of holdings quarterly – that should be the minimum requirement here.
Of course there is an exception, and that is Neil Woodford, who publishes his full holdings once a month.
Now, you may argue that the level of scrutiny he gets is why the rest of the industry will never follow suit. I say it demonstrates precisely why they must. Not every fund generates the same level of interest as him, but plenty will. We have had a 10-year bull run.
Fund managers need to start talking today about the value they have achieved – that only comes through openness and transparency. If they do not start doing it in the good times then when the tide turns against the markets, we will have another generation of investment cynics on our hands.
Identifying tax avoidance
You can always spot tax avoiders a mile off. Whenever they are caught using a scheme, their standard response to the media is: “I have paid all tax owed.”
Of course, it is true. They have.
What is more, every time I write about tax avoidance there is some smart alec who says that paying into a pension or an Isa is tax evasion. It is among the most petty and unimaginative arguments there is.
The tax system is full of restrictions and allowances designed to encourage spending, saving, and (my most used word) prudence, such as tax bands, and the personal allowance. Pensions, Isas, venture capital trusts, the Enterprise Investment Scheme – all of these are designed to fit within this remit.
It is the artificiality of tax avoidance schemes that makes them so sinister, the way cash is funnelled through different channels, and the use of loans and dividends to create payments – such as film partnerships were.
As we roll in to April it is time we had a proper conversation about tax in the UK, so that we can establish what is right and wrong. Then maybe we might be able to fund our NHS and get enough police on the streets.
Home cheap home
A friend calls. His house has been on the market for £500,000 for months. Lots of viewings, no offers.
Now he has an offer at £460,000. My advice: try to get £470,000 and if you do, say yes now.
This is the reality of the market now – what once seemed a very gettable price is now a long way from what you can expect.
What is a house worth? Only what someone will pay for it.
James Coney is money editor of the Sunday Times
