From the monthly archives: March 2017

We are pleased to present below all posts archived in 'March 2017'. If you still can't find what you are looking for, try using the search box.

Fund Rating Removal for the Schroder Global Multi Asset Income fund

Square Mile has decided to remove the positive prospect rating on the Schroder Global Multi Asset Income fund. This fund was introduced into the Academy in July 2015, but since then our conviction in the proposition has not grown to the sufficient level required.

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Square Mile introduces the Jupiter Absolute Return fund to the Academy of Funds

We are pleased to announce the introduction of the Jupiter Absolute Return fund into our Academy of Funds. This is essentially a global equity long/short strategy run by James Clunie, who has a proven background of taking both long (buying stocks) and short (outright selling stocks) positions.

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Fourteen Passive Funds Join Square Mile's Academy Of Funds

Square Mile Investment Consulting and Research today confirms an extension to the open-ended passive funds rated on the Square Mile Academy of Funds, awarding a further 14 funds 'Recommended' status.

Square Mile's assessment identifies funds that follow a low-cost approach to approximate the average market return, and can be held for the longer-term. Funds achieving 'R&' ratings are typically run by investment companies that demonstrate a firm commitment to running passive strategies. They track an index suitable to retail investors such as regional equity and gilt markets and are low cost, managed efficiently and of sufficient size to allow an accurate implementation of their strategy.

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Architas Multi Asset Active Fund Range Reinstatement

We are pleased to announce the reinstatement of the Recommended rating for the Architas Multi Asset Active range of funds. This range consists of six funds: Multi Asset Active Reserve, Moderate Income, Intermediate Income, Progressive, Growth and Dynamic. The ratings were suspended in April 2016, following the announcement that then CIO and co-manager on the fund range, Caspar Rock, was to leave the firm. Architas announced the appointment of a new CIO, Jaime Arguello, in the summer of 2016 and he joined the business in November.

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IA UK Equity Income Sector Lowers Yield Hurdle

At Square Mile we take time to ensure that we have clear and measurable performance objectives for all funds that we review. These vary depending on the what outcome is being sought but clearly for equity income funds it is yield, distribution consistency, dividend growth and capital accumulation that are the important considerations. However, satisfying all of these areas all of the time is not easy and this has meant that within the sector there are a range of different approaches that emphasise different objectives. Therefore, we are not particularly concerned as to which sector a fund falls into, as long as it is meeting, or we believe that it can meet, its longer-term performance objectives. An obvious point of contention nonetheless, can be funds that are highlighted, and potentially marketed, as one thing, but in practice managed to a different set of objectives. As such, time must be taken to evaluate and understand each fund on its own merits.

Nevertheless, regarding these changes specifically we would perhaps question whether just meeting the market yield (albeit with the 90% annual limit) makes enough of a distinction between funds that are managed on a true income basis and those to a capital and/or total return outcome. This is especially pertinent in a world where the industry should arguably be, now more than ever, trying to highlight the particular merits of active investing over passive.

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Retail Versus Institutional Portfolio Management Fees

The opening words of the FCA's Asset Management Market Study stress that the 'asset management industry plays a vital role in the UK's economy'. On first reading there follows 200 pages of what seems like well-aimed broadsides at the industry raising concerns about excessive fees, disappointing performance, hidden costs, high profit margins, weak price competition, poor cost control, weak fund governance bodies, etc. However, on closer reading, I interpret the review a being little more measured, very well thought out and at this stage, relatively targeted in the reforms that the FCA is considering putting through.

The study acknowledges the importance of the asset management industry to the UK, which generates around £17bn in revenues or about 1% of national GDP. We should also remember that when the FCA was set up in 2013, it was tasked with wider objectives than the FSA and these objectives now include 'promote effective competition in the interests of consumers'. This new obligation on the FCA is something that should be recognised when reading the report. That said, we hope that the FCA will also recognise the vulnerability of the industry at a time when the UK is extricating itself from the EU. The coming years will be trying ones for the economy and especially for financial services. Taking combative swipes at an industry that manages £2.7 trillion of assets on behalf of overseas investors and a major earner of foreign exchange could be counterproductive to the nation as a whole.

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Square Mile Takes On The 3 Peaks Challenge To Help Raise £1M For Charity

Square Mile Investment Consulting and Research will take on the Three Peaks Challenge to support CASCAID in a bid to raise over £1m for Cancer Research UK, as part of a new industry-wide charity initiative.

The Square Mile team will climb three mountains in three countries: Ben Nevis in Scotland, Scafell Pike in England and Snowdon in Wales. To be successful, they must complete the challenge within 24 hours on the 8th and 9th June 2017.

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Square Mile upgrades the Dodge & Cox US Stock fund to AA rating

Square Mile is delighted to announce the upgrade of the Dodge & Cox US Stock fund from an A to a AA rating. We hold the team and its long held approach in high regard and the increased rating is reflective of our growing conviction in this strategy meeting its investment outcome.

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Changes to Santander Atlas Portfolio Range

Following a review of the Santander Atlas Portfolios, we have decided to remove the Recommend ratings on the range, which includes Atlas Portfolio 3, Atlas Portfolio 4, Atlas Portfolio 5, Atlas Portfolio 6 and Atlas Portfolio 7.

We have been monitoring these funds very closely over 2016, following a tweak to the permitted investment limits, which effectively allows the managers greater flexibility over the asset allocation. Following this change, our understanding was that this should lead to the funds being more resilient during periods of market weakness. This has not manifested itself to the level we would have expected since then and has fallen short of expectations.

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Proposed Merger of Standard Life Investments and Aberdeen Asset Management

On Saturday 4th March 2017 Standard Life Investments and Aberdeen Asset Management announced a proposal to merge. With a number of funds of both companies featuring in the Square Mile Academy of Funds, we wanted to briefly outline our thinking on this potential merger and what effect we believe it will have for investors.

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