Progeny made its mark on the media this weekend, featuring in a number of pieces across the broadsheets. We have recently posted articles about the topics of cost transparency and how investing in the AIM market can help mitigate against the impact of Inheritance Tax, so it was a good opportunity to take these messages out to a wider audience.
The Times on Saturday 10 March urged investors to pay closer attention to how much they were paying for funds after an ‘FCA study found that £109 billion of investors’ cash was languishing in funds that charge for active management, but don’t deliver it.’
A number of fund groups have been ordered to pay millions in compensation to investors over high fees for active funds which were doing nothing more impressive than following the benchmark, effectively performing no better than cheaper passive funds. The article encouraged investors to educate themselves on the type of funds they’re investing in and how they work so they can hold advisers and managers to account.
Neil Moles, Managing Director of the Progeny Group, explained why it’s important for investors to enquire about the total cost of owning the fund, taking all fees and charges into account: “We have had rising markets since 2009 so it’s been easy for managers to sit back and look good, but in a potential bear market, trading may become more frequent and cost becomes more important”.
Knowing the fund’s average annual turnover and how it compares with market peers is also vital. Frequent trading can bring greater returns for investors, but the cost of these trades mounts up and all are passed on to the investor. “You don’t want a manager to trade willy-nilly without thinking about the cost implications”, Neil added, while also encouraging investors to consider the alternative options for achieving results from funds with lower costs, like passive funds. “Has your adviser looked at smart beta or index funds and is there any way of investing for the same returns that will be cheaper?”
We have long been advocates of greater cost transparency across the industry. Emily Marland, Senior Financial Planner at Progeny Wealth, wrote about this issue recently.
The Sunday Times (11 March) ran an article on investing in companies listed on the Alternative Investment Market, and how this can be an effective way of mitigating the impact of Inheritance Tax on your estate. The article notes that, ‘AIM companies that are not involved in agriculture, financial services or property can be exempt from inheritance tax after you have owned them for two years, instead of the usual seven-year requirement for gifts to become tax-free.’
Neil Moles explained: “AIM stocks are overlooked in inheritance tax planning because of a perception problem. AIM was set up in 1995 to help smaller companies access capital and its 10 stocks had a total value of £83m. As a result, they didn’t feature on most people’s radar. Now AIM boasts just under 1,000 companies with a total market capitalisation of £63bn.”
Progeny Asset Management’s AIM portfolio is set up specifically for investors keen to use it for the purposes of mitigating Inheritance Tax. More information about how it can work for you can be found here.
Progeny Asset Management Investment Manager, Craig Melling, was quoted in an article in the Financial Times on Friday (9 March) on the increasing appeal of equities over bonds and cash. The piece notes that in an investing environment where ‘nothing erodes invested wealth like rising prices…. for most wealth managers, then, it is a question of which equities, not whether equities — despite the early February stock market sell-off.’
On the question of which equities investors should be looking at, Craig advised steering clear of retailers in the “squeezed middle”, as the brands are not powerful enough to pass on increasing input costs, and neither do they have “buying power and logistical scale to protect their margins”.