Investment

Ruth Sullivan

Do fund managers do what they say? Well, it seems not. At least when it comes to the frequency they change portfolio stocks.

Some equity fund managers have higher portfolio turnover rates than they claim, according to Investment Horizons, a report by Mercer, the consultants, and New-York based Investor Responsibility Research Center Institute.

FTfm columnist John Dizard was, apparently, just tapping into the global zeitgeist when he wrote of the debate surrounding shale gas reserves. In his November 1 column, Shale gas numbers may not add up, he described what sounded like the lone voice of a softly spoken shale sceptic, Art Berman.

At the time that we went to press, Art Berman was a columnist for World Oil and the editor of World Oil was Perry Fischer. By the end of the week both those facts had changed and  Art Berman now finds himself a star on energy blog spots.

John Dizard, meanwhile, has promised to return to the shale gas issue with “ever more tedious levels of detail”. He says: “Mr Berman is not the only professional who has raised questions about producibility, cost, and decline curves.” We’re hoping whoever the other professionals are that they enjoy being in the limelight.

Ruth Sullivan

Hand cradles a globe above the cracked earth

Half of UK consumers would like to check the ethical credentials of their next investment

Post credit crunch, most people would expect investors - or would-be ones - to focus on how to gain returns from any financial product, while other considerations such as ethical concerns have headed out of the door.

Not so, it seems. An Ipsos Mori/Eiris consumer survey that dropped into my email box today, showed nearly half of UK consumers are keen to find out about the ethical credentials of their next investment. Given that most of those polled are already investors, they are likely to have some relevant views.

They felt banks and other financial institutions should prioritise concerns such as protecting human rights, investing in fair trade, protecting the environment and tackling climate change. These are now the hot issues rather than the more traditional ones of manufacturing relating to alcohol, tobacco and gambling, says Eiris, the Ethical Investment Research Service.

But there is still a long way to go. Awareness of ethical financial products is low as is trust, with more than a third not believing claims made by financial providers. But only 15 per cent thought ethical products were likely to underperform similar standard products.

They might want to take a look at a report brought out this week by Mercer, the consultant, that lays out volumes of academic research on how taking account of environmental, social and corporate governance issues can have a positive impact on portfolio returns.

One thing is sure. Green, social and ethical funds have grown considerably in number and size in Europe over the past year, in spite of the fall-out from the financial crisis.

The number of retail funds increased over the year to the end of June to 683 from 537, or by 27 per cent, according to Vigeo, a corporate social responsibility ratings agency, and Morningstar.

Guy Hands, head of private equity house Terra Firma, warns US and Europe could suffer ‘Japanese problem’ unless banks’ leveraged loans are restructured

Goldman apologises for role in crisis and pledges $500m to help US small businesses

Mark Lowe, who set up Nomos Capital Partners is being sued for discrimination by a former employee

Doomed to repeat history? asks whether we need to learn from excessive consumer debt or was it an issue of leverage in the financial system

Bankers fear over-regulation

Tankers store oil as futures prices rocket

Pauline Skypala

The blog posts on websites read by UK independent financial advisers are alive with objections to comments by Andrew Fisher, outspoken chief executive of Towry Law.

Mr Fisher runs a fee-based advice outfit, but revealed recently that his firm gets £6m a year in trail commission on legacy business it inherited from firms it has taken over. Towry Law does not provide a service in return for this money – an example of how it is possible to earn money for nothing in the strange world of financial advice.

Pauline Skypala

Man in suit praying

Praying for a market miracle

The revelation that the Church of England is relying almost exclusively on returns from equities to pay vicars’ pensions in the future raises an interesting question: which institutions can afford a sufficient time horizon to be able to rely on the expectation that equities will outperform bonds over the longer term?

Ruth Sullivan

One meeting to watch out for today is the sustainable stock exchanges event in New York, hosted by several United Nations’ bodies including the the UN Principles for Responsible Investment.

The aim of the gathering is to take stock of how the world’s exchanges can work together with investors, regulators and companies to increase corporate transparency and encourage responsible long-term investing.

This will involve tackling environmental, social and corporate governance issues. Eiris, the Ethical Investment Research Services, says one of the key drivers will be to include ESG disclosure into listing rules and corporate governance standards.

Paul Abberley, chief executive of Aviva Investors London says little support from listing authorities “who play a crucial role in setting out what companies report to the market” has come so far.

Many present today will be hoping to discuss measures to encourage best practice among companies through sustainable indices. Some exchanges such as Johannesburg Stock Exchange Socially Responsible index or the Deutsche Borse Daxglobal Alternative Energy Index, and the Indonesian exchange have already done this but there is plenty of scope for others to follow.

Global stock exchanges are likely to hear some challenging calls to take action.

Ruth Sullivan

Norway’s Government Pension Fund seems to have it all. Oil wealth, decent returns and a responsible approach to investment.

The decision to put part of its oil wealth to work for the country’s pension pot is one that makes many pension savers in other parts of the world gnash their teeth in envy, particularly if they happen to live in a resource-rich country that has not invested its black gold in the same way, such as the UK. 

Pauline Skypala

Despite the academic hours put into debating whether active fund managers outperform, no one has definitively won the argument it seems.

The debate has been fuelled recently by papers from Eugene Fama and Kenneth French (Luck versus Skill in the Cross Section of Mutual Fund α Estimates) and Laurent Barrat, O. Scaillet and Russ Wermers ( False Discoveries in Mutual Fund Performance: Measuring Luck in Estimated Alphas).

Neither make good reading for active managers.

Ruth Sullivan

 

a man in a business suit with dunce cap

Consumers have low levels of financial literacy

Are we financially savvy enough to make the right decisions about how to  invest for retirement or calculate mortgage payments or avoid the danger of repossession?

Not enough people are, according to the OECD. In a recent study  the organisation found consumers not only have low levels of financial literacy preventing them from making informed financial decisions but they often overestimate their knowledge and skills.

Now Allianz has launched a website where people can find out about a whole range of financial terms to help their decision making, from estate planning to merging portfolios after marriage. There’s even a chance to trace how the price of coffee has increased in the past 30 years or how it might change in the future.

And if that doesn’t help to demystify some of the jargon then try the Financial Times lexicon.

About the blog

FTfm is no longer updated but it remains open as an archive.

FTfm's specialist writing team offer their insights into the global fund management industry.

About the authors

Pauline Skypala has been editor of FTfm for four years having previously been deputy personal finance editor. She joined the FT in 1999 and has been writing on savings and investment issues throughout her career.

Steve Johnson, FTfm deputy editor, has been a journalist for 17 years, 10 of which have been with the FT.


Sophia Grene, reporter on FTfm, has been a financial journalist in print and online for 12 years.

Ruth Sullivan has worked as a financial/business journalist and foreign correspondent and for the past 10 years has been at the FT.

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