10 Largest Investment Funds in the UK

Interesting article in Fund Strategy about investment fund size & performance. Normal logic is that if a fund becomes bigger because of populariy it becomes harder to run, it is more difficult to find invest the money in good value values which are often small in size.

The one exception has been Neil Woodford at Invesco Perpetual with his Income & High Income funds, who gas managed ot maintain his performance despite huge inflows of cash.

Woodford has nealy £15 billion in money invested in his funds. Huge, but as Chris Traulsen of Morningstar pointed out, the largest US funds exceed $100 billion.

Would I invest in any of the top 10 funds? Yes, a few...however I would avoid others.

Nationwide withdraws Payment Protection Insurance (PPI)

Nationwide has stopped selling payment protection insurance after it admitted uncovering problems in mystery shopper exercises. They are now retraining their staff, a large percentage based in Swindon.

Payment Protection Insurance covers you against missed payments due to unemployment and other reasons on credit cards

They have advised customers to contact IFAs (Independent Financial Advisers).

Earlier in the the year loans.co.uk were fined by the Financial Services Authority (FSA) for misselling.

US Sub Prime Mortgages

I've written abut the US Sub prime mortgage crisis previously and more generally about sub prime mortgages. Now as the current financial correction is being blamed on it, it is time to revisit it.

What happened?

US banks lent money when interest rates were very low to people who would maybe not normally get mortgages. Some sections of the press have dubbed them "trailer trash" hinting that the relatives of Britney Spears could cause economic meltdown.

Ok, some US banks have bad debts...how does this affect the UK & Swindon?

Banks buy debts form each other, some UK & European banks have taken on these debts. UK Bamks are being coy about how much of these problem debts they took on.

Stock markets are jumpy at the best of times, during August many dealers are away on holiday so small scale sell offs have had a larger impact.

What now?

The US federal Reserve stepped in to help US banks which calmed the fears.

What should I do?

1 Sit tight, corrections happen all the time. Banks like HBos (Halifax bank of Scotland) are sniffing aroung the US mortgage market looking to pick up bad debts and make a killing. Derive your own conclusions

2 Speak to your financial adviser, they should know more than the Sun or Daily Mail. I have one or 2 recommendations myself...

What next for interest rates?

In the last 2 years the Bank of England's Base rate has risen from 3.5% to 5.75%, with products like mortgages & loans being linked to it.

The main reason for the rise was to control inflation and partly tot try to control the housing market.

Things have taken an unexpected twist recently with the sub prime mortgage problems in the US. To deal with this the US Federal reserve (the equivalent of the Bank of England) has lowered the rate at which it lends money to banks.

What does this mean for the UK, financial advisers & their clients in Swindon?

The rise in interest rates [& the forecasedt end of the world :)] is likely to stop for the time being. Tracker /discounted mortgages could become more attractive again as arrangement fees for Fixed Rate mortgages are now rather high.

Worst product provider for Customer Service

The Worst Product provider in my experience.

By far, Scottish Provident. I sent in an insurance application in April. It has still not been underwritten. I asked to speak to managers twice, my number was taken, no phone calls received.

2 complaint letters written & still not resolved

Conclusion: Atrocious

Stock Market Crisis? No, a correction.

Stock markets have been very volatile in recent weeks. In August many traders are on holiday and relatively small changes can cause huge swings in prices. The jargon used in such a situation is "a correction", typically there might be 2 or 3 corrections in any year.

In the long term markets should recover. The BBC noted yesterday that the FTSE 100 had merely returned to the values of October 2006.

Over the last 5 years markets have been relatively un-volatile historically.

There is an upside to the current volatility, now is a good time to buy. It is also a good time for clients with regular savings plans as their regular £50/100 buys more units.

14 000 homes repossessed in last 3 months

Repossessions have risen by 30% since last year according to the Council Of Mortgage lenders (CML). 14 000 alone in the last 3 months

Additionally 125 000 borrowers have mortgage arrears.

Things can only get worse as around 1.5 million borrowers will experience a 2% rise in interest rates in the next 6 months when their fixed interest deals end.

Who are Anthony Bolton & Fidelity Special Situations?

Anthony Bolton is one of the most famous fund managers in the UK. He's been in charge of the Fidelity Special Situations Fund since 1979. He has fantastic performance figures of 19.9% a year on average. His strategy is to find unloved out of favour shares in smaller companies

The fund has been in the news because Bolton is retiring at the end of the year. His replacement Sanjeev Shah is gradually taking over the reins.

The key question is...can Shah continue the track record of the fund?

1 At £3 billion the fund is huge, so finding bargain stocks & using the money becomes increasinlgy hard.

2 he has had mixed records in the 2 funds he has manged, one beating the market the other tracking it.

3 Fidelity's fund record has been a bit patchy recently & 3 fund managers recently left to set up their own investment boutique (small fund house).

Conclusion
There are plenty of decent alternatives to the fund with established fund managers. Have a word with your financial adviser.

See also Christpher Traulsen's article at Morningstar