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10 Differences between investment trusts and unit trusts

ridodirected@gmail.com (RIDO) — Sat, 10 May 2014 00:10:00 +0000

By Danny Cox on Wednesday, 7 May 2014 at 15:16
Article from http://www.everyinvestor.co.uk

Here are 10 facts for investors to bear in mind when researching funds

1) Closed-ended rather than open-ended

Investment trusts are ‘closed-ended’ investments, usually with a fixed number of shares in issue. This effectively means investment trust managers have a fixed pool of money to invest, unlike unit trusts that create or cancel units depending on demand, depending upon whether money is flowing into or out of the fund.

2) Premiums/discounts

A consequence of being ‘closed-ended’ is that the price of an investment trust is driven by supply and demand. If a trust is popular with investors, its price can be driven higher than its net asset value (NAV) – the value of the underlying investments. This is known as trading at a premium. Conversely if supply exceeds demand the price can be driven lower than the NAV – known as trading at a discount. This is in contrast to unit trusts and open-ended investment companies (OEICs), whose price is solely dictated by the NAV.

3) Pricing

Shares in investment trusts are traded on the London Stock Exchange and the price will vary throughout the trading day. Unit trusts/OEICs are valued once a day, in most cases at 12.00 noon.

4) Exposure to areas not covered by unit trusts

The closed-ended structure makes it easier for investment trusts to focus on less well-known and niche areas, where investments can be harder to buy and sell in large quantities. Examples include trusts that invest in private equity, property, or more obscure stock markets such as those in developing countries.

5) Gearing

Investment trust managers have the flexibility to borrow money in order to purchase investments – this is referred to as ‘gearing’. If the total assets of a trust are worth £100 million, and the manager borrows £10 million, this is expressed as 110% gearing. This can enhance returns if the manager makes the right decisions, but magnify losses if the opposite were true. The increased risk plus the cost of borrowing the money need to be factored in.

6) Performance

In a rising market, as we have seen over the past five years, gearing can help generate superior returns for investment trusts compared to unit trusts as the manager has more capital invested in the stock market. However, during 2008′s crisis, heavily geared investment trusts suffered significantly higher losses than comparable unit trusts, which do not use gearing.

7) Smoothed dividends

Investment trust managers can hold back up to 15% of the income generated by the underlying investments each year. This creates a cash reserve that can be used to boost dividends in tougher times. Trusts that use this facility therefore often have more consistent dividend records – in some cases delivering many consecutive years of dividend growth for their investors.

8) Choice

There are approximately 400 investment trusts compared to around 2,500 unit trusts/OEICS.

9) Charges

Investment trusts and unit trusts carry similar charging structures, but investment trusts are more likely to have performance fees.

10) Information

Knowing a fund or trust’s underlying holdings is a key factor when analysing and deciding whether to invest. This information is usually widely available from unit trusts and some larger investment trusts. However, it is not always readily available from smaller trusts.

Danny Cox on Wednesday, 7 May 2014 at 15:16
Article from http://www.everyinvestor.co.uk

How to invest in funds, investment trusts and ETFs - and save money as a DIY investor

ridodirected@gmail.com (RIDO) — Sat, 03 May 2014 05:57:00 +0000

By Simon Lambert
CREATED: 12:36 GMT, 13 January 2010 UPDATED: 09:09 GMT, 14 April 2014
Article from http://www.thisismoney.co.uk/money/

Investing in funds is the route often recommended to small investors by the experts - allowing them to

pool their money with others to access a range of investments and avoid putting all their eggs in one basket.

There are a variety of ways to do this, from the most popular 'fund' options, to investment trusts and exchange traded funds.

Some tap into professional's expertise while others simply track a certain index, some follow popular markets while others allow access to obscure and adventurous corners of the world.

We explain what funds are, how to invest, and how to save money by becoming a DIY investor and using a fund supermarket or platform.

What are funds?

When investors talk about funds they are typically referring to either unit trusts, or open-ended investment companies, Oeics.

These may sound complicated but they are essentially just funds where investors' money is pooled to invest in shares, bonds or other funds.

The idea is that as the fund invests in lots of different companies' shares or bonds, the risk of you losing all your money is less than it would be if you were in a single company's shares.

Similarly, most funds will have a fund manager. This will be someone, typically with substantial investing expertise and experience, who will aim to beat the market and provide the best return for investors (although, often they do not manage to do so.)

When times are good a fund manager aims to do make higher gains than their peers, when times are bad a good manager will come into their own by continuing to make money, or just not losing as much as their peers.

Investors have to make a minimum investment, usually £500 to £1,000 to access a fund, and their investment will either go up or down in value depending on how the fund has performed.

Investment funds, the typical term for Oeics and unit trusts, carry two sets of charges - an initial charge, which can take a chunk of your money when you put it in, and annual management charges, which go towards the cost of paying the fund manager and running the fund.

Initial charges can be up to 5 per cent but are easily avoidable through a good broker or platform. You do not want to be paying these. Annual management charges vary, but have traditionally been around 1.5 per cent with half of that going to financial advisers and platforms that sold the fund.

This is changing due to new financial regulations stopping these payments and new clean funds have been brought in, which typically charge 0.75 per cent to 1 per cent and pay no commission back to advisers or platforms

Investment trusts have typically had lower charges and did not pay any commission to advisers or platforms.

Annual management charges are taken from your investment every year and act as a drag on its performance.

The annual management charge is not the true cost of investing, however, a closer estimate is the total expense ratio or its replacement measure ongoing charges.

A good DIY fund or Isa investing platform will slash these charges [Read more: The best (& cheapest) Isa investing platforms]

The best way to invest is through an Isa wrapper which shields your investments and their growth from the taxman.

Passive or active funds

To complicate matters funds are typically divided into two categories active and passive.

Around one in four funds is passive, there is no stock picking involved, it simply buys the shares or market represented and therefore tracks it, ie a fund that mirrors the FTSE 100 and will deliver the same returns as that market.

An active fund on the other hand has a manager buying and selling assets, attempting to beat the market.

Some tracker funds are far more sophisticated than others. For example, Vanguard's LifeStrategy range and rivals allow investors to choose their risk levels and then buys a basket of assets that suits them, across shares and bonds around the world.

The advantage of a passive fund is that it is cheaper. These generally take two forms, either a tracker fund bought and sold in the same way managed funds are, or an Exchange Traded Fund, bought and sold in the same way shares are.

This low cost investing has become increasingly popular in recent years, especially ETFs which offer the chance to trade anything from the FTSE 100 and gold, to coffee beans and cotton.The more exotic the ETF the higher charges are likely to be.

Fund managers will tell you that the advantage of an active fund is their expertise, however, you actually have to choose the right manager to benefit from this, many actually consistently fail to beat their benchmark and still levy their fees - a handful do actually outperform year after year.

There is plenty of debate as to which side of the active vs passive argument is right.

Choosing a fund

There are thousands of funds to choose from and they are divided into different types or sectors. You can buy funds that invest in shares, corporate bonds, gilts, commodities and property, among other things, they will also typically have some form of geographical focus.

The wealth of choice means investors can target any theme they choose but can also make picking one baffling. If you are unsure of how to invest speak to an independent financial adviser

If you are comfortable going it alone, our expert fund tips provide some pointers.

Buying funds and investment trusts

If you go direct to the fund company, you'll lose up to 5% of your investment as an initial charge, that makes this one of the areas of a life where a middleman pays off.

A financial adviser can help - but you must now pay them for their time either through an upfront fee, hourly rate or percentage of your investments, which for many small investors may prove overly expensive.

If you don't want help from a financial adviser, it is cheaper and easier to go through a DIY investing platform or an 'execution-only' broker, who does not give advice. They can provide access to funds, investment trusts and ETFs.

The best way to invest is through an Isa wrapper which shields your investments and their growth from the taxman

This may sound complicated but is actually simple. Once you identify your chosen platform, you can go open an account with them, pick your investments and choose to fund them with a lump sum, regular investments or both.

Platforms are easy to use, the best have helpful customer service on the end of the phone and you can manage your investments online.

What about investment trusts?

Investment trusts are less common and have not tended to be recommended as often by advisers as they do not pay them commission.

The crucial difference between them and funds is that investment trusts are listed companies with shares that trade on the stockmarket.

They invest in the shares of other companies and are known as closed end, meaning the number of shares or units the trust's portfolio is divided into is limited. Investors can buy or sell these units to join or leave the fund, but new money outside this pool cannot be raised without formally issuing new shares.

Investment trusts can be riskier than unit trusts because their shares can trade at a premium or discount to the value of the assets they hold, known as the net asset value.

For example, a trust's price can fall below the total value of its holdings, if it is unpopular and people do not want to invest but do want to sell, thus pushing down demand and driving up the supply of its units for sale. This gives new investors the opportunity to buy in at a discount, but means existing investors holdings are worth less than they should be.

Investment trusts tend to be a lower cost option than funds, with no initial charge and lower annual fees, however, buying incurs share-dealing charges, again a good DIY investment platform will cut these.

Research has show that investment trusts have in many cases delivered better performance than funds over time. Investors should be aware, however, that buying investment trusts can carry more risk.

Firstly, the share price at which you can sell out could fall to a level below the value of what the trust holds, whereas an open-ended fund's price always reflects that underlying value. Secondly, investment trusts can borrow to boost returns, under a process known as gearing, when times are good this can deliver market beating returns but when share prices fall it can spell a bigger dip in an investment trust's value.

There is an added advantage to investment trusts, however, in that if markets fall and investors rush for the exit they are not forced to sell assets at unattractive prices to let them redeem their investment, as an open-ended fund would need to.

Instead, an investment trust can opt to sit tight and ride out the storm and those who want to sell out will simply find the market between buyers and sellers sets the price of their shares in the trust.

Simon Lambert
CREATED: 12:36 GMT, 13 January 2010 UPDATED: 09:09 GMT, 14 April 2014
Article from http://www.thisismoney.co.uk/money/

Investment trusts or unit trusts – what's your Isa money on?

ridodirected@gmail.com (RIDO) — Tue, 22 Apr 2014 12:59:00 +0000

Investment trusts have been shunned by financial advisers for years, but with lower costs and higher returns, what's not to like?

David Prosser

The Observer, Sunday 23 March 2014

From http://www.theguardian.com/money/

Given a choice of two investments for your Isa, would you pick the high-performing, low-cost option or the more expensive fund with higher charges? That might seem a silly question, but for decades, sales of unit trusts have outstripped those of investment trusts that boast superior returns and lower charges.

Unit trusts have typically been the preferred option of financial advisers. However, this has started to change following an overhaul of investment charges, snappily titled the "retail distribution review", since January 2013. This banned investment companies from paying commission to financial advisers recommending their products, something investment trust providers have never been allowed to do. Research by the Association of Investment Companies suggests there has been a 53% increase in purchases of investment trusts through financial advisers since the changes.

The trend is likely to accelerate, says John Ditchfield of independent financial adviser (IFA) Barchester Green Investment. "The appeal of investment trusts has been demonstrated consistently in performance terms, and now that commission has been banned on all of these products, they will receive more attention."

What are investment trusts?

Both unit and investment trusts are run by a professional manager who picks and chooses a portfolio of assets on behalf of investors – these might include company shares, bonds, or property. Often, a fund manager may run both unit trusts and investment trusts with similar aims and almost identical portfolios.

Investment trusts are listed companies that issue a fixed number of shares quoted on a stock market – usually the London Stock Exchange. And as the number of shares is fixed, funds are "closed-ended", so their price is determined by demand and supply in the market – ie the number of investors who want to buy and sell.

Often, demand and supply falls out of line with changes in the value of the assets the investment trust owns. This means that sometimes the trust's share price may trade at a discount to the value of its underlying assets – less commonly, it may trade at a premium.

By contrast, the price of a unit trust always reflects the value of its holdings. When more investors want to buy into the fund than sell, the manager issues more units. When the opposite is true, the manager cancels units.

Advisers have often cited the issue of discounts as adding complexity – and a reason for avoiding investment trusts. However, many investors like the idea of buying exposure to assets at less than face value, even if there is a risk of the discount widening further.

And performance and cost?

Alan Brierley, analyst at stockbroker Canaccord Genuity, regularly compares the performance of similar investment and unit trusts. In 2013 Brierley looked at the five-year performance records of 19 investment trusts and the comparable open-ended fund. In many cases, the two funds were managed by the same person. All but one of the investment trusts came out on top, achieving average annual returns 2.24 percentage points higher than the equivalent open-ended funds.

"This outperformance is underpinned by a number of advantages that give investment trust managers a distinct competitive advantage," Brierley says.

The most obvious is cost. With no need to finance commissions, investment trusts have been able to undercut open-ended funds. Since the retail distribution review, many open-ended funds have begun cutting fees, but even then, investment trusts remain cheaper in most cases.

Another advantage is that investment trusts are free to take on gearing – to borrow additional money to invest. When stock markets are performing well, this provides a boost to returns – and since share prices, at least in the past, have tended to rise strongly over the longer term, gearing has helped investment trusts. However, it also adds risk. When share prices fall, the losses of geared funds are multiplied.

Why don't advisers like them?

Martin Bamford of independent financial adviser Informed Choice says: "Investors are generally best advised to avoid investment trusts because their gearing and their discount or premium pricing structure can both result in losses being magnified."

However, Brierley argues that open-ended funds can change in size quickly and dramatically, particularly during times of market stress or buoyancy, which can cause managers real problems. In extreme circumstances they may have to sell assets at knock-down prices to pay investors who want to leave, or to invest at top-of-the-market prices when new investors join.

In the end, argues Jason Hollands, of independent financial adviser BestInvest, advisers who turn their back on investment trusts are doing their clients a disservice. "In our view, the right approach to building a portfolio is to be agnostic – sometimes the right instruments will be a fund, sometimes a trust."

What to buy and where to buy

Shares in investment trusts can be bought and sold on most of the large online platforms, or through stockbrokers. There are likely to be dealing charges and platform or intermediary fees, as well as the fund's own charges, so look for the best deal. It's also possible to invest direct with investment trust managers – many offer regular savings schemes and Isas.

"Some of the large global investment trusts are ideal as long-term buy-and-hold pension investments or for children's savings," says Patrick Connolly of independent financial adviser Chase de Vere. "My own son's Junior Isa is in the Witan Investment Trust, for example."

Another option popular with investment trust specialists looking for funds investing all around the word is Edinburgh Worldwide, run by a team at Scottish fund manager Baillie Gifford that has also enjoyed excellent results with its range of open-ended funds.

For investors looking for a UK specialist, it is worth considering Perpetual Income and Growth. More specialist investment trust options include funds that buy illiquid assets, such as infrastructure and private equity, where open-ended funds' fluctuating size makes investment much less practical.

David Prosser
The Observer, Sunday 23 March 2014
From http://www.theguardian.com/money/

Gen X to be worse off than Boomers in retirement, study finds

ridodirected@gmail.com (RIDO) — Fri, 17 May 2013 08:12:00 +0000

By Melanie Hicken @melhicken May 17, 2013: 12:39 AM ET
Article from http://money.cnn.com/2013/

NEW YORK (CNNMoney)

Boomers lost a significant chunk of their retirement nest eggs in the recession, but it was members of Generation X who were really hit the hardest, according to a report released Thursday.

If they don't start paying off debt and saving more, Gen Xers (those between the ages of 38 and 47) and younger Boomers (those in their late 40s to mid-50s) are on track to retire financially worse off than the generations before them, according to analysis from the Pew Charitable Trusts, a Washington, D.C.-based nonprofit.

"Many younger Americans were already behind in saving for retirement, and suddenly millions of them were out of work or owned homes worth far less than they had been just a few years earlier," the report said.

Including Social Security benefits, Gen Xers are projected to have enough money in retirement to replace only half of their annual pre-retirement earnings. Financial planners recommend retirement savers aim to replace 70% to 100% of pre-retirement income.

Between 2007 and 2010, members of Gen X saw their median net worth sink 45% from $75,077 to $41,600. That's compared to a drop of around 25% for both younger Baby Boomers and older Boomers, between the ages 58 and 67.

By the end of the recession, Gen X held investments, retirement plans and savings with a median value of just $14,500, down from $19,382 in 2007. Younger Boomers had median savings of $32,135 and older Boomers had $55,850, according to the report.

Money 101: Planning for retirement

And while only two-thirds of Gen Xers owned homes in 2010, those who did saw their median home equity plummet by 27% during the past three years, Pew said. In comparison, the home equity of younger Baby Boomers fell 14%, and older Boomers saw a 22% drop.

Gen Xers were also plagued by significantly higher debt levels, including mortgages, auto loans, credit card and student loan debt -- much of which was accumulated in the years leading up to the recession. In 2010, Gen X had a median debt level of more than $80,000, while younger Baby Boomers carried about $60,000 and older Boomers had less than $40,000.

Younger Boomers, between 48 and 57 years old, are slightly better off with a median expected income replacement rate of about 60%, although it pales in comparison to the roughly 80% projected for their older counterparts.

"Unless this path is altered, younger Baby Boomers and Gen Xers may face a real possibility of downward mobility in their Golden Years," said Diana Elliott, research manager for Pew's economic mobility project.

Pew's study did not look at retirement security for anyone born after 1975, which leaves out the youngest Gen Xers and Generation Y, also commonly dubbed the "Millennials," who were born between the early 1980s and early 2000s. The country's youngest workers, who are saddled with historic levels of student loan debt and are starting their careers in an unfriendly job market, likely face similar levels of retirement insecurity.

First Published: May 16, 2013: 8:58 PM ET
Melanie Hicken @melhicken May 17, 2013: 12:39 AM ET
Article from http://money.cnn.com/2013/

Quarterly unit trust inflows rise to a near record

ridodirected@gmail.com (RIDO) — Wed, 15 May 2013 07:47:00 +0000

by Edward West, 29 April 2013, 19:57
Article from http://www.bdlive.co.za/business/financial/

UNIT trust inflows reached their second-highest quarterly level in the first quarter, owing to strong investor confidence, the Association for Savings and Investment SA (Asisa) said on Monday.

The collective investment schemes industry attracted R47bn in the first quarter, with the highest amount reported in one quarter being R63bn in the third quarter of last year. The third-highest amount was R41bn in the fourth quarter of last year.

Asisa represents most of South Africa’s asset managers, collective investment scheme management companies, linked investment service providers, multimanagers and life insurers. Among them they hold assets under management of more than R4-trillion.

Asisa senior policy adviser Peter Blohm said the record inflows meant that savers were saving more than ever and receiving a good net real return from their unit trust investments.

Three successive quarters of record-breaking net inflows for unit trusts, and other local collective investment schemes, resulted in the highest net inflows for any rolling 12-month period. Net inflows for the year to March 31 came to R166bn.

Asisa CEO Leon Campher said that at the end of the first quarter, the local collective investment schemes industry managed assets of R1.28-trillion and offered investors 988 funds. Total assets under management at the end of December stood at R1.2-trillion.

Mr Blohm said there had also been a shift from fixed-interest investments into equities, in a search for higher yields.

Mr Campher said assets under management had almost doubled over the past five years. At the end of March 2009 assets under management were R611bn.

Mr Campher said the bulk of the inflows in the 12 months to March 31 came directly from investors (27%) or were channelled via intermediaries (35%). This meant that more than 60% of inflows consisted of retail money.

Linked investment services providers generated 21% of sales, and 17% of sales were received from institutional investors such as pension and provident funds.

Investors favoured funds in the South African multi-asset category in the first quarter, said Mr Campher. At the end of March, this category held 44% of industry assets. In the first quarter of this year local multi-asset funds attracted R26.2bn in net inflows.

South Africa’s multi-asset category is made up of: the income subcategory, low equity, medium equity, high equity, and flexible.

South African multi-asset, low-equity funds proved most popular with investors, attracting R12bn of inflows in the quarter.

The South African interest bearing short-term category was favoured by investors looking for higher yields than those of cash investments in the low interest-rate environment. These funds attracted the second-highest inflows in the quarter of R9bn.

Mr Campher said only 25% of assets were invested in pure equity and real estate funds at the end of last month. "Investors prefer multi-asset funds because they make it possible to achieve diversification across asset classes within one fund," he said.

Edward West, 29 April 2013, 19:57
Article from http://www.bdlive.co.za/business/financial/

Bifm reports rush for unit trusts

ridodirected@gmail.com (RIDO) — Mon, 13 May 2013 08:49:00 +0000

MBONGENI MGUNI
Staff Writer
Article from http://www.mmegi.bw/index.php?sid=4&aid=28&dir=2013/May/Friday10

Local asset manager, Bifm says retail and institutional investors have responded strongly to its recent launch of four unit trust products, signalling the market's hunger for safe, liquid and lucrative investment pathways.

Bifm's recent launch of Money Market, Balanced Prudential, Equity Fund and Offshore Fund unit trusts also came as some retail investors licked the wounds from a recent explosion of investment scams.On Wednesday, Bifm Head of Retail Setshwano Ngope told BusinessWeek the response to the local financial market's newest products had been "overwhelming".

"We are seeing overwhelming response from both institutional and retail investors, the latter ranging from the working class, to older people who are close to retirement and others who have already retired," she said."As much as we know that financial literacy is low in the market, we also know that there are investors who have money and don't know where to go.

While some may think that those who get involved in Ponzi schemes are stupid, we see it as a cry for help from them to say 'we have money to invest but we don't know how to go about it.'"At last week's launch, Bifm CEO Tiny Kgatlwane described unit trusts as an ideal investment opportunity for Batswana, "especially those that previously could not afford to invest large amounts in blue chip shares".

Ngope said institutional investors were also drawn to the unit trusts, viewing them as an alternative investment vehicle for excess cash that would normally be deposited in call or fixed deposit accounts.The strong response to the unit trusts is important, as NBIFRA's licence for asset firms to offer such products requires that the pooled fund reach a pre-determined size within a specific time frame.

Should a fund manager fail to reach the agreed milestones, it would have to return cap in hand to NBFIRA or face the possibility of losing its licence to operate a unit trust.Ngope revealed that Bifm acquired its licence last year and had already gathered momentum in the new product.

"We received our licence last year and our shareholder invested as well as our own staff members, as a pilot," she said."The unit trusts have thus been running in the background although they had not been officially launched until last week. We will soon be publishing prices of the units in the very near future, as the legislation requires that we do so."

The Bifm executive said there was space in the local unit trust market for the new products, as there had been growth in fund managers and products, since the first unit trust was launched 11 years ago."I would be surprised if we are the last entrant in the market," Ngope said.

"As much as there's a shortage of instruments in the market, I believe we will continue to find opportunities regardless of the size or choices. Over the years, there has been a push for more funds to be invested domestically and I expect that to boost the market and for more instruments to be issued."

She added that the uptake of financial products such as unit trusts would continue rising as financial literacy levels improved. Bifm plans to engage potential investors further to educate them on the various products available to them.

MBONGENI MGUNI
Staff Writer
Article from http://www.mmegi.bw/index.php?sid=4&aid=28&dir=2013/May/Friday10

Why Unit Investment Trusts Can Be A Good Investment Alternative

ridodirected@gmail.com (RIDO) — Sat, 11 May 2013 07:03:00 +0000

Kevin Mahn, Contributor
4/22/2013 @ 1:58PM
Article from http://www.forbes.com/sites/advisor/2013/04/22/why-unit-investment-trusts-can-be-a-good-investment-alternative/

According to the Investment Company Institute (ICI), data on the market value of unit investment trusts (UITs) issued and outstanding as of year-end 2012 indicates a total of 5,787 trusts with a value of $71.73 billion. According to reports submitted by the major sponsors of UITs to ICI, at year-end 2012 there were:

2,808 tax-free bond trusts, with a market value of $15.76 billion
553 taxable bond trusts, with a market value of $4.06 billion
2,426 equity trusts, with a market value of $51.91 billion.

Over the last 5 years, while the number of UITs outstanding decreased from 5,984 to 5,787, total net assets invested in UITs have grown by more than 151%, starting at approximately $28 billion at the end of 2008 and finishing at the aforementioned $72 billion at the end of 2012.

Unit Investment Trust (UIT) Total Net Assets (Millions of Dollars, Year-End)

Source: Investment Company Institute, April 2013

The popularity of UITs in recent years can be attributed to a number of factors, one of which is that many of the more popular UITs have primary investment objectives oriented towards current dividend income.

These same UITs can invest in income producing securities that can tend to pay a higher level of current income when compared to more traditionally recognized income producing securities (i..e bonds). Such income producing securities can include, but are not limited to, closed-end funds (that may or may not employ leverage), preferred stocks, real estate investment trusts (REITs), business development companies (BDCs), master limited partnerships (MLPs) and dividend paying equities.

These strategies have been particularly appealing within an interest rate environment with persisting record low yields of fixed-income/debt securities.

For those who are not completely familiar with UITs, the following summary information may be beneficial to help better understand this product type.

Unit Investment Trusts (UITs) are a fixed portfolio of stocks, bonds or other securities. These types of portfolios allow investors to know what securities are held within a UIT as of the date of deposit, as well as the mandatory termination date of the trust. While it is not common, a trust may terminate early as described in the prospectus.
UITs offer an attractive opportunity for investors to own a portfolio of securities via a low minimum, typically liquid investment. As a point of contrast, while many actively managed funds continually buy and sell securities, thereby changing their investment mix, the securities held in a UIT generally remain fixed.
Some UIT securities are chosen according to a quantitative selection process determined by a sponsor while some are based on an index. Other UITs are chosen by experienced analysts or portfolio managers, who research the securities and screen them for various characteristics, according to specific objectives. Once securities are selected, the UIT portfolios are then supervised accordingly throughout the life of the trust.
While it is rare, a security held in a UIT may be removed from a portfolio under certain circumstances, such as a significant decline in credit rating. By and large, securities held in a UIT remain fixed for the life of the trust, regardless of market value.
At the maturity of a UIT, unitholders generally have three options:

Option #1: Rollover at a reduced sales charge – At a reduced sales charge, investors may roll over into a new series of the same trust, if available or potentially other UITs from the same of different sponsor of UITS, available in the primary market. It should be noted that maturity rollover is considered a taxable event. Please refer to each trust’s prospectus for complete rollover option information. Investors should be aware that there is a time limit to notify the trustee of the rollover.
Option #2: Maturity – Unitholders may do nothing and allow the portfolio units to mature. The trust will liquidate and the unitholder will receive a cash distribution of the trust’s proceeds, if any.
Option #3: In-kind distribution - Unitholders may generally request an in-kind distribution of the securities underlying the units if they own 2,500 or more units at either the time of purchase or maturity. Please see additional provisions set forth in the prospectus of each Trust in this regard.

Typical minimums for UIT purchases are 100 units; however, the minimums may vary based on the type of UIT. Higher minimums may also be required by each respective brokerage firm.
Unitholders may sell all, or a portion of, their units any day the stock market is open. These unitholders will receive the then-current net asset value of the units, based on the current market value of the underlying securities in the portfolio, less any remaining deferred sales charge, as of the evaluation time. As the market fluctuates, of course, so will the value of your units. Therefore, units may be worth more or less than what the unitholder originally paid.
UITs are priced at the end of each business day similar to mutual funds. The price is based on the market value of the underlying securities and includes cash and other assets and liabilities held by the trust.
UITs are available in a sales charge structure for commission accounts as well as for fee/wrap accounts. It is best to check with each individual brokerage firm to see if UITs are eligible for purchase on their fee/wrap platform.
Unit investment trusts are one of three basic types of investment companies. Investment companies are subject to stringent federal laws and oversight by the U.S. Securities and Exchange Commission (SEC). It is important to note that the SEC does not approve or disapprove of UITs or the securities within a given UIT or pass upon the adequacy of any prospectus for a given UIT. Investment companies are regulated primarily under the Investment Company Act of 1940. This federal statute is highly detailed and governs the structure and day-to-day operations of investment companies. Investment companies are also subject to regulations of the Securities Act of 1933, FINRA, and the Securities Exchange Act of 1934.

I encourage all investors to educate themselves on all aspects of UITs, including risks and expenses, in addition to understanding each UIT’s investment strategy in particular before considering an investment.

Disclosure: Hennion & Walsh is the sponsor of SmartTrust® Unit Investment Trusts (UITs). For more information on SmartTrust® UITs, please visit www.smarttrustuit.com. The overview above is for informational purposes and is not an offer to sell or a solicitation of an offer to buy any SmartTrust® UITs. Investors should consider the Trust’s investment objective, risks, charges and expenses carefully before investing. The prospectus contains this and other information relevant to an investment in the Trust and investors should read the prospectus carefully before they invest.

Kevin Mahn, Contributor

4/22/2013 @ 1:58PM

Article from http://www.forbes.com/sites/advisor/2013/04/22/why-unit-investment-trusts-can-be-a-good-investment-alternative/

Genghis Capital targets mass market with Sh500 unit trust

ridodirected@gmail.com (RIDO) — Thu, 09 May 2013 07:00:00 +0000

Genghis Capital Limited head of unit trusts Theresa Kaleja, managing director Zafrullah Khan and director Ali Cheema during the unveiling of a unit trust aiming to reach the mass market at the Crown Plaza, Nairobi. Photo/Diana Ngila

By George Ngigi
Posted Thursday, April 25 2013 at 18:46
From http://www.businessdailyafrica.com/

IN SUMMARY

The Sh500 unit trust deepens competition for retail investors in unit trusts.
Fund managers have over the past three years strived to attract small investors to unit trust schemes by lowering the minimum investment.
Unit trusts have been a preserve of investment banks, with Genghis Capital being the first stockbroker to offer the product.

Stockbrokerage firm Genghis Capital has opened a unit trust aiming to reach the mass market with a Sh500 minimum investment plan.

The minimum investment amount deepens competition for retail investors in unit trusts, where Zimele Asset Management’s Sh250 and Old Mutual’s Sh1,000 minimum were previously the lowest entry points.

Fund managers have over the past three years strived to attract small investors to unit trust schemes by lowering the minimum investment amount from upwards of Sh100,000.

Genghis Capital will also be reaching out to Muslims with a sharia- compliant investment vehicle dubbed Gencap Imam Fund.

The stockbrokerage firm, a subsidiary of Chase Group, plans to ride on the geographical reach of its banking arm and on its micro lender Rafiki Deposit Taking Microfinance to sell unit trusts to the mass market.

“We are aware of the fixed costs but we are banking on high volumes. Most people have been asking for better rates than those being offered by the banks,” said Dr Theresa Kaleja, head of Unit Trust at Genghis Capital.

Unit Trusts provide investors an opportunity to invest in a portfolio of stocks or fixed-income securities or both, without directly going to the market themselves. The investors deposit funds with fund managers, who charge them a fee for their services.

Genghis will charge a one-off initial fee of 3.5 per cent, which it will use to settle fees charged by its service providers who include custodians, fund managers and trustees. It will also levy an annual management fee of two per cent.

Unit trusts have been a preserve of investment banks, with Genghis Capital being the first stockbroker to offer the product. The management, however, said it plans to convert the brokerage firm into an investment bank.

(Read: Genghis Capital now starts selling Shariah unit trust)

“By end of year we will have converted into an investment bank. We have to raise capital in order to comply with the regulatory requirement, which we will do from our own funds and fresh capital,” said Zafrullah Khan, the group chairman.

Initially, there were fears of entry into unit trusts due to the high administrative costs but entry of players such as Zimele Asset Management has proved that the retail segment offers a good bargain.

“That is where the potential of unit trust lies as high net worth guys have other means of accessing the market,” said Isaac Njuguna, head of investments at Zimele.

Zimele has a minimum investment option of Sh250 which can be deposited through M-Pesa.

The shariah compliant Iman Fund set up by Genghis has received exemption from the regulator to exceed the 10 per cent cap put on foreign investment.

The fund can invest up to 30 per cent of its portfolio in stocks listed on the Nairobi Securities Exchange (NSE), 60 per cent in unlisted securities and 30 per cent in offshore investments.

Unit trusts generally provide higher returns on savings than bank deposits, but equity funds can also result in losses of initial investments. Currently banks’ savings accounts are yielding an average of 1.65 per cent and 6.5 per cent for the fixed deposit account.

Unit trusts split their funds according to the risk appetite of the contributor, with money markets — composed of Treasury bills and bonds — being for those who are risk averse and equity markets for those who are willing to commit money for longer and are willing to take more risk.

Currently the returns from the money markets are above 10 per cent, with the one year T-bill closing at 12.5 per cent in the last auction.

The equities market has also been vibrant up 15.6 per cent since the beginning of the year.

With the minimum investment in a government securities set at Sh50,000, the pooling of cash from the mass market allows them into a market that they would not access individually.

Investment of huge sums in the equities market also gives the fund managers bargaining power on fees and prices.

gngigi@ke.nationmedia.com

By George Ngigi
Posted Thursday, April 25 2013 at 18:46
From http://www.businessdailyafrica.com/

These are SA's best unit trusts

ridodirected@gmail.com (RIDO) — Tue, 07 May 2013 05:07:00 +0000

INVESTMENT INSIGHTS

Author: Patrick Cairns|

19 February 2013 10:34

From: http://www.moneyweb.co.za/moneyweb-investment-insights/

The top performers over five, ten and fifteen years.

ORAPA – The last decade and a half has seen more than its share of market turmoil. Over this time we've seen the dot-com bubble, 9-11, the Chinese stock bubble of 2007, the financial crisis, a global recession and the sovereign debt crisis in Europe.

And yet, local equity investors have come out of it all pretty okay.

Between January 1 1998 and December 31 2012, the FTSE/JSE Shareholders Weighted All Share Index produced annualised growth of 15.6%. This is well above inflation, which averaged around 6.5% for that period.

Of course, not all local unit trusts made the most of this situation. But for the stars of this space, it's been a good ride.

Taking the view that unit trusts should be long-term investments, we have looked at the top-performing domestic equity and real estate funds over the last five, ten and fifteen years. What we found may surprise you.

Five years

Over the last 60 months, property has been the undisputed king of the JSE, and that shows in the figures. Eleven of the best 15 performers over this time have been real estate funds.

While all of these property funds have been an outstanding investments relative to other unit trusts, it is nevertheless worth noting that only two of them actually out-performed the FTSE/JSE SA Listed Property Index. Annualised, the index was up 15.89% over this period.

The Marriot Dividend Growth Fund was comfortably the best general equity fund over this time-frame. The next best was the Foord Equity Fund, which produced an annualised return of 12.90%. By comparison, the FTSE/JSE Shareholders Weighted All Share Index was up 10.60%.

Amongst the large cap funds, the Coronation Top 20 Fund completely outpaced the Absa Rand Protector Fund, which gave an annualised return of 10.55%. Both funds were, however, well above the 8.80% of the FTSE/JSE Top 40 Index.

After the Coronation and Stanlib Industrial Funds, the next best in the Industrials category was the SIM Industrial Fund. It delivered an annualised return of 12.68%. None of these funds, however beat the 16.50% of the FTSE/JSE Indi 25.

Ten years

The range of unit trusts that delivered leading performances over the last ten years is the most diverse in this analysis. Small cap funds make their mark here, with the two best funds both coming from this category and four in total making it into the top 15.

The list also includes four industrial funds, three real estate funds, two value funds, one large cap fund and one general equity fund.

The smaller companies funds have gained from having a much stronger universe of stocks to choose from in recent years and that has been one of the primary reasons for their good showing. As the quality of these companies has improved, so they have delivered the higher growth one would like to see from them.

It hasn't all been rosy for small cap funds though. While the above funds have glittered, the Stanlib Small Cap Fund was the third worst performing fund in the country over the same period.

In terms of the industrials, the Stanlib and Coronation Industrial Funds are again top of their sector here, and this time both marginally out-performed the index. The FTSE/JSE Indi 25 delivered 24.40% over this period. The performances of the Old Mutual Industrial Fund and Momentum Industrial Fund, while excellent relative to other unit trusts, came in below the index.

Again, the Coronation Top 20 Fund beat its benchmark index over this period. Annualised, the FTSE/JSE Top 40 was up 18.10%. It's also worth noting that this fund beat every general equity fund over this time frame.

Fifteen years

This is where we find perhaps the biggest surprise: although resource stocks and consequently resource funds have performed horribly over the last few years, the five best funds over the last decade and a half are all resource funds.

This is despite the fact that all five of these are in the bottom 20 funds over the last five years. The Stanlib Resources Fund, which is fourth on this list, has even delivered a negative return since 2008.

While it should be taken into account that only 38 domestic equity unit trusts have been around for this long and therefore the competitive universe is much smaller, these resource funds have nevertheless been outstanding. Every one of them has delivered annualised returns greater than 21.00%.

Source: Moneymate & moneyweb

Coming in directly after the resource funds there is one small cap fund and two value funds. It is worth noting that although value funds will now be classified as general equity funds, value investing is still a philosophy that investors may want to seek out. The Nedgroup Investments and Investec Value Funds have out-performed every general equity fund over this fifteen year period.

One of the most interesting funds on this list is the only real estate fund that appears – the Marriot Property Equity Fund. What is fascinating is that this fund is the worst performer in the real estate category over the last five years, where it has delivered an annualised return of just 7.83%. However, it's standard deviation over the last fifteen years of 10.44% is comfortably the lowest of any domestic equity or real estate fund in the country.

The Kagiso Top 40 Tracker Fund is another worth highlighting because it was one of the first index trackers in the country, pre-dating the establishment of exchange traded funds on the JSE. It slots into 14th place on this list, meaning that early adopters of the index tracking philosophy in South Africa would have beaten 63% of all managed funds over this period.

Interestingly, not a single fund appears in the top 15 over all three time frames. The closest is the Stanlib Industrial Fund, which is 15th over five years, third over 10 years, and 20th over 15 years.

The overall picture

Of the 38 funds that have been around for the full 15 years, 16 beat the FTSE/JSE Shareholders Weighted All Share Index. In other words, 42.1%. Over ten years, this figure decreases to just 31.3%, and over five years slips even further to 28.6%.

Expressed another way, the average (median) annualised return of domestic equity and real estate funds over the last five years is 8.22%. Over ten years it is 18.84% and over fifteen years 15.40%. In all three cases, the FTSE/JSE Shareholders Weighted All Share Index comes in higher – 10.6%, 20.1% and 15.6%.

For more, visit Moneyweb's Click-a-unit trust/ETF.

Topics: unit trusts, long-term investment, domestic equity, real estate

Author: Patrick Cairns|

19 February 2013 10:34

From: http://www.moneyweb.co.za/moneyweb-investment-insights/

NIT funds deliver good performance

ridodirected@gmail.com (RIDO) — Thu, 12 Apr 2012 17:49:00 +0000

APRIL 12, 2012 BR RESEARCH

Article from Business Recorder

The National Investment (Unit) Trust, the countrys leading fund, posted a healthy year-on-year bottom-line growth of around 30 percent during the first nine months of the current fiscal year.

The NIT has registered a net profit of Rs4.34 billion (without impairments) during 9MFY12, thereby yielding an earning per unit of Rs3.23, as opposed to Rs2.85 during the same period last year.

The bottom-line growth is symptomatic of growth in dividend income and realised capital gains.

This can be gauged from the fact that the Fund saw a hefty 37 percent year-on-year growth in its dividend income to Rs2.15 billion during 9MFY12.

At the same time, realized capital gains grew by around 63 percent to Rs891 million.

The Funds Net Asset Value (NAV) amounted to Rs30.01 per unit as on March 31, glided higher by around seven percent since the start of the current fiscal year.

With exposure in equities, NIT-State Enterprise Fund (NIT-SEF) and NIT-Equity Market Opportunity Fund (NIT EMOF) flourished at the heels of growth in capital gains and dividend income.

With the KSE-100 index up by 10.31 percent during the first nine months of FY12, NIT EMOF outperformed the market benchmark index by a whopping margin of 7.8 percent.

The NIT Government Bond Fund (NIT-GBF) recorded a slight drop in its net income, hammered by a decline in income from government securities.

This is down to redemptions and a decline in yields on sovereign instruments.

The fund holds exposure in sovereign instruments and National saving bonds and yielded an annualized return of 9.5 percent to its unit holders.

Growth in income from fixed income instruments supported the performance of the NIT Income Fund, with the funds net profit up by 19 percent, year-on-year, to Rs185 million in 9MFY12.

The fund managed to yield an annualized return of around 12.69 percent to its investors, thereby outperforming its benchmark by 19 bps.

Article from Business Recorder

Aberdeen Asian Smaller Companies Investment Trust research update

ridodirected@gmail.com (RIDO) — Wed, 11 Apr 2012 13:18:00 +0000

Ben Yearsley | Tue 10 April 2012

Article from Hargreaves Lansdown

Combine the growth prospects of smaller companies with Asia's vibrant economies and I believe a tremendous long-term opportunity presents itself.

An interesting way to access this theme is through the Aberdeen Asian Smaller Companies Investment Trust. Aberdeen's expertise in Asia is well known. Their Aberdeen Asia Pacific unit trust has been on the Wealth 150 since its inception in November 2003. Smaller companies and emerging markets are both higher risk areas in which to invest and any investment can fall in value as well as rise.

Aberdeen's Asia team is headed by Hugh Young and their approach is the same on all the funds they manage. They believe their focus on "quality" companies helps steer them through volatile markets. They suggest long-term share prices reflect the quality of the underlying business, so they look to identify their best ideas, but only invest when the valuation is right.

One benefit of the investment trust structure is that money does not flow in and out of the fund on a daily basis as it does with an open-ended fund. This means the team can take positions in some of the smallest companies in the region, which can be more illiquid (harder to buy and sell). This allows them the flexibility to take a long-term view and uncover opportunities that might be off the radar of most investors. None of the top ten holdings feature in the MSCI Asia Pacific Index, but all have been in the portfolio for at least eight years.

While Asian stock markets have started 2012 positively, which is beneficial for existing holdings in the fund, Hugh Young and the team note valuations are less attractive than they were, making it harder to find new opportunities. The portfolio is currently tilted towards companies capitalising on domestic consumption in the region. Consumer businesses make up almost 45% of the portfolio compared to around 13% of the index. Top ten holdings include Siam Macro (a Thai retailer), Multi Bintang (a brewer) and Godrej (a consumer products business).

At a country level the team have found excellent opportunities in India, Malaysia, Thailand, and Indonesia; while it is harder to find high quality smaller companies in China, Taiwan and Korea. Ultimately the decision on whether to invest is based on the quality of the companies alone, not their location.

Investment trusts can borrow money, otherwise known as gearing, to enhance returns. Aberdeen takes a prudent approach and gearing over the long term has typically been no more than 10% of the trust's assets. Nevertheless, while gearing can add value in a rising market in a falling market it can magnify losses. Furthermore, the share price of an investment trust does not necessarily reflect its underlying net asset value (NAV). This trust is currently trading at or around its NAV and those considering an investment might wish to monitor the price before investing if they believe it could fall to a discount.

We believe Aberdeen's Asia team is of the highest calibre in the region. For investors looking for exposure to smaller companies in the Far East we believe this could be an excellent addition to a more adventurous portfolio.

Find out more about investment trusts including the costs associated with buying, selling and holding them in a Vantage account.

The value of investments can go down as well as up, this means you could get back less than you invested. Therefore all investments should be regarded with a long term view. No news or research item is a personal recommendation to deal. If you are unsure about the suitability of an investment please contact us for advice.

Article from Hargreaves Lansdown

Incapital Extends Diversified Suite of Products with Unit Trusts Designed in Collaboration with Leading Global Partners

ridodirected@gmail.com (RIDO) — Sat, 07 Apr 2012 08:14:00 +0000

April 4, 2012, 1:52 p.m. EDT

Article from Market Watch

BOCA RATON, Fla. and CHICAGO, April 4, 2012 /PRNewswire via COMTEX/ -- Incapital LLC announced Monday the launch of Incapital Unit Trusts, providing individual investors with a convenient, transparent and cost-effective way to own a professionally-selected and diversified fixed portfolio of securities.

"Incapital is pleased to extend our already robust platform of products to meet the unique needs of various investment portfolios," said Incapital Chief Executive Officer John Radtke. "Incapital Unit Trusts will integrate institutional strategies from our leading global partners into vehicles designed for 'buy and hold' investors."

Incapital will announce global institutional partners for Incapital Unit Trusts in the near future.

Incapital's Unit Trust division is directed by John Browning who previously served as Managing Director of the Unit Trust division at Guggenheim Funds Distributors Inc. and held leadership positions at Van Kampen Investments and Invesco PowerShares.

"We are hitting the ground running in this growing Unit Trust market with the top tier quality products and service Incapital's clients have come to expect," said Browning. "The ability to strategically target a particular asset class or investment methodology combined with options to build core positions make unit trusts a potential lower cost option from which to build an investment portfolio."

Incapital Unit Trusts generally remain fixed and require a low minimum purchase of $1,000. The professionally selected basket of securities may allow investors to diversify market risk without the large capital commitment and time it would require to achieve this type of diversification on their own.

Incapital Unit Trusts have a predetermined investment life which provides for regular opportunities to review and evaluate an investor's current investment needs. Additionally, the daily redemption feature provides flexibility to meet an investor's individual situation.

About Incapital

Incapital LLC is a securities and investment banking firm with offices in Chicago and Boca Raton, Florida. Incapital underwrites and distributes fixed income securities, structured notes and unit trusts through more than 700 broker-dealers, institutions, advisors and wealth managers. With a diverse range of new issue and secondary market offerings, Incapital specializes in U.S. Agency securities, corporate notes, CDs, mortgage-backed securities, municipal bonds, and market-linked notes.

Investors should consider their investment objectives as well as the risks, fees, charges and expenses of the unit investment trust(s) carefully before investing. Investors should also read the prospectus, which contains this and other information about the unit investment(s). To obtain a prospectus, please download one from the SEC's EDGAR filing system or the Unit Trust Offerings page on www.incapital.com .

More information about Incapital is available at www.incapital.com .

Incapital LLC, Member FINRA/SIPC, 200 South Wacker Drive, Ste. 3700, Chicago, IL 60606

SOURCE Incapital LLC

Article from Market Watch

Obsessing over cost

ridodirected@gmail.com (RIDO) — Thu, 05 Apr 2012 09:34:00 +0000

The FSA’s scrutiny of wraps and internal rebates could ultimately be to the detriment of the consumer

By Terry O'Halloran | Published Apr 04, 2012

Article from FT Adviser

In days of yore it seemed to me that broker bonds were the absolute pinnacle of the financial adviser fund management evolution.

We had moved on from the unit trust portfolios of the 1970s and the days of Julian Gibb and other great ‘brokers’ that looked after people’s money so well.

The metamorphoses following regulation of everything other than term insurance and unit trusts led to the great Lloyds TSB partnership and the mass marketing of savings plans into unitised contracts ‘buy term and invest the rest’. The savings market, in effect, was well taken care of and the investment market suddenly found a new niche in ‘broker bonds’ which started with one advocate of the ‘investment bond’ fund management fraternity starting a trend that eventually, in 1987, brought many companies to their knees and some five or six years later to their graves. The modern manifestation of the broker bond, and unit trust fund manager that pre-dated it, is of course the wrap.

As with the downfall of previous incarnations, the wrap is now under severe scrutiny particularly by the FSA in policy statement 11/09 and has become so embroiled with detail that it is examining the supermarket funds’ internal rebates from fund managers because they “lack transparency”. The FSA concludes that it feels that rebates are undesirable. Why? The consumer cannot see the cost. But is it a cost? Well, even the FSA does not know. PS11/09 does not tell us. Indeed the document leaves us all hanging in mid-air.

The preoccupation and fetish of the FSA to look unswervingly at ‘cost’ ignores almost entirely the end benefit that is available to the consumer. The latter of course is a function of the markets and the former is an accountancy process fact and there, perhaps, is the report’s Achilles heel.

If we go back to the maximum commission agreement I spent three years working as an intermediary, with the companies that provided life assurance products, pensions and investment bonds as well as the investment houses, in order to gain an industry-wide acceptance of a level of commission that would be acceptable. I found at the 11th hour that Lord Borrie, then head of the Office of Fair Trading, declared the agreement “a constraint of trade”and said it was, in fact, “anti-competitive”.

Damage

In the years since the early 1990s I have failed to work out quite where Lord Borrie got his determination of that fact. He created a lot of damage in subsequent years by failing to allow the industry to resolve its own commercial problems without government interference.

Coincidentally, of course, there was a banking crisis (the Bank of Credit and Commerce International went bust) and the withdrawal of the maximum commission agreement allowed building societies and banks to over-egg their particular cakes by taking up to 230 per cent Life Assurance and Unit Trust Regulatory Organisation commissions while consumer-conscious intermediaries such as myself restrained our enthusiasm and stayed with 130 per cent Lautro, the norm under the agreement.

Surely, it is plain to see that the rebates that were paid back to ‘supermarket fund’ providers is merely a bulk discount, an internal mechanism acknowledging the size of the purchase? When a large supermarket such as Tesco approaches Heinz for a bulk order it expects to get a higher margin. In other words, a rebate on cost because of the volume of the product that it is buying.

How can we possibly have Lord Borrie making a decision at one point in time an agreement that offends the retail price maintenance mentality (and legislation) and here we have the FSA endeavouring to, unsuccessfully, prescribe what are basic valid commercial decisions between two commercial entities. It just does not make sense.

Of course someone will see it as unfair.

The fact that Tesco should be able to sell beans cheaper than the corner shop could also be seen as ‘unfair’, but please do not get on at me with puerile letters saying: ‘What is Mr O’Halloran doing comparing tins of beans with financial products?’ I did not make the rules.

The FSA is endeavouring to make the rules and failing at just about every hurdle. PS11/09 does not come to a conclusion, it comes to a ‘non-statement’ that leaves the market in doubt as to which way it should go and what it should do.

All that does, as it has in the past, is promote ‘the industry’ predisposition to dump the products that are under threat and innovate with new products which circumvent the problem. That actually helps nobody particularly as there is £40bn reportedly in supermarket funds that is going to find itself in a regulatory cleft stick that can only have one outcome – detriment to the consumer.

On what basis does the FSA come to these decisions, or non-decisions as is the case with PS11/09? What are the qualifications of those who are making the decision or non-decision in the first place? Are they practitioners? Do they have any idea as to how these products are put together? Have they any knowledge of commerce? Margaret Cole, the FSA’s former managing director and board member, was apparently a corporate lawyer and yet she was enabled to pass comment about life assurance products, or more precisely, investment products that involved life assurance products.

If we are going to have a regulator of any genuine credibility in the UK then it has to be populated by researchers who know their subject inside out and can make decisions based upon fact rather than hypotheses and experiment. When one wrap platform provider starts saying: ‘We are not like the rest of the market’, then you can pretty well put money on the fact that, such as unit trusts and broker bonds before them, the writing is on the wall for their demise.

Confidence

That is not good for public confidence nor for the offices that spend millions of pounds developing not only their market products but also the market into which they provide their service.

Before the retail distribution review is even contemplated the rules under which we are all bound should be clear and unequivocal. They should follow normal commercial practice, the best practice of course, and be capable of producing the best outcome for clients, not necessarily at the least cost inherent in the product.

If stakeholder pensions have anything to prove to the world at large, and the regulator in particular, it is that forcing suppliers to wait 25 years to make any profit on a financial product while leaving that product open, through pension transfers, to pillaging by fund management groups when the funds get large enough, is not only bad commerce, it is bad value for those invested.

PS11/09 should be relegated to ‘File 101’ and the wrap/platform market left to commercial pressures which the FSA should monitor, not prescribe. Reading the Better Regulation paper of 2006 would help the FSA understand the current disquiet.

Terry O’Halloran is founder of O’Halloran & Company

Article from FT Adviser

UK fund launches groundbreaking equity sukuk

ridodirected@gmail.com (RIDO) — Mon, 02 Apr 2012 21:10:00 +0000

Article from Reuters
By Bernardo Vizcaino
DUBAI | Mon Apr 2, 2012 11:20am EDT

(Reuters) - London-based Ethical Asset Management has launched what it calls the world's first "investment sukuk", aiming to resolve a major area of controversy in Islamic finance by treating the vehicle as an equity instrument rather than as a bond.

The firm aims to raise 200 million pounds ($318 million) through the sukuk in the next 12 to 18 months, with 50 million pounds required to start buying the assets which will back the instrument.

The initial tranche will buy between two and four assets, Ethical Asset's founder and chief executive Saadat Khan told Reuters. The sukuk is a closed-end private placement fund, structured as a Jersey property unit trust.

Traditional sukuk, often described as "Islamic bonds", have been criticized by a number of Islamic scholars and investors for resembling conventional debt products; payments on them can be seen as akin to interest payments, which are banned under sharia principles.

Instead, Ethical Asset will invest money raised by the sukuk in income-generating student housing in Britain, projecting annual net returns of 4 to 6 percent, and give investors ownership of those assets - which it says will make the instrument closer to an equity product than debt.

Ethical "will provide investors with full ownership, which includes exposure to the risk/reward that is integral in a sharia transaction," Khan said.

The sukuk's maturity is expected to be five to seven years, he said. "We want to provide a commercially viable option...which does not rely on debt and can still deliver secure and stable returns."

RISK

The nature of the equity sukuk means investors will directly face risk in the student housing market, and there is no guarantee that they will receive returns of 4 to 6 percent.

Khan said he expected the British student housing market would remain strong despite weakness in the larger British real estate market.

Annual investment returns on student accommodation in London jumped to 15.1 percent in September 2011 from 8.4 percent in 2010, according to data from real estate consultancy Knight Frank. Other cities in Britain posted a return of 10.5 percent, down from 14.6 percent in the previous period.

Knight Frank said higher tuition fees at British universities taking effect from this autumn were a concern for the market, since they could potentially affect student enrollments.

Since the start of 2011, a total of 12 sukuk have been listed on the London Stock Exchange, bringing the total to 37 with a combined value of $20 billion, according to the UK Islamic Finance Secretariat, part of the financial lobby group TheCityUK.

(This story deletes part of paragraph 7 incorrectly attributed to Khan)

(With additional reporting by Anjuli Davies; Editing by Andrew Torchia)

Article from Reuters

Fund Managers Aren’t Showing Much Faith In Euro-Zone Debt

ridodirected@gmail.com (RIDO) — Sun, 01 Apr 2012 09:54:00 +0000

March 30, 2012, 9:54 AM
Article from The Wall Street Journal

By Min Zeng

In an ominous sign for Europe’s sovereign-debt crisis, big global asset managers are showing little faith in government bonds sold by the euro zone’s debt-strapped nations, even as these markets have posted an impressive rally this quarter.

While banks and hedge funds have chased bond prices higher, fueled mainly by liquidity provided by the European Central Bank, Pacific Investment Management Co., or Pimco, the world’s biggest bond-fund manager, has slashed its already-depleted holdings in debt of Spain and Italy in February and has said it expects selling to return in coming months.

Raiffeisen KAG has sold Spanish and French debt in recent weeks, holding less than is designated by benchmark indices. Frankfurt Trust Investment shifted its position on Spain back to underweight last week. BlackRock Inc. (BLK), meanwhile, has done no more than dip its toes in Italy this quarter and Fidelity Investments has refrained from buying altogether.

Such big investors regard the policy response until now, including cheap loans for banks from the European Central Bank, as a short-term fix and they believe the euro zone’s structural problems will take time to resolve. Without such big investors, many peripheral nations will face funding challenges, with several having been shut out of the capital markets. This means that the ECB may need to intervene more to prevent sharp rises in borrowing costs, but getting more financial aid from Germany and other creditor nations’ taxpayers could be a tall order.

“At the very top level, liquidity has provided a nicer buffer against volatility but, if you peel back the cover, you are not going to like what you see in terms of structural issues which remain very weak,” said Bob Brown, president of the bond group at Fidelity Investments, with more than $1 trillion assets under management. Brown manages $331 billion in bonds.

Indeed, signs of stress have popped up again this month, with bond yields, which move inversely to their prices, having climbed from recent lows in Spain and Italy. This month through Wednesday, Spanish government bonds have handed investors a loss of 2.34% in dollar terms, shrinking its year-to-dated gain to 3.45%, according to data from Barclays. Over the same time frame, Italy’s government bonds lost 0.4%, though the gain for the year, at 14%, is still juicy.

This doesn’t impress Scott Mather, head of global bond-portfolio management at Newport Beach, Calif.-based Pimco, who predicts bond prices will drop in both Spain and Italy in the months ahead as both nations are likely to disappoint on their deficit-reduction targets. Pimco is a unit of Allianz SE (ALV.XE).

A key issue, Mather pointed out, is that Europe “has not moved convincingly” toward fiscal union even as Germany earlier this week dropped its opposition to an enlargement of the euro zone’s bailout mechanism.

Underlining his concerns, Mather said he holds most of his European exposure in Germany and the U.K. He has sold out of peripheral Europe and has even moved out of countries that many consider “core,” such as France and Netherlands, which he thinks can suffer, given disappointing debt dynamics and political unwillingness to tackle the issues.

The yield on the Spanish government’s 10-year bond traded at 5.433% Friday, a surge from this year’s low of 4.634% in February. Italy’s 10-year government bond’s yield traded at 5.170% Friday, up from the March low of 4.754%.

Yields are still far off the stress levels near the end of last year when Italy’s 10-year yield moved above 7.4%. But the recent increase signals that the euphoria from the ECB’s liquidity–two operations of cheap three-year loans for banks–is wearing off.

Fund managers cited upcoming elections in Greece and France, the risk that Spain could miss its deficit-reduction target again, and the threat of deeper economic contractions in the euro zone. The latter would make it harder for governments to implement austerity measures in line with the strict rules laid down by the European Union.

Spain is seen as the biggest risk by Werner Fey, a fund manager at Frankfurt Trust Investment GmbH in Frankfurt, which manages about EUR15 billion of assets including stocks and bonds. Fey cited problems with the nation’s saving banks, high unemployment and the fact that the government fell short of its fiscal deficit-reduction target.

Christian Zima, fixed-income fund manager in Vienna at Raiffeisen KAG, which oversees about EUR28 billion of assets, said yields on Italian and Spanish 10-year debt could rise as high as 5.75% but this would prompt policy actions to cap further increases, such as bond purchases by the ECB, he said.

Still, Zima said he is wary of downside surprises from the euro zone as he sees the steep belt-tightening carried out in peripheral nations taking a toll on the economy.

“There are so many risks down the road. Stay defensive,” he said.

Article from The Wall Street Journal

Energy Leaders Income Fund Files Preliminary Prospectus

ridodirected@gmail.com (RIDO) — Fri, 30 Mar 2012 07:48:00 +0000

March 29, 2012, 1:28 p.m. EDT
Article from Market Watch

TORONTO, ONTARIO, Mar 29, 2012 (MARKETWIRE via COMTEX) -- Harvest Portfolios Group Inc. (the "Manager") is pleased to announce that a preliminary prospectus for Energy Leaders Income Fund (the "Fund") has been filed with, and a receipt therefor issued by, the securities regulatory authorities in each of the provinces and territories of Canada.

The Fund proposes to issue units (the "Units") of the Fund at a price of $12.00 per Unit (the "Offering"). Each Unit consists of one transferable trust unit ("Trust Unit") and one Trust Unit purchase warrant ("Warrant"). The Units will separate into Trust Units and Warrants upon the earlier of the closing of the over-allotment option and the 30th day following the closing of the Offering. Each Warrant entitles the holder to purchase one Trust Unit at the subscription price of $12.00 per Trust Unit at 5:00 p.m. (Toronto time) on and only on June 14, 2013.

The Fund will invest in a portfolio (the "Portfolio") of equity securities of 15 Energy Issuers listed on a North American stock exchange that have the following characteristics: a market capitalization of at least $10 billion determined at the time of investment; are currently paying a dividend/distribution; are eligible to have options written on their equity securities; and operations and/or offices in at least two countries.

The Portfolio will be initially acquired and thereafter rebalanced quarterly on an equally weighted basis by Highstreet Asset Management Inc. (the "Investment Manager" or "Highstreet").

The investment objectives of the Fund are to provide Unitholders with (i) monthly cash distributions; (ii) the opportunity for capital appreciation; and (iii) lower overall volatility of the Portfolio returns than would otherwise be experienced by owning the equity securities held by the Fund directly; by investing in the Portfolio and writing covered call options on up to 33% of the equity securities of each Energy Issuer held in the Portfolio.

The indicative distribution amount is initially targeted to be $0.07 per Trust Unit per month ($0.84 per annum) representing an annual cash distribution of 7% based on the 12.00 per Unit issue price.

Highstreet will be responsible for the execution of the Fund's overall investment strategy, including managing the composition of the Portfolio.

The syndicate of agents is being led by CIBC and co-led by RBC Capital Markets, and includes Scotiabank, National Bank Financial Inc., TD Securities Inc., Canaccord Genuity Corp., Desjardins Securities Inc., GMP Securities L.P., Macquarie Private Wealth Inc., Raymond James Ltd., Burgeonvest Bick Securities Limited, Dundee Securities Ltd. and Industrial Alliance Securities Inc. (collectively, the "Agents").

Certain statements included in this news release constitute forward-looking statements, including, but not limited to, those identified by the expressions "expect", "intend", "will" and similar expressions to the extent they relate to the Fund, the Manager and/or the Investment Manager. The forward-looking statements are not historical facts but reflect the Fund's, the Manager's and/or Investment Manager's current expectations regarding future results or events. These forward-looking statements are subject to a number of risks and uncertainties that could cause actual results or events to differ materially from current expectations. Although the Fund, the Manager and/or the Investment Manager believes that the assumptions inherent in the forward-looking statements are reasonable, forward-looking statements are not guarantees of future performance and, accordingly, readers are cautioned not to place undue reliance on such statements due to the inherent uncertainty therein. The Fund, the Manager and/or the Investment Manager undertakes no obligation to update publicly or otherwise revise any forward-looking statement or information whether as a result of new information, future events or other such factors which affect this information, except as required by law.

A preliminary prospectus dated March 28, 2012 (the "Prospectus") containing important information relating to these securities has been filed with securities commissions or similar authorities in each of the provinces and territories of Canada. The Prospectus is still subject to completion or amendment. Copies of the Prospectus may be obtained from any of the Agents. There will not be any sale or any acceptance of an offer to buy the securities until a receipt for the final prospectus has been issued.

All capitalized terms noted herein but not defined are as defined in the Prospectus.

For additional information or a copy of the Prospectus, please contact your registered financial advisor.

Contacts:

Harvest Portfolios Group Inc.

Michael Kovacs

1-866-998-8298

mkovacs@harvestportfolios.com

SOURCE: Energy Leaders Income Fund and Harvest Portfolios Group Inc.

mailto:mkovacs@harvestportfolios.com

Article from Market Watch

Awaiting the construction rebound

ridodirected@gmail.com (RIDO) — Wed, 28 Mar 2012 09:00:00 +0000

Author: Patrick Cairns|

28 March 2012 03:20

Article from Money Web

Is the wheel turning for infrastructure development group Aveng?

While executives at South Africa's big construction companies are hardly all smiles at the moment, there may be fewer frowns than there were a couple of years ago. The sector is still facing a heavily subdued local environment, but things may be starting to look up.

Since work on projects for the 2010 FIFA World Cup came to an end, companies have found work difficult to come by. However, with government promising huge amounts of spending on infrastructure and orders in the rest of Africa growing, the construction sector on the JSE has enjoyed a bouyant start to the year.

“The market believes that we have gotten over the worst in terms of loss-making contracts and that we should start seeing an improvement from a low base,” says Momentum Asset Management equity research analyst Khanyisa Ngesi. “Although there is scepticism on implementation, the market is encouraged by government viewing infrastructure spending as a serious issue. We are also anticipating an announcement about nuclear sometime during the middle of this year, and this will mean more jobs.”

As the largest construction stock on the local bourse, Aveng is a pretty good gauge of where the industry stands. Its 13% gain since the start of the year is therefore indicative of investors growing more positive about the sector's prospects.

Aveng operates in over 30 countries, with its primary geographies being Australia and South Africa. It owns 100% of McConnel Dowell in Australia, 75% of Aveng Africa and 75% of Aveng Trident Steel.

History

The formation of Aveng dates back to 1944 when Anglovaal Industries separated its interests into three distinct entities – mining business Avmin, consumer products company AVI and engineering services business Aveng.

Over the subsequent decades, the company steadily increased its exposure along the engineering value chain through acquiring businesses in a number of sectors. It acquired 51% of Trident Steel in 1977 and took a majority stake in construction company Grinekar in 1981.

The Anglovaal group unbundled Aveng in 1998, the same year in which Trident became a fully owned subsidiary. It also took a 46% interest in cement producer Alpha Limited, which subsequently changed its name to Holcim.

Aveng bought out Grinekar's majority shareholders in 1999 and de-listed the company from the JSE. Aveng listed itself on the local bourse later that year.

In 2000 the group acquired construction business LTA from Anglo American, which included its 63% interest in Australian-based McConnel Dowell. It combined this business with Grinaker to form Grinaker-LTA.

The group bought out the remaining shares in McConnel Dowell in 2003 and disposed of its shareholding in Holcim in 2007.

Aveng Water was launched as a subsidiary in 2011.

Dividends

For the last four years – from 2008 to 2011 – Aveng has kept its dividend steady at 145 cents per share. This translates into a dividend yield in the region of 3.9%.

Aveng also paid out a special dividend of 145 cents per share in the 2008 financial year.

Which funds hold this stock?

A number of South Africa's leading unit trust funds over the last three to five years have exposure to Aveng. Two of the three top performing value funds over that period include the stock in their portfolios. The Momentum Value Fund gives it a weighting of 1.2% and the Prudential Dividend Maximiser Fund 0.7%.

Two of the best targeted absolute and real return funds also have a liking for Aveng. The Cadiz Equity Ladder Fund holds 3.3% of its assets in the counter, while the Coronation SA Capital Plus Fund gives it a weighting of 1.4%.

However, of the three best performing industrial equity funds, only the Stanlib Industrial Fund has a holding in the group. The counter was the fund's third largest holding at the end of 2009, but its weighting has since dropped and it currently makes up 3.3% of its assets.

Similarly, only one of the leading general equity funds includes Aveng in its portfolio. The Absa Select Equity Fund gives the stock a weighting of 1.8%.

To see which funds are buying and selling the counter, visit Moneyweb's Unit Trust Portfolio Tool.

Why would an individual consider investing in this company?

Aveng has an excellent track record of delivering large projects in both the public and private sectors. Its expertise covers roads, ports, pipelines, railways, conventional and renewable power generation and mining.

By diversifying away from South Africa, Aveng has also mitigated against the effects of the prolonged slump in the local market. McConnel Dowell has become the biggest contributor to group revenues and the market in Australia is more robust than that in South Africa.

“Orders from Australian resources, power and transport companies are supporting this business,” says Momentum's Ngesi. “This is combined with a positive outlook driven by investment in the mining, oil and gas sectors in South East Asia and New Zealand.”

Although Aveng is best known for its construction work, it is a well diversified business with exposure across the engineering value chain. Through Trident Steel the group is one of the leading producers of steel products in South Africa, and it also has interests in water treatment, open pit contract mining and engineering services. This has also played a part in lessening the impact of adverse market conditions.

Despite the trying industry conditions, Aveng has also managed its balance sheet well and has a very healthy pile of cash. This liquidity gives it added flexibility and a base from which to pursue growth as fundamentals improve.

What risks does this company face?

Construction is a cyclical industry, and the bad times can be very bad. When the global meltdown hit in 2008 and construction companies saw their order books nearly erased, Aveng's share price dropped by 75%.

The sector in both South Africa and Australia is also extremely competitive, with very thin margins. This is made worse by large clients expecting contractors to take on more and more of the risk associated with projects, without offering any greater returns.

This was recently highlighted in Australia, where work on the Queensland Curtis Liquid Natural Gas (QCLNG) pipelines project was delayed by unseasonal flooding. McConnel Dowell has had to carry the cost of making up on lost productivity.

“Aveng's biggest risks are around the execution of major projects,” Ngesi says. “Given the early phase of the project, the delay in the construction of the QCLNG pipelines poses risk to earnings in the medium-term.”

Where does this company’s growth potential lie?

The 2012 State of the Nation address prioritised infrastructure development, and Aveng has a long history of winning large government contracts. Railway development is also one of the group's core competencies, and with Transet set to spend significant amounts on improving the local rail network, this could be a boon for Aveng.

The group has also positioned itself to benefit from local investment in new power infrastructure. It is involved in the construction of the Medupi power station and is growing its expertise in both nuclear and renewable energy to take advantage of opportunities in those areas.

While the group has highlighted this potential in the public sector, it has however warned that contract awards are likely to be slow. It is therefore likely to rely on private sector work in South Africa for at least the next 18 months to two years.

The rest of Africa may however be a key growth area for the group, with the mining and oil and gas sectors being its primary focus. The group is also enjoying growing demand for its contract mining services on the continent and will benefit as many countries work to overcome their infrastructure backlogs.

Nearly two thirds of Aveng's two-year order book is however in the Australasia and Pacific region. Through McConnel Dowell, the group will continue to benefit from capital expenditure in the Australian mining sector, as well as projects in surrounding countries such as Papua New Guinea. There is also likely to be continued expenditure on infrastructure projects in power and transportation.

“The bulk (77%) of the group’s R46bn two-year order book is offshore, and this is likely to be the largest generator of earnings over that period,” says Ngesi. “The South African construction sector conditions are expected to remain depressed for the next 12 to 18 months.”

For more, visit Moneyweb's click-a-company profile on Aveng Ltd.

Article from Money Web

EQUITY ISA FUND TIPS: How to find the right equity income fund for your Isa

ridodirected@gmail.com (RIDO) — Sun, 25 Mar 2012 21:06:00 +0000

By RICHARD DYSON

PUBLISHED: 22:21 GMT, 24 March 2012 | UPDATED: 09:05 GMT, 25 March 2012

Article from This is Money

With the end of the tax year around the corner, time is running out for savers and investors to shelter money from the clutches of the taxman.

Financial Mail assesses some of the best opportunities available for those who want to put their Isa allowance before April 5 into investment funds. The maximum is £10,680 in the current tax year – and a further £11,280 in the tax year starting on April 6.

EQUITY INCOME

Many financial advisers recommend equity income funds as core Isa holdings. These funds typically invest in financially robust companies with a history of paying dividends to shareholders. As a result, they tend to avoid fashionable, high-growth sectors and instead deliver a consistent, if plodding, investment return.

Cushion: Brian Webzell, who faces redundancy, can fall back on his dividends

Much of the total gain comes from reinvestment of dividend payments. A £1,000 investment 20 years ago in Invesco Perpetual Income, for example, is now worth £9,067, of which £5,694 is capital growth in the value of underlying shares while £2,373 is dividend income.

One big advantage of these income-paying funds is that investors can leave the dividends to roll up when it suits them – and then opt to take them if, in future, they need the income to fund retirement.

Brian Webzell, 56, is a self-taught investor who discovered dividend-paying funds while in the Army.

Brian, who served 22 years as a vehicle fleet engineer, says: ‘Whenever we were posted abroad, we were visited by financial salesmen trying to sell us insurance policies and investments. They smelt fishy and inappropriate. So I set to learn more about investing, reading up as much as I could.’

Over the past 20 years Brian has built up holdings in about 30 trusts. He now works for Oxfordshire County Council, also in a fleet management role, while living in Witney, near Oxford.

Five-point plan to find your right ISA

FUND broker Chelsea Financial Services advises investors to consider these points before choosing an investment Isa:

1. Define your investment goal What do you want to use your savings for? A rainy day? School fees? To supplement your pension?

2. Match your goal to the appropriate level of risk The longer your aim to invest, the more risk you can afford to take.

3. Diversify Don’t put all your eggs in one basket. Depending on your goal and how long you aim to invest, you might want to invest in more than one geographical area or asset class, as well as more than one fund.

4. Manage your Isa in one place Don’t leave pots of money here and there if you don’t need to. Fund platforms are a good place to start as they will normally encourage you to consolidate your Isas. They will also allow you to review your Isas in one place – something you should do at least once a year.

5. Don’t pay too much Shop around and find an Isa provider that will offer you a wide range of funds but will discount initial charges and offer free switching or other deals on your investments.

Brian prefers funds structured as investment trusts rather than the more common unit trusts (such as Invesco Perpetual Income). Investment trusts are often less expensive. They do not pay commission to intermediaries and so are not usually recommended by brokers such as Hargreaves Lansdown.

Information about them is readily available, however, at theaic.co.uk. Brian owns shares in several specialist investment trusts, such as Ecofin Trust and BlackRock New Energy. Both of these seek to profit by investing in companies involved in energy and water.

Other holdings include Aberdeen New Dawn and JPMorgan Emerging Markets, which aims to profit from growth in markets in Asia, South America and elsewhere. But core to Brian’s investment portfolio are big, low-cost giant trusts such as Alliance, Edinburgh, Witan and Scottish. These are all faithful payers of dividends.

Until now, Brian has always had dividends reinvested into his portfolio. But he has been told he is to be made redundant in a few months, so the dividends might come in useful to top up his income.

‘Dividends are an important part of investment returns,’ he says. ‘The fact I reinvested mine in the past has helped my portfolio grow. But the joy of dividends is that if you need the income, it’s there to take.

‘I feel relatively comfortable financially about the future. But if I don’t find employment over the next year, it’s a relief to know the dividends will be there.’

Article from This is Money

Dividend wars: OEICs vs trusts

ridodirected@gmail.com (RIDO) — Fri, 23 Mar 2012 21:42:00 +0000

23 Mar 2012 | 14:59

Kyle Caldwell

Article from Investment Week

Follow @K_S_Caldwell Categories: Investment | Investment Trusts Topics: Uk income

Investors snapping up shares in UK-listed companies have never had it so good, with dividends payouts last year hitting an all-time high of £67.8bn.

But when it comes to income payouts, who fares better, unit trust and OEICs or investment trusts?

Data from independent financial adviser Dennehy Weller & Co (DWC) earlier this year revealed 34% of UK equity income funds cut payouts in 2011.

Leigh Harrison and Richard Colwell's £240m Threadneedle's UK Equity Alpha Income fund reduced payouts the most, cutting its dividend by 12.7% to pay out 0.967p in dividends per unit.

On average, the sector increased payouts by 4.82%, with ten of the 101 funds managing to grow payouts by more than 10%.

However, in stark contrast, data from the Association of Investment Companies (AIC) shows all 19 investment companies in the UK Growth & Income sector increased payouts last year.

In fact, since the credit crunch, only one trust, Finsbury Growth & Income, has failed to either increase or maintain its dividend payout in any given year.

According to the AIC, 46% of UK Growth & Income sector portfolios raised dividends each year for 20 years or more.

A spokesperson for the AIC attributed the superior dividend performance to the structural advantage the sector boasts over its open-ended peers, as a trust can store 15% of its annual income as revenue reserves.

"The investment company sector has a long and proud history of delivering returns for shareholders, and what many shareholders are increasingly looking for is a reliable dividend in unreliable times," said the AIC.

"Investment companies have been aware of the importance of yield for years and the sector's dividend track record is unparalleled."

Dividend payouts from AIC UK Growth & Income sector (in pence)

Source: AIC

Article from Investment Week

Why Chinese Trusts are Getting Global Interest

ridodirected@gmail.com (RIDO) — Thu, 22 Mar 2012 05:08:00 +0000

March 21, 2012, 12:15 AM
Article from The Wall Street Journal
By Isabella Steger

Property developers in China have been heavily reliant on trust companies for funding

Amid a string of recent sell-downs by Western banks of their stakes Chinese lenders, another sector in China’s finance industry could be seeing renewed interest: trust companies.

As the WSJ reports Wednesday, J.P. Morgan Chase & Co. will buy a 19.9% stake in China’s Bridge Trust Co., based in Zhengzhou, Henan province. It comes shortly after Bank of Montreal said it would take a 19.99% stake in Cofco Trust, a unit of China’s state-owned agricultural trading house, Cofco Group.

These investments also take place against a backdrop of Wall Street banks cutting their holdings in Chinese lenders, signaling continuing worries over the outlook for the sector. Goldman Sachs has been steadily paring its stake in Industrial & Commercial Bank of China, for example, while Bank of America Merrill Lynch cut half its stake in China Construction Bank last year. Citigroup Inc. sold its stake in Shanghai Pudong Development Bank this week.

The recent interest in these vehicles could indicate that Western banks are taking a new look at trust companies, as investments in large Chinese lenders seem too volatile – Goldman made a loss in Asia last year due to the plunging value of its ICBC stake – while their securities joint ventures in China struggle to be highly profitable.

Trust companies appear to offer a better alternative. These lightly regulated vehicles occupy a special place in the country’s financial sector. They don’t take on the risk of an investment, but channel funds from companies and rich individuals to other investments including private equity, loans, bonds, stocks and stakes in property development, connecting Western banks with China’s wealthy population and huge savings pool. There are more than 60 trust companies in the country.

They have been instrumental in making up the shortfall in lending to property developers as conventional banks pulled back their exposure to the sector last year, particularly during the second quarter. But in a bid to cool credit growth and curtail “shadow financing,” Chinese regulators also started clamping down on that loophole in the middle of 2011 by requiring that any trust financing for a property project must be vetted by the China Banking Regulatory Commission. As a result, trust financing to developers plunged by year-end. Earlier this year, China also banned trust firms from selling commercial-paper backed products.

Despite the crackdown, interest in trust companies continues to balloon. Tired of putting their money in underperforming stocks and mutual funds, Chinese investors have been piling into trusts, with total trust assets under management up 58.25% at the end of 2011 to 1.67 trillion yuan.

There was a wave of Western interest in trust companies a few years ago. The first foreign lender to enter the trust market was National Australia Bank Ltd. in 2008. In 2009, Macquarie Group Ltd. formed trust company joint venture with two state-backed companies, Sino-Australian International Trust Co. Morgan Stanley also invested in Hangzhou Industrial & Commercial Trust Co. in the same year. Barclays Bank and Royal Bank of Scotland PLC also have investments in the sector.

Japan’s Sumitomo Trust & Banking Co. has also said earlier this year it hopes to invest more in China’s trust industry by offering financial services and products to local companies and wealthy individuals. It already has an investment dating back to 2010 in Nanjing Trust Investment Company.

Article from The Wall Street Journal

More investment pools coming

ridodirected@gmail.com (RIDO) — Sat, 17 Mar 2012 20:14:00 +0000

Publish Date: Mar 16, 2012

Article from New Vision

By David Mugabe

Investors who had put money in the recently folded unit trust funds will have more in¬vestment options in the near future.

The African Alliance Unit Trust Scheme was recent¬ly suspended after what the company described as “failure to attain a critical mass, especially as a retail product.”

Japheth Kato, the chief executive officer of Capital Markets Authority (CMA), said there were firms lined up ready to offer the product but had not yet been licensed.

One needs as low as sh100,000 to invest in some of the unit trust products. This is a figure that observers say is within reach of many people. They also argue that had much more publicity and awareness campaigns been conducted, the fund would have a stronger financial base.

Analysts say one of the rea¬sons for the collapse of the scheme was the low level of awareness. Observers called for more public education with the as¬sistance of the private sector.

On the market, trading slightly edged up to sh15.4m in turnover, from the sh2m the previous session. Uganda Clays had the big¬gest share, with sh13m after pushing 375,082 shares at an average share price of sh35.

Stanbic Bank picked sh2.1m in turnover at an average of sh100. New Vision had offers of 692,698 shares that did not have corresponding buyers. The media house, however, sold 142 shares at an average of sh680 to pick sh96,560.

Both Stanbic Bank and Uganda Clays also had de¬mand on their stocks, but were not matched by corre¬sponding buys.

NIC had both sell and buy offers that also did not march.

In total, 396,582 shares were sold on Tuesday.

Article from New Vision

Will unbundling boost investment trust uptake?

ridodirected@gmail.com (RIDO) — Thu, 15 Mar 2012 02:28:00 +0000

Author: Will Roberts

Professional Adviser | 14 Mar 2012 | 08:00

Article from IFAonline.co.uk

Platform unbundling will no doubt make investment trusts more accessible – but the jury is still out on whether it will make them more popular.

Investment trusts have long operated in the shadow of OEICs and unit trusts. The products’ complexity, inability to pay commission and higher risk when compared to their open-ended cousins has hindered wider take-up.

Another major factor limiting their appeal is the fact investment trusts cannot be accessed via the three big fund platforms – Skandia, Cofunds and FundsNetwork – which operate bundled charging models.

This is because investment trusts do not pay fund manager rebates – a vital cog in the bundled structure.

But things are set to change as the three ‘big guns’ prepare to launch unbundled offerings in anticipation of a likely ban on platform rebates.

FundsNetwork, which is rolling out an unbundled model in a matter of weeks, plans to add investment trusts in November. Cofunds, meanwhile, has opted not to provide a share trading service itself but is making investment trusts available via a link-up with Barclays.

However Skandia, citing lack of demand, has no immediate plans to offer the products.

Popular

So, with FundsNetwork and Cofunds laying out concrete plans in the investment trust arena, are the products set to enjoy a boom in popularity?

MPL Wealth Management client services manager, Adam Stewart, said a key reason his firm has not been a big user of investment trusts is because they have not been available on all platforms.

“Platform unbundling will definitely make investment trusts more popular,” he said. “After unbundling it will be incumbent on advisers to consider them as an option for clients.”

The Nucleus wrap currently offers about 300 investment trusts, and business development director Barry Neilson agreed unbundling could shake up the market.

“If supermarkets transition to a wrap model there may well be a bigger uptake of investment trusts,” he said.

“Unbundled platforms have models which can facilitate adviser charging, so IFAs can receive adviser charges on investment trusts.”

But others remain sceptical. Skandia said the products’ availability on platforms would not over-ride a more important factor: investor demand. Ascentric also doubts unbundling will have much of an impact.

“There’s no reason why other platforms adopting investment trusts will make uptake any higher,” said managing director Hugo Thorman. “The problem with investment trusts is they are quite difficult to accommodate in a risk-profiling process because they are allowed to gear.”

Thorman added investment trusts are perhaps better suited to execution-only platforms due to the problems advisers face incorporating them into their client risk analysis.

Platform unbundling will no doubt make investment trusts more accessible – but the jury is still out on whether it will make them more popular.

He also argued the commission disincentive does not fully explain why investment trusts are not used more widely now, pointing out index trackers – which do not pay commission either – are popular on the platform.

The ‘fee factor’ is a further problem.

Aegon head of platform sales Martin Coyle said extra fees applied to investment trusts held within portfolios could be hindering uptake.

“We are seeing a move towards model portfolio use and if you have an investment trust within a portfolio there is a cost associated with trading it,” he said. “The cost of rebalancing a portfolio might outweigh the benefits.”

He added demand for investment trusts on the Aegon Retirement Choices platform – an unbundled proposition which launched in November – has been limited to date.

The fact stamp duty is payable on purchases could also prove a deterrent.

“I can see a client pointing out they do not have to pay stamp duty on an OEIC structure,” said MPL’s Stewart.

While unbundling will no doubt make investment trusts more accessible, this does not necessarily equate to wider usage.

If the products are to break into the investment mainstream then providers will need to communicate their benefits more effectively. Historically, unit trusts have been marketed far more aggressively than their closed-ended counterparts.

“Perhaps the investment trust providers have to get out there and explain their products in a simple way to the end investor,” said Cofunds head of proposition Verona Smith. “At the moment they are not doing that and this is a challenge for them.”

Nucleus’s Neilson thinks a more intensive marketing strategy could pay dividends.

“In the medium term, if investment trust companies market their services better and the stock market continues to rise, we will see wider usage,” he said.

Whether the move to unbundled platforms will create fresh appetite for investment trusts is open to debate. Perhaps the greatest boost will come from the regulator in the form of the retail distribution review and its wider whole-of-market requirements on IFAs.

“The RDR will put investment trusts more on the radar because advisers who want to remain fully independent will absolutely have to consider them,” said Prosperity Independent Financial Advisors & Stockbrokers director Mark Newman.

Unbundling:

What the ‘big three’ say

FundsNetwork

• Adding investment trusts in the second half of this year – expected to be November.

• Will initially offer the most popular and liquid trusts before expanding its range.

• Launching investment trusts in response to adviser demand.

Cofunds

• Will not provide a share trading service directly but make investment trusts available via a link-up with Barclays.

• Platform teamed up with Barclays at the end of last year to launch a pilot share trading service enabling advisers to trade any investment listed on the London Stock Exchange – including investment trusts, exchanges traded funds (ETFs) and stocks.

• The service, piloted with ten advisory firms, is expected to be rolled out more widely later this year.

Skandia

• No immediate plans to offer investment trusts – current focus is RDR.

• Investment trusts an option in the future as platform looks to expand investment range.

• Platform said it sees limited demand for investment trusts and ETFs compared to unit trusts and OEICs.

Article from IFAonline.co.uk

Uganda: Country's Only Unit Trust Fund Bows Out

ridodirected@gmail.com (RIDO) — Mon, 12 Mar 2012 21:03:00 +0000

BY DAVID MUGABE, 10 MARCH 2012

Article from All Africa

A weak saving culture and the delayed liberalisation of the pensions sector are at the heart of the recent suspension of Uganda's only unit trust fund.

The African Alliance Unit Trust Scheme started in 2004, was suspended last week after what the company described as "failure to attain a critical mass especially as a retail product." A unit trust fund is a form of collective investment for investors of similar objectives who pool funds which are then invested by a fund manager.

"Due to the unfeasibility of the continued operation of the African Alliance Unit Trust Scheme, we are winding up the Scheme with effect from December 31, 2011," read a notice from African Alliance, the fund managers who have been running the unit trust.

To run profitability, the three-unit trust funds were supposed to have a capitalisation base of sh5-6b. But the fund was operating at a capitalisation base of only sh2b. In comparison, Kenya has 45 unit trusts that collectively amount to approximately 28b Kenya shillings (about sh717b), illustrating the disparity between the two markets. Most of the investors voted for the winding up of the fund at a meeting held last week.

Mona Muguma, the African Alliance head of asset management, explained that the bigger part of the sh2b fund was from institutions with retail individual investors totalling 300 and contributing about sh400m. "Every other month we have been bleeding and it affected other operations," said Muguma. The fund gave an annual return of between 8-20% depending on the profile.

The profiles were low risk investments like Treasury Bills and bonds, corporate bonds. The third profile was the high risk investments like equity (Uganda and regional) and offshore investments. Uganda Securities Exchange (USE) chief executive officer Joseph Kitamirike said the development is not good because it limits the avenues for investments for those in a pool.

"This is the price you pay for delaying opening up the sector (pensions)," said Kitamirike, adding that the unit trusts are designed to offer very good and competitive returns. Uganda's working class are starved of savings and investment options.

National Social Security Fund, is the only body that manages the retirement benefits of workers and has a statutory entitlement to receive monthly contributions from every employer in Uganda. Pieces of legislation aimed at liberalising the pension sector have been thrown around between Cabinet and Parliament over the years and many times are overtaken by political legislation.

In 2011, Parliament passed the Uganda Retirement Benefits Regulatory Authority (URBA), a body expected to regulate the establishment, management and operation of the retirement benefits schemes in public and private sectors. The URBA Act was assented to by the President on June 28, 2011. Another bill still in the offing is the Retirement Benefits Sector Liberalisation Bill 2011.

The bill seeks to end the monopoly of the NSSF. Experts believe that were the pensions sector to be opened, the level of financial literacy would increase alongside savings and investment options. "When the human resource manager says pick a fund manager, staff start to ask questions - 'what is a fund manager?'

"Later they start to appreciate and even want to put more money in the funds," said Muguma. Muguma said even the efforts by the Capital Markets Authority (CMA) in the schools capital markets challenge are only sowing the seeds for the future because students don't save or have enough to save.

"Liberalisation will open the market in ways it has not been imagined," said Muguma. Experts have observed that when savings have been left to be brought on a voluntary basis, it has not worked out partly because of low awareness. Yet in other countries where a similar fund is being operated, they have been spurred on by liberalised markets and aggressive marketing and advertising.

Kenneth Kitariko, the African Alliance chief executive officer said operations have been suspended but not completely wound up "and if the environment improved, the fund would be up in a day." African Alliance has been the sole provider of unit trusts since 2004.

Kenya has 11 licensed unit trust licensees. "The absence of other players or entry into the market for an eight-year period is telling of the difficulty of the market in its current state," read a notice.

The advantage with the unit trust is that being a mass scale product, the cost of administration and audits are spread among all the unit holders. "You are cost sharing on running it but benefiting individually on the returns," said Kitariko.

Article from All Africa

Is upfront sales charge of unit trust investing too high for you?

ridodirected@gmail.com (RIDO) — Sun, 11 Mar 2012 09:31:00 +0000

by Lee Khee Chuan. Posted on March 4, 2012, Sunday

Article from Borneo Post Online

If the question above catches your attention, chances are that you are having qualms, like some other investors, about the high upfront cost of investing in unit trusts.

A national English daily highlighted this issue in its business pullout section headlined ‘High fees dampener for unit trust’ on November 12, 2011. It was a well written piece of news report.

This news report started with one Jason Yap, feeling that he already started losing money before he had a chance to make a profit. And what irritated Yap further, who was a retiree, was the high upfront fee he had to endure, and that had a profound impact on the return on his investment.

Some unit trust management companies charge up to 6.5 per cent upfront sales charge for its equity funds when investors invested using cash. The rest usually charge around five per cent, except for money from Employees Provident Fund (EPF) to invest in funds (under the EPF Members Investment Scheme) which was capped at three per cent recently since January 1, 2008.

The news report highlighted that in developed countries like Britain and Australia, there was a regulatory push for such financial products to be delivered on a fee for service basis rather than on a high push environment with upfront sales commissions.

In Britain, the government had legislated that by January 1, 2013, all financial products were not allowed to have commissions attached.

One financial adviser interviewed opined, “I think the upfront fee is too high and eats into the returns of investors. The average compounded rate of return of equity unit trusts in Malaysia over the last 10 years is only about 7.5 per cent per annum, and losing six per cent upfront is too high a cost for investors.”

I was curious about the responses from the unit trust management companies.

Let’s review some of the answers put forward by the top management from the unit trust management companies, as reported in the news report, to see if they made sense.

One of them said the performance of a fund and its relevance to investors was key rather than merely looking at sales charges. At the end of the day, the basic rule of investing was making an informed decision.

This meant investors needed to have sufficient information and knowledge of the product they were investing in.

A second one said any attempt to restructure the front-end and back-end charges would require very careful study and strong will on the part of the authorities to make tough changes to the rules and regulations on existing distribution channels which was dominated by a tied-agency system.

Agent commissions had already been compressed when the EPF capped the maximum service charge at three per cent. This translated to more than 50 per cent reduction in the normal service charge.

The front-end service charge was the primary means of compensating the agents for the service they provided to investors. He estimated the tied agency force to be over 60,000 at the end of last year.

A third one felt that the market should determine the fee structure as ultimately good performance and achieving the investor’s objective were more important.

Lower charges, better returns?

What do you think as an intelligent investor who has to come up with your hard-earned and hard-saved money?

To me, it is simple. Only three things to commend here, firstly, taking all things being equal, ie, irrespective of fund performance, every one per cent sales charge that went to the fund company would reduce the return that could be earned by the investor correspondingly.

So, if you were charged 3.5 per cent lower, in a way it was already a 3.5 per cent return earned before you even started investing. So don’t you think that it made sense to support funds or fund distribution channels that offered you lower upfront sales charge?

Are you getting good value for the fee charged?

Secondly, as an intelligent investor, you must ask do you get the value when you are charged the annual management fee by the fund manager, usually 1.5 per cent to 1.75 per cent per annum for managing your money.

The simple yardstick to measure was that the fund managed by the asset management company should outperform the index that was chosen as a benchmark for the fund. Investors should fire their fund management companies if they could not even bring extra value to the investors.

Ask for the fund fact-sheet from your fund promoter or simply download it from the fund houses’ websites. See diagram A.

Thirdly, you should review what value-added services your present fund sales person was providing you since the present market practice was such that front-end service charge was the primary means of compensating the fund salespersons for the service they provided to investors.

This is a list that you should start asking yourself, as an intelligent investor:

• What method was the fund seller using in helping you invest and manage the downside investment risk, other than the money being diversified in the unit trust fund?

• How regularly did your fund seller monitor your investments?

• What regular reports did you get from your fund seller that could tell you at a glance how your money was doing, as most of the reports or statements by fund companies were unfriendly to investors?

Article from Borneo Post Online

Oil could hit $200 a barrel, says David Coombs

ridodirected@gmail.com (RIDO) — Tue, 06 Mar 2012 21:22:00 +0000

Author: Will Roberts

IFAonline | 06 Mar 2012 | 12:15

Article from IFAonline.co.uk

The price of oil could rocket to $200 a barrel this year, triggering a flash crash in stock markets, according to Rathbones' David Coombs.

Coombs, head of multi-asset investments at Rathbone Unit Trust Management, said if current political tensions over Iran's nuclear programme escalate then the price of 'black gold' could surge to $200 a barrel.

"If Iran blocks the straits of Hormuz, I see oil possibly going to $200 and then down again," said Coombs. "It would be a short-lived but significant event which could see equities go down by perhaps 20%."

He added if the flash crash plays out it will create buying opportunities in sectors such as emerging markets.

The price of oil has been increasing recently on the back of rising political tensions over Iran's nuclear programme. Iran has threatened to close the Straits of Hormuz - a vital oil trade route in the Gulf - if the US and EU impose further economic sanctions.

Speculation Israel could be planning an attack on Iran's nuclear facilities has also raised concerns the Islamic state will retaliate by closing the straits.

Last week, Crude oil prices hit a 43-month high after Brent crude jumped $5.74 to $128.40 per barrel in New York following reports a Saudi Arabian pipeline had exploded.

Coombs thinks the escalating oil price poses the biggest threat to the global economy.

"The oil price keeps me awake at night," he said. "Europe does not because Europe is a known uncertainty. But a spike in oil would create huge uncertainty."

But Coombs, who runs three multi-manager funds, said despite the oil threat, he has been "really encouraged" by recent economic indicators.

He said the European Central Bank's Long Term Refinancing Operation (LTRO) - which allows banks to borrow cheaply whilst holding less collateral - has helped provide long-term stability to the banking sector and economy as a whole.

Coombs also pointed to healthier US bank balance sheets and an improved US housing market as further positives.

"The US economy is now growing and I think Europe will stagger through with its economy flat-lining" he said.

Article from IFAonline.co.uk