Welcome to some more Friday musings.
Another week in lockdown has flown by and yet another Friday is upon us.
It’s gloomy here in Manchester, but after several weeks of plant-obliterating heat, I consider a bit of rain to keep my garden alive no bad thing.
Recent weeks have seen a number of new personal and corporate clients join us, so a big welcome to those of you who came on board in May. It also marked the conclusion of an interesting experiment, whereby a financial journalist went through our financial planning process, writing about her experience in a series of blogs released via the industry press. It has been invaluable to get such a detailed perspective from an external party and see the planning process through a client’s eyes, so thank you Sam for your insight and fascinating blog articles, it’s been a pleasure.
WHEN WILL MEETINGS RESUME AT OUR OFFICES?
I wanted to provide an update this week about when our team may be returning to the office and when client review meetings may be held at our Manchester premises. Whilst I cannot provide a firm timescale for this at present, the broad answer is that this is unlikely to be any time soon.
My priorities as a business owner are twofold; keeping our team and clients safe, whilst continuing to deliver a quality service. City Tower have begun to see many resident businesses return with social distancing measures in place. Despite this, my feelings are that if we were to return to the office in the current environment, it could increase risk of transmission to staff and visitors. The business has been running remarkably well with our team working remotely, so hurrying back to working in an office environment seems unnecessary. If returning to the office and resuming face-to-face client meetings poses any significant increased health risks, it does not seem a prudent course of action.
This means that – for the time being - ongoing client review meetings and financial planning sessions for new clients will continue to be conducted online via Zoom. Whilst most of our meetings are usually conducted at our offices, Josh and I often travel to meet clients who are in their elder years or who are less-able to travel at home. Home visits also remain suspended for now, to avoid any risk of transmitting Coronavirus to our vulnerable clients.
PORTFOLIO MANAGEMENT - COMPETENCEY, RELATIONSHIPS AND PSYCHOLOGY
This week Tatton have carried out some further portfolio updates. Rather than a tactical move like the last round of rebalances, this is a response to a specific event. The fund managers of one of the holdings that makes up a number of client portfolios - the Kames Global Sustainable Equity fund - have left en masse, to be replaced with a new untested management team. As a result Tatton are removing the fund in question with the (deep breath) ‘Vanguard ESG Developed World All Cap Equity Index fund’. Might have to practice pronouncing that one before my next client review meeting...
This is a great example of active portfolio management in action and a key part of Tatton’s approach to managing our investments. In addition to fund performance and economic analysis, they also assess the capability and relationship dynamics of a fund’s management team. This takes the form of interviews to learn more about the key people that are making the decisions, keeping a regular dialogue going and monitoring any changes to the team.
Another relevant example of this in recent times were their meetings with the management of the ill-fated Woodford Equity Income fund, which made headlines for all the wrong reasons at the end of last year. Around that time I met with Tatton’s director of investment solutions for a catch up over coffee and we were discussing the topic of Woodford’s fall from grace. She explained that Tatton had met with Woodford and his team some years prior as they were considering including the fund in client portfolios. Whilst the performance and track record at the time was excellent, in the meeting the dynamic amongst the team in the room gave cause for concern.
It appeared that Woodford was quite an overbearing figure and even his senior team-mates seemed somewhat hesitant in putting forward their own ideas. As a result Tatton chose not to place money with them due to concerns about Woodford having too much influence over decision making, with a risk that egotism could potentially cloud judgement. As it turned out this was the right call, as soon after the fund began to go off the boil before it’s spectacular implosion in 2019.
Ups and downs are commonplace and many situations that hamper performance cannot be foreseen. However, having a professional portfolio manager such as Tatton carrying out the day-to-day oversight of investments, provides a proactive hand on the tiller, to help navigate the often choppy waters of investment markets.
TATTON - FUND SWITCH RATIONALE
Why are you performing this rebalance?
We have decided to rebalance clients’ portfolios because of a change in opinion on an underlying fund position. This rebalance does not reflect a change in asset or sub-asset allocation.
Fund selection
Following the departure of the portfolio management team of the Kames Global Sustainable Equity Fund, as well as a member of their ESG analysis team, we have elected to redeem the holding for clients.
The fund has performed well in portfolios thus far, however the lack of continuity within the team running the fund has led us to consider that track record less relevant for the fund in the future.
This position will be replaced where possible by the Vanguard ESG Developed World All Cap Equity Index Fund, which is the new name for the Vanguard SRI Global Stock Fund. In the last few weeks this fund has undergone some changes: the fees have been reduced and the index has been changed to align far more closely with our goals for the Ethical portfolio range. As per the manager’s documentation the new fund will exclude investment in shares of companies that the sponsor of the Index determines to be engaged or involved in the following activities: Controversies, Non-renewable energy, Vice products and Weapons.
Portfolio Changes
A replacement of the Kames fund with the passive Vanguard fund as mentioned above, is the only change to portfolios at this time.
With that I will close for now and wish you a pleasant weekend with the hope that you and yours are keeping safe and well.
