26 June 2011

Don't rely on arbitration when you feel cheated

US Regulators may not allow evidence from other arbitration cases (NY Times)

19 June 2011

Fund investors given short shrift by US Supreme Court

A recent judgement by the US Supreme Court relies on hair-splitting as it declares that the management company of a mutual fund cannot be sued by investors that are misled by a prospectus that is issued by a managed by the company. As a consequence investors cannot get any compensation from the people that are actually behind the misleading information. While this case is a purely US case it is representative for the cavalier attitude that investors are treated by regulators, courts and governments in most jurisdictions.

17 June 2011

Do-good politicians want a third bite off your money

Not enough that income from employment is often taxed higher than income from (often inherited) wealth and that returns on savings are taxed again, now the Nomenklatura that runs our governments - and especially the pointless Eurocracy - wants to 'direct' your investments into 'socially-desirable' activities as it becomes more and more difficult to raise the 'yield' from ever-increasing taxation to finance the ambitious goals of the do-gooders. Investment strategy has to be carefully planned to prevent the fall-out from these schemes.

16 June 2011

Do Earnings forecasts matter?

An interesting couple of charts on Ed Yardeni's blog illustrates the near-permanent bias towards overestimating the future earnings growth of S&P 500 companies. Especially at the beginning of each year estimates are over-optimistic and they are reduced during the course of the year.

12 June 2011

Does your adviser take secret commission payments?

One of the leading platforms for investment fund sales in the UK refuses to disclose commission payments to funds it sells through its platform (Daily Mail)

Ireland raids pension savings again

Who in his right mind would want to entrust his retirement savings to governments? The Irish government wants to use the money to fund a job creation scheme - given the track record of such schemes the money is a much as gone in our opinion.

8 June 2011

Lack of transparency in wealth management fees and performance

Wealth managers have long been stingy about publicly disclosing data on fees and the performance of standard portfolios READ MORE

7 June 2011

Are you protected against fraudulent investment advisers?

A report about the loss of Sfr 20 million that has been uncovered in the private banking department at UBS highlights the need to carefully select and monitor investment advisers. In this particular case a senior adviser to very high net Spanish clients had caused the misappropriation and the bank had to reimburse them. So one could say that it pays to entrust only very large and financially strong institutions with the management of one's investments. But there is another way and it means that independent or smaller money managers can well be entrusted with the direction of the investment but that the safekeeping of the securities and funds should be handled at arms-length by an independent and secure custodian.

4 June 2011

How to monitor your 'execution'

While the executions we have in mind are less blood-curdling than the one you might see in your typical Horror Movie they are of critical importance for you financial well-being. We are talking about how well your orders to deal in shares, bonds or foreign exchange are handled by your broker or financial adviser. Any amount of 'slippage' - even if not due to malice - is a drag on the performance of your portfolio. The more often you turn over your investments the more importance is careful monitoring of execution costs. The lackadaisical regulation of 'dark pools', 'high-frequency trading' and 'predatory algos' have made it more difficult - but even more important - to keep a close watch on executions.

3 June 2011

Growthbuilder - but is it building your wealth?

A new structured product has just been launched in the UK and it carries the promising name 'Growthbuilder'. But before you rush to sign on the dotted line potential investors should ask themselves if they understand the complicated option strategies that are packaged into this product. Only then they could be assured that they buy the product at a fair price and are not charged excessive mark-ups by the vendor. And even if they - or their unbiased advisor (who has no financial interest in the sale of the structure) - can understand the sophisticated mathematical models it does not mean that an investment should be made. All option strategies suffer from the defect that investors have to be extremely accurate in their timing - in addition to the already difficult task of choosing the right investment in the first place. The Libyan Investment Authority found that out to its not inconsiderable cost (which in its case surpassed the billion dollar mark quite comfortably). Dealing with sophisticated investment professionals that are incentivised by commission payments should only be undertaken with extreme care and 'Buyer beware' should be foremost on any investor's mind.