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Issue 59 - Out With the Old and In with the New!

I hadn’t appreciated that it had been a month since writing my last News Letter and I have to say, that time has gone so quickly, but then we’ve had Easter and another bank holiday weekend as well. There is quite a lot to include this time, so my apologies for a longer than usual message.

I am delighted to be able to confirm that this will be the last News Letter drafted from RAFP because at the tail end of last week, we did finalise all of the documentation to merge RAFP with Bates Campbell and during the course of the next few days, Companies House and the FCA will be informed of the Company name changes as we launch the Alexander Bates Campbell brand.

As I mentioned in an earlier News Letter, I have known Martyn Bates and Lynne Campbell for many years and in fact, they used to work for me in my previous business before establishing their own firm in 2010.

They have two main strands to their business, one of which is providing corporate services to overseas Companies, particularly those based in North America, who have employees in the UK.  The services provided are to look after those employees, provide them with their benefits, manage the payroll and human resource support services.  In developing this area of business, they have evolved a business model that I was running in my previous Company, and I have been pleased to see how successful they have been.

In addition, they have a private client portfolio as well, where they are looking after personal investments and associated tax advice, very similar to the services provided by RAFP.

As you may recall, one of my concerns has been continuity and by creating the combined business, we now have a stronger platform to be able to evolve our client services further, whilst being able to ensure continuity for clients, staff and indeed, the stakeholders in the business.

The combined business will now comprise 17 people, with 5 advisers and 12 support staff.  The actual structure and individual responsibilities are as detailed below.

Richard Alexander has over 46 years financial services industry experience providing specialist financial planning services to clients with accumulated capital who prefer the personal touch of a dedicated and trusted financial adviser.
Martyn Bates had many successful years in the computer software world before turning his attention to financial planning 20+ years ago. Martyn is renowned for his experience and patience and providing customer care to individual and corporate clients.   Lynne Campbell has built her experience advising with industry leading independent specialists for 25+ years. Her professional approach, combined with considerable capability are the foundation of her acknowledged success.  
Nigel King has worked in financial services for over 25 years, during which time he has built up a wealth of experience and knowledge that he uses to help friends, clients, and colleagues. As well as studying hard to become a Chartered Fellow of the Institute, he says “I find work genuinely enjoyable, which is a rare comment, as I genuinely enjoy meeting and helping people achieve what they want financially.”

His spare time is at a premium, having 4 young active children, running a local football team and being involved in a local charity tends to fill most weekends!  
Ian Collier has built up considerable financial knowledge and experience during his 34 years within the industry.  
His time with HSBC in particular, as both Relationship Manager and Financial Adviser, helped cultivate his passion for helping client’s achieve their life goals.
When not working Ian loves visiting his family and friends, going on holidays with his partner, running, gardening, and watching Cricket.   
Private Clients Lesley Alexander – Administration Manager Chantelle Bennett – Paraplanner Sarah Donno – Administrator Charlotte Penfold – Administrator  Corporate Clients Jeanette Owen – Head of Administration Eva Bodan – Administrator Rebecca James – Administrator Holly Whitaker – Administrator  
Chris Alexander – Director Jess Greenslade – Payroll Manager Gaby Reading – Accounts Manager Katrina Stonestreet – Operations Manager  

Continuing Market Turbulence

We are continuing to see turbulence in investment markets globally, with the on-going influence of concerns over the conflict in Ukraine and supply chain issues, both of which are contributing to the inflationary pressures, which are in turn, seeing central Banks raising interest rates. 

Over the last 40 years in business, there have been a number of occasions when we’ve experienced similar periods of volatility in markets, each of which at the time have been very concerning, but on each occasion, the markets do eventually bottom out and then we are likely to see a period of sustained recovery. 

We work with a number of Investment Managers, and I thought it might be useful to invite them to summarise things as they see them at present and the remainder of this News Letter therefore comprises two contributions, one from Hugo Pring, who is a Partner at Lunesdale Investment Management and the other from James Penny, who is the Chief Investment Officer at TAM Asset Management.

Hugo will be known to some of our clients, as he manages a range of bespoke investment portfolios for clients.  The approach from TAM is somewhat different, inasmuch that they run a series of model portfolios, which are risk graded and designed to meet specific client needs and you will see that they have different styles in their presentation, but I hope that you might find their comments to be of interest.

In future News Letters, I intend to include comments from other Fund Managers, so if you don’t recognise either of these, don’t worry, we should see further comments from others in due course.

Hugo Pring – Partner at Lunesdale Investment Management

The value of long term income streams are being undermined by high and rising inflation all around the world. 

Supply chain cost increases have been a feature of the global economy for the past year since the height of the disruptions caused by the Covid pandemic. 

Energy price rises were also rising even before Russia’s ill-advised invasion of Ukraine but with so much of the EU having become reliant on Russian gas, these increases have also accelerated.

Central banks are now using the only policy tool that they have at their disposal to bear down on inflation and so around the world, interest rates are rising.  The stock of cheap borrowing available to businesses everywhere is therefore contracting fast and at the same time, wage inflation is also beginning to affect profitability.

Whilst each of these trends was to some extent predictable (excluding perhaps the invasion of Ukraine) the combination of them all in such a short time has dramatically undermined confidence in equity investments.  Initially this undermined the elevated valuations of the high-growth companies in the USA (normally quoted in the NASDAQ index) in the last few months of 2021 but by now, more prosaic traditional businesses (which make up older indices such as the Dow Jones, the FT100 and others) are also being marked down consistently.

Most of our portfolios have now given up all the growth of 2021 and some are approaching values closer to the lows of 2020 when the Covid pandemic first struck.

To use an over-common phrase, “we are where we are – not where we would perhaps like to be!”.  Clients portfolios have fallen despite our having done our best to diversify them between industries, markets, currencies and time durations.  Gold has fallen, as have index-linked gilts – perhaps the two most common “hedges” against investment risk - which demonstrates how hard it is to find a calm port in the storm.  Even cash is of course being undermined by renewed inflation and will lose 6% of its purchasing-value in 2022 unless something changes fast.  In other words, cash is a guaranteed loser whereas losses are NOT guaranteed with other investments!

So what should the investor do?  Given all the above, the following (in my opinion, which is what you asked me for!)

  1. Check that any money invested really is long-term risk capital and is NOT required to meet a fixed commitment in the next 2 or 3 years.  We have tried to ensure this is the case with our risk-questions that were last completed in 2021.
  2. Subject to 1. above, is there any other cash that is not needed that could be used to start adding to holdings during the summer/autumn at these lower levels?
  3. Try to be brave and NOT sell at current levels.  It is perfectly possible that markets will fall further but it is not guaranteed and even if they do, no bell will ring when it is time to buy back in again.
  4. Remember that stock-markets will start to rise BEFORE the true signs of recovery are evident.  Indeed it is often best to buy when news is at its worst.  Sadly we cannot know when the perfect time to buy is going to be – but it is irrelevant anyway if one has never sold in the first place. 
  5. Bear markets take the elevator and bull markets ride the escalator up again. 

James Penny – Chief Investment Officer at Tam Asset Management

Markets over the last month have become noticeably more volatile than in Q1 which is hard to believe. The reasoning for this step up in fear and selling seems to be based around the idea that central banks are now actually raising rates rather than just talking about it as they were for most of the first quarter of this year. The war in Ukraine has helped to exacerbate this volatility and supercharge inflation expectations (no oil in Europe, no corn for core food production and no wiring looms for cars, to name a few) which is, in turn, feeding the flames of fear around investing into this market.

This scenario is obviously most negative for bonds as interest rises erode the value of owning bonds and likewise growth stocks come under serious pressure in a rate hiking market. We can see this with the Nasdaq down over 20% whilst the normal S&P500 only down 8.5%. It really does seem that anything which has done well prior to 2019 is now firmly at the bottom of the pile.  Whilst this is regrettable it is well known that what goes up, must, at some juncture come back down again.

As growth stocks come down, one might have expected investors to now be switching to value investing (a move which TAM did long ago).

It would appear, from chatting to our competitors that invest in funds, many of whom have been so heavily invested into high growth funds for the last decade (Fundsmith and Ballie Gifford) these peers have been somewhat reluctant to sell these holdings and are thus down over 10% at the end of the first quarter and some much more than that.

Conversely, TAM’s portfolios were down in the region of 2-5% over the first quarter which is significantly better than many competitors. This is not because we saw the writing on the wall but more that TAM has, and always will be a cautious manager and a safe pair of hands in a crisis. 

To my earlier comment about when TAM started buying value stocks which are so in demand now. TAM has been investing into value funds since the first vaccine came out in November 2020.

The fund we have been buying is mainly the Pzena Global Value fund and this year it’s up 1.5% when the wider market is down nearly 9%. Likewise, TAM made a switch into an S&P500 Value ETF and put it, along with Pzena, as the largest part of clients’ portfolios.

This very cheap and highly effective ETF is down just 3.4% when the actual S&P500 is down 8.5%, that’s a relative performance over 150% better than the S&P500 which so many passive investors own.

Further to this, a move was taken to decrease equity exposure and increase precious metals exposure a week before the invasion of Ukraine which proved a very defensive move. Finally, a move to insulate the clients’ portfolios with healthy levels of commodities and alternative hedge fund style investments have all returned handsomely for the clients. These moves in aggregate helped to secure TAM’s position as one of the best performing DFM’s in the wider IA mixed investment sector over Q1. 

Of course, this commentary is not intended to detract from the negative performance seen in clients’ portfolios this year and no one takes these negative markets more seriously than TAM.

We do however think it’s worth framing this small level of underperformance against competitors offering a similar balanced investment option suffering larger losses because of their focus on returns rather than protecting clients.

To conclude, in markets like this it doesn’t do to start throwing the baby out with the bath water and panicking about every stock and bond owned and selling everything hand over fist.

The focus points for clients worrying about their invested wealth is to remain calm, remain sanguine about the fact that markets do move in fits and starts and what does go down can come back up.

TAM’s investments are geared to invest clients’ money simply, clearly and importantly invest it into the very best and highest quality companies we can find.

If we can do this whilst trying to protect clients’ assets in times of volatility then we believe this delivers the best of both worlds and I hope from my previous comments we have demonstrated that we have delivered exactly that in these trying times. 

I often feel successful investing is often less about correctly predicting the outcome of every risky scenario which plagues this market and more about owning what you know to be a great investment, holding it for the longer term and getting rewarded for doing so.

And to that end, things are becoming volatile and whilst we are cognisant of this fact, we are also hugely positive for the future of this market and over the longer term this short term shock to markets is just a great opportunity to own more high quality companies which we believe will become the winners of tomorrows market.

As always, do let us know if we can help in any way and in the meantime, stay safe and we will keep in touch.

Best wishes.Best wishes from all at RAFP

Alexander Bates Campbell Financial Planning Limited is entered on the FCA Register under reference 817090. Alexander Bates Campbell Limited is an Appointed Representative of Alexander Bates Campbell Financial Planning Limited and is entered on the FCA Register under reference 522399
Alexander Bates Campbell Financial Planning Limited is authorised and regulated by the Financial Conduct Authority. The FCA does not regulate taxation advice.

The guidance and/or advice contained within this website are subject to the UK regulatory regime and the European Markets in Financial Instruments Directive and is targeted at consumers based in the UK.
Alexander Bates Campbell Financial Planning Limited/Alexander Bates Campbell Limited
First Floor, Unit 9/10 Riverview Business Park
Station Road
Forest Row
East Sussex
RH18 5FS
United Kingdom
Tel: 0203 167 0880
If you wish to register a complaint, please write to us at the above address or email us as or telephone 0203 167 0880
A summary of our internal complaints handling procedures for the reasonable and prompt handling of complaints is available on request and if you cannot settle your complaint with us, you may be entitled to refer it to the Financial Ombudsman Service at or by contacting them on 0800 0234 567