“There are still many people who believe the RDR will not happen or will happen in a different form. The reality is that the RDR will happen and there are only two years to go.”
Karen Vilder is the managing director at AV Trinity
Q: Global asset allocators have taken their most positive stance on British equities over three years at the expense of America and Japan, according to the latest Bank of America Merrill Lynch Fund Manager Survey. Do you have any regional preferences?
A: We agree and have taken a negative view on America. Instead, we prefer Asia and other emerging markets. We like Britain but are still underweight because there are a still a few issues. We want to see what unemployment numbers are going to be like in September. The fourth quarter of the year, which is commonly referred to as the silly season, is critical. Statistics published during this time are often out of context. The September numbers for unemployment are of significant importance and critical for investor and consumer confidence. The market will thrive and fall on investor confidence.
Asia and emerging markets are looking increasingly attractive. Stocks are generating yield, awarding shareholders by paying dividends. Because companies are aiming to grow their dividend yield, they incorporate inflation protection. We like emerging markets, especially Asia, but we would not look at them in isolation.
Q: Which British equity funds are on your radar, if any?
A: We like the Rensburg UK Mid Cap Growth Trust because it is well positioned in the market: its companies generate strong cash flows, have significant overseas earnings and the management team can capture the opportunities in the market.
Q: When selecting funds for your clients, what criteria do you apply?
A: Most of our clients have accumulated their wealth over a period of time or inherited it. Others have their own business. Fund selection depends on our clients’ risk tolerance so we consider, among other factors, risk and volatility. Those factors are critical, otherwise they will not sit tight when they should.
Emerging markets are a fantastic buy, but not for everyone, and for the majority of investors they are not suitable to make up a significant proportion of their portfolio, especially when they are risk averse. We are operating in a highly volatile market environment and looking for managers that can perform in both bull and bear markets. A proven track record for the manager and the team is also crucial. (article continues below)
Q: Which new launches have caught your attention?
A: There are three new launches we like: the JP Morgan Emerging Markets Investment Trust, Swip Strategic Bond and Jupiter Absolute Return.
The JP Morgan Emerging Markets Investment Trust, which launched last month, offers a 4% yield and is already trading on a premium. We like the sector anyway and the management team on the trust is strong.
Swip Strategic Bond launched in July. Again it has a strong management team that captures the yield.
One fund we really like and have bought into since it launched in December 2009 is Jupiter Absolute Return. It is one of the best launches in years and Philip Gibbs is one of the best fund managers Britain has had in the last decade.
Q: What are the biggest challenges independent financial advisers face (IFA)?
A: The biggest challenge is certainly creating a workable and profitable business model that works post-RDR (retail distribution review). Although most decent firms have started to address the RDR, I am amazed by how many are not ready. There are still many people who believe the RDR will not happen or will happen in a different form. The reality is that the RDR will happen and there are only two years to go.
Q: What has AV Trinity done to prepare for the consequences that the RDR brings?
A: As a firm, we are already largely positioned in a way to meet the requirements set by the RDR. Much of our work is fee-based and our IFAs do have appropriate qualifications. We are not one of the largest firms but do have a reasonable size.
The RDR is especially challenging for smaller firms that employ one or two advisers. They do not have the time and the resources to sit down in order to rethink and redesign their business models; they need to spend time with their clients.
Q: What do you do in your spare time, when the RDR is not causing you to work overtime?
A: My ambition is to spend more time gardening. I am a keen but not very knowledgeable gardener. I grow weeds extremely well and would like to learn more about gardening. I also like walking, I have three large dogs that need a lot of exercise.