Mark Dampier is head of research at Hargreaves Lansdown.
Q: Has the large number of fund launches surprised you this year considering the market conditions? Of those launched which have caught your imagination?
A: I wasn’t aware of that many, but the ones I have noticed are the Ucits III retail hedge funds. For example, the Cazenove Absolute UK Dynamic fund [which launches next week] and the recently launched Artemis fund for William Littlewood [Artemis Strategic Assets]. This is because these sorts of funds offer something different and interesting to the retail client. Before if they wanted to invest in Neil Pegrum’s [manager of the Cazenove fund] hedge fund the minimum investment was £100,000.
Q: Are there too many funds?
A: It’s my view that far too many fund management houses have too many funds, and far too many UK-invested funds. I don’t need eight different UK funds to choose from.
However, the fact there are too many funds will always be. It’s why I created the Wealth 150 [of recommended funds], it’s a much more manageable universe. Some may say that 150 funds is too many, but it’s a starting point. The point is that some 90% of the active funds out there are crap and there is lots of money stuffed in funds that clients will never pull out.
Q: What’s your stand on passive funds?
A: I have no problem with passive funds and I am not into the whole debate of active versus passive, and which is better. They can easily co-exist side-by-side. In fact if passive funds can broaden the appeal of equity investment among those not ready to go active, it is a good thing, not bad. This is because after a while these first timers might consider spreading their investment; increasing the size of the pie is good for everyone.
Q: Are you planning on going back into commercial property funds any time soon?
A: I have been looking but I am in no hurry. This is because my view of the economy is that it will be a tough grind for the next two to three years. This year has been better than expected mainly because of the effects of the lower interest rates. However, commercial and residential property lives or dies by the availability of bank lending, and with that likely to be squeezed I can’t see it being that exciting, and I don’t think the commercial property market has bottomed yet.
Q: Many advisers have expressed concerns over the amount invested in corporate bonds. Are you in the same camp?
A: Actually no. I said six months ago that I did not see a corporate bond bubble emerging and this has proved correct. Six months ago the bonds were very undervalued, and if you bought them then it has proved a very sensible decision.
Today I still think they look good value, although they are not as cheap. With many funds you can still get a significant premium over cash, while for the time being inflation is not a problem and I can’t see interest rates going up in the next year. I have had a lot of corporate bonds in my own portfolio over the past year. The bond rally will reverse, I am just not sure when.