Politics and portfolios

Brexit and your portfolio
Whichever way one voted, it is hard not to be dismayed by the shambles that is Brexit, concocted by all sides. In the event that any deal agreed gets voted down in Parliament, or there is no deal, there is a material chance that the government could fall. One or both of these events would come with great uncertainty. We set out three key investment risks relating to Brexit and how sensible portfolio structures can mitigate them.
Risk 1: Greater volatility in the UK and possibly other equity markets
In the event of a poorly received deal or no deal, it is certainly possible that the UK equity market could suffer a market fall as it tries to come to terms with what this means for the UK economy and the impact on the wider global economy. A collapse of the Conservative government and a Labour victory would add further uncertainty.
Risk 2: A fall in Sterling against other currencies
In 2016, after the referendum, Sterling fell against the major currencies including the US dollar and the Euro. There is certainly a risk that Sterling could fall further in the event of a poor/no deal.
Risk 3: A rise in UK bond yields (and thus a fall in bond prices)
The economic impact of a poor/no deal and/or a high-spending socialist government could put pressure on the cost of borrowing, with investors in bonds issued by the UK Government (and UK corporations) demanding higher yields on these bonds in compensation for the greater perceived risks. Bond yield rises mean bond price falls, which will take time to recoup through the higher yields.
Mitigant 1: Global diversification of equity exposure
Although it is the World’s sixth largest economy (depending on how you measure it), the UK produces only 3% to 4% of global GDP, and its equity market is around 6% of global market capitalisation. Well-structured portfolios hold diversified exposure to many markets and companies. Changing your mix between bonds and equities would be ill-advised. Timing when to get in and out of markets is notoriously difficult. Provided you do not need the money today, you should hold your nerve and stick with your strategy.
Mitigant 2: Owning non-Sterling currencies in the growth assets
In the event that Sterling is hit hard, it is worth remembering that the overseas equities that you own come with the currency exposure linked to those assets. Remember too that a fall in Sterling has a positive effect on non-UK assets that are unhedged. The bond element of your portfolio should generally be hedged to avoid mixing the higher volatility of currency movements with the lower volatility of shorter-dated bonds.
Mitigant 3: Owning short-dated, high quality and globally diversified bonds
Any bonds you own should be predominantly high quality to act as a strong defensive position against falls in equity markets. Avoiding over-exposure to lower quality (e.g. high yield, sub-investment grade) bonds makes sense as they tend to act more like equities at times of economic and equity market crisis.

Some thoughts to leave you with
Even if you cannot avoid watching, hearing or reading the news, it is important to keep things in perspective. The UK is a strong economy with a strong democracy. It will survive Brexit, whatever the short-term consequences that we will have to bear, and so will your portfolio. Keeping faith with both global capitalism and the structure of your portfolio and holding your nerve, accompanied by periodic rebalancing is key. Lean on your adviser if you need support.
‘This too shall pass’ as the investment legend Jack Bogle likes to say.

Risk warnings
This article is distributed for educational purposes and should not be considered investment advice or an offer of any security for sale. This article contains the opinions of the author but not necessarily the Firm and does not represent a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable but is not guaranteed.
Past performance is not indicative of future results and no representation is made that the stated results will be replicated.
Errors and omissions excepted.

How Addidi inspires change

‘Inspiring change’ has been our theme for 2018. So many initiatives, campaigns and collectives are being formed with the aim of promoting women’s advancement worldwide, and it’s a cause we at Addidi fully applaud. But while we often think that challenging the status quo and fighting oppression is something more essential in countries where woman are less well represented, it would appear the UK is still behind the times too.

Although the gender pay gap is narrowing year on year, women working full-time can expect to be paid 9.1% less than their male counterparts – according to a 2017 study from the Office of National Statistics. That equates to an average of £100 a week, and as a result calls for companies to publish their gender pay gaps are growing louder.

While equal pay legislation has gone some way to narrowing the gap, it has failed to totally eradicate this embarrassing issue. In this day and age, why should women receive less pay for equal work?

Discrimination remains present in the workplace – and it is unfortunately true that the higher you climb, the fewer women you will find there. A recent study published by the Economic Journal confirms this kind of gender bias in the workplace. The research found that the UK’s biggest companies were only likely to appoint a female director if the post was just left by another woman.

The percentage of female directors on the boards of FTSE 350 companies increased from 2% in 1996 to 8% in 2010. Although progress has been made since then (mostly thanks to the efforts of women making a difference through organisations such as the 30 Percent Club and Women on Board), we still have to contend with the fact that whereas women had a 20% chance of obtaining a position that was left open by a woman, this fell to 10% when the post had previously been held by a man.

The EU has set itself the ambitious target of achieving 40% female representation on listed companies’ board of directors by 2020 – this is something that we believe must happen. In addition to the benefits it would have on the economy (many studies have shown that gender-diverse boards outperform male-only boards), boards at the top level could benefit greatly from the diversification, unique skill sets and refreshing leadership styles that women bring with them.

By their very nature, women are natural opportunity experts, able to breathe life into their ideas and inspire others to do the same. Women are great at cultivating strong relationships and thrive on facilitating connections between people. Women are also natural givers, with twice as many women running social enterprises as opposed to leading small businesses.

Now is the perfect time to think about how we – the government, business leaders, and women – can help unlock the full potential of women and ensure we put an end to an unfair state of inequality that does us all a disservice.

 

‘Harnessing the Power of the Purse’ research – what women want from their financial adviser

We were approached by the Centre of Innovation (http://www.talentinnovation.org/) a few months ago who were conducting some fascinating research into what women wanted from their financial advisers – titled ‘Harnessing the Power of the Purse’ and presented in parliament in May.

As a female-focused financial advisory business, they were interested in our extensive experience of advising women on wealth. And of course being the collaborative, open business we are – we were happy to help. Before the launch, we were asked if we would connect the researcher with a couple of our clients, as the research seemed to be highlighting that the Addidi way of doing business met many of the key needs of the female consumer as identified by the research. We were more than happy to do so.

It was truly heart-warming to have one of our clients quoted and featured at the research launch event at the Houses of Parliament on 22ndMay. So what are the key findings of this report, and what is it that Addidi doing that is so cutting-edge?

Key UK findings:

  • Much female wealth is unmanaged; 56% of those surveyed did not have a financial adviser.
  • Many women do not feel their adviser either understands them or is interested in them; 73% did not feel their adviser understands them, whilst 87% felt their adviser was not interested in them.

 

Women define wealth differently to men. Whilst investment performance is also important for women, 77% of women across the globe say “making a positive impact on society” is important to them too.

So what are women looking for from their advisers, and what is Addidi providing along those lines? They want advisers who:

  1. understand them
  2. create a safe space for them
  3. educate them
  4. help them align their investment and life goals

 

Addidi is quoted as creating the following for women: “a room of their own to manage their wealth and feed their soul”.

Whilst we may talk numbers (after all we wouldn’t be great financial advisers if we didn’t!), our position will always be centred round mutuality, inclusiveness, inspiration, and a nurturing disposition. We add value where it matters, and in the process feed our own soul too.

Check out the findings for yourself at: http://www.talentinnovation.org/assets/HarnessingThePowerOfThePurse_Infographic-CTI.pdf

Like to know more about how we work? We’d love to hear from you.