Capital Markets Corporate

July 3, 2020

Our Weekly Newsletter

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Across Instinctif Partners’ Financial Services team, we are always keeping an eye on the key developments taking place across the sector to evaluate their impact on the many businesses we work with. Here we share our picks of the week’s most interesting news, and our expert views.

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The increasing popularity of active ETF funds
More actively managed ETFs have been launched in the US this year than index trackers, with 42 active ETFs listed as of June 4 in comparison to just 35 index funds. While still early days, signs suggest that more active funds will continue to come to the market. Some will be provided by ETF issuers and others will be from mutual fund managers looking to migrate to ETFs. One shift that helped cause the rise in active ETF popularity is the Security and Exchange Commission approving models that allow active managers to list ETFs that shield their portfolios or are “non-transparent”. (From Financial Times, 28 June 2020)

UK home loans fall 90% since the start of the pandemic
The number of new home loans approved in the UK has declined by 90% since the start of the pandemic, marking its lowest fall since the early 1990s, according to the Bank of England. The bank’s monthly update on the property market revealed that mortgage approvals fell from 15,900 to 9,300 in April, despite the reopening of estate agents in May. Similarly, the number of home loans fell below the 25,000 approvals predicted by financial markets in May. This is in stark contrast to the beginning of this year, where over 70,000 new loans were approved each month. (From The Guardian, 29 June 2020)

How tech and gold funds shone brightly during crisis with returns of over 50% since January
According to new data from Chelsea Financial Services, gold investment funds have had some of the best performers during the pandemic. It is highlighted that the Ruffer Gold Fund has returned savers 53.5% of their money since 1st January, and that MFM Junior Gold and ES Gold and Precious Metals have made investors more money than any other fund since late March. The findings also indicated that tech firms have been largely unaffected by the coronavirus pandemic, with video conferencing platforms such as Zoom faring well due to the increase in remote working. (From Daily Mail, 30 June 2020)

Coronavirus: People saving more but get little in return
At a time when many have been saving, Moneyfacts has found that interest paid on variable easy access savings accounts has fallen faster in the first half of the year than in the first half of any year since 2009. The article notes that this will frustrate the increased number of those saving during the Covid-19 lockdown; UK households saved 8.6% of their disposable income in the first three months of the year, up from 5.4% during the same period last year, according to ONS. Moneyfacts comments that “savers will be in for a shock to find the first six months of 2020 have been the worst for rate cuts in over a decade”, adding that it demonstrates the significant impact of Covid-19 on the market. (From BBC News, 30 June 2020)

Advisers to face intense scrutiny over DB transfers from FCA
The FCA is preparing to issue another questionnaire to every firm involved in providing defined benefit (DB) transfer advice. Nearly 2,000 firms will receive the regulator’s letter and will have 30 days to respond. The new questionnaire follows a major investigation conducted by the FCA into the standard of DB transfer advice in September 2018. Responses provided in the previous questionnaire helped inform the regulator’s recent decision to ban contingent charging, a process in which advisers are paid after their client has transferred their DB scheme. (From Money Marketing, 30 June 2020).

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