Capital Markets Corporate

October 9, 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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UK mortgage approvals at 12-year high as house prices keep rising
Mortgage applications in the UK have surged to a 12-year high according to Halifax, as house prices rose at the fastest annual pace since mid-2016. Halifax attributes the rise in applications to the greater demand for space following more people working from home during the Covid-19 pandemic. It added that the average price of a home rose by 1.6% to £249,870 in September from August, pushing the annual growth rate to 7.3%, the fastest since June 2016. (From The Guardian, 7 October 2020)

Coronavirus hits LBO funds’ global performance
Research group eFront has revealed research finding that leveraged buyout returns (LBO) are starting to deteriorate as the coronavirus crisis advances. In the first two quarters of 2020, LBO funds across the world delivered an average multiple of 1.36x on invested capital, a decrease from 1.45x recorded in late 2019. This follows a decade-strong performance, and sees levels returning to those last seen in 2014. (From Private Equity News, 6 October 2020)

Growing appetite for income fuels trust launch boom
Rapidly growing appetite for income among investors in a contracting dividend environment is fuelling a surge in investment trust launches. Despite just one trust launching at the beginning of 2020, several were recently formed as fund managers seek to capitalise on low company valuations, while investors are still willing to allocate their capital in equities. Trusts are popular with income investors for their ability to use cash reserves when dividend pay outs fall and provide a reliable income stream. Their closed-ended structure means they can hold illiquid assets and unlisted companies without fear of a sell-off. (From the FT, 1 October 2020)

Number of cash machines and bank branches lower in deprived areas
The number of cash machines and physical bank branches are lower in poorer and rural areas of the UK, according to the Financial Conduct Authority in collaboration with the University of Bristol and the Payment Systems Regulator. The lack of access to core in-person financial services highlights how parts of the country could be left behind as the UK rapidly switches to a cashless society. Deprived areas often have a higher concentration of elderly people who still use cash regularly and rely on physical bank branches to manage their finances. (From The Times, 3 October 2020)

FCA launches 85 cases amid mounting scrutiny on pension scams
The Financial Conduct Authority watchdog is investigating 85 cases for possible pension scams, with six firms agreeing to change their permissions to date. The high number of investigations has been partly driven by the City regulator cracking down on possible scams being carried out on defined benefit transfers, especially by overseas advisers. Scams are often facilitated by a UK-based firm giving transfer advice to a client, and then an overseas firm advising on where the funds could be allocated if they proceeded with a transfer. (From FT Adviser, 6 October 2020)

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