Our Weekly Newsletter
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.
Equity release values fall as borrower numbers rise
A report published by equity release adviser Key reveals that over-55s are borrowing lower sums through equity release, despite how the number of customers taking out loans increased in Q1 2020 compared to the same time last year. The advisory firm partly attributes the change to the rise in sales of drawdown plans, which sees people borrow an initial lump sum with the option to withdraw further sums later on. According to Will Hale, CEO at Key, people are withdrawing lower amounts and using more drawdown products to mitigate the impact of roll-up interest and protect their later life finances. (From FT Adviser, 26 May 2020)
UK’s largest pension scheme hoards cash
Nest, the UK’s largest pension fund, has stockpiled cash reserves in anticipation of continued market uncertainty as the world struggles to get back on track amid the current economic fallout. The pension scheme, which has 9 million members, has increased its allocation to cash in its main investment funds from its usual 1-2% to 5%. According to the fund’s CIO Mark Fawcett, there are a “bunch of risks the market seems to be feeling fairly benign about”, including the possibility of a second wave of outbreaks and the spread of the pandemic in emerging markets. (From Financial Times, 23 May 2020)
Nearly a year after the Woodford debacle, where are the fund stars of tomorrow?
In light of the upcoming anniversary of Woodford Equity Income fund’s suspension after the fund held many near-valueless unquoted stocks and lost the savings of thousands, the Daily Mail has explored whether trust still exists towards rising managers in the sector. Groups like Jupiter have shifted their emphasis towards the strength of their teams, although the named manager is still responsible for the selection of stocks. The piece goes on to signpost Nick Train of Lindsell Train and Terry Smith of Fundsmith, whose recent stewardship of their funds seems to have confirmed their reputations as two of the biggest names currently operating. (From Daily Mail, 24th May 2020).
Coronavirus to force people to retire later and work for longer
Even before the pandemic, one in seven people aged 65 or over were still working, with more than half of them working full time or self-employed, according to a new study published by insurer Sunlife. Experts warn individuals may be forced to retire later and work for longer to recover the severe drop in incomes and the value of pension pots as a result of coronavirus. The research also indicates many pensioners may have been facing a dramatic shortfall in their retirement finances even before the pandemic, with 31% of over 65s worried their retirement income would struggle to cover their living costs. (From Money Observer, 26th May 2020).
UK asset managers plan to ramp up private market activity
More than half of the UK’s asset managers are planning to launch new funds focused on private investments such as private equity, infrastructure and private lending this year. Reduced activity from asset managers in public markets is in part a reaction to low-cost index-trackers increasing their share. Retail investors are allocating greater proportions of their capital with passive, index-linked funds and are increasingly utilising fund supermarket platforms as their main vehicle to generate returns, removing the need to employ fund managers to manage their portfolios. Index-linked funds can reduce risk by spreading investments across several sectors and have often outperformed active funds in recent years. (From Private Equity News, 27th May 2020).