Nick Robinson Message from Westminster
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ISSUE 6 9 INV ES TM E N T N E W S F O R C L IE NT S OF ST. JAM ES ’ S P L A C E WE A LT H M ANAG E M E N T S P R I N G 2 0 1 1 NICK ROBINSON MESSAGE FROM WESTMINSTER 01 cover.indd 1 30/03/2011 14:58 02 | The Investor TheThe Investor Investor | |07 03 C ONTENTS Welcome Welcome to the latest edition of The Investor. Politics is something of a dominant theme in this issue. The Budget, at least partly a political event, is now behind us and we report on some of its 08 10 ramifications. As the new government approaches its first anniversary, we asked Ian Cowie, head of personal finance at The Daily Telegraph, to give us 04 It’s in the Diary... 12 The Interview his scorecard on how the coalition has served savers and investors so far. A day in the life of a fund manager Nick Robinson on changing times Our regular feature, The Interview, profiles the BBC’s political editor, 05 Investor News in the world of Westminster Nick Robinson, who tells us how the mood has changed at Westminster. Recovery in Japan; small caps 14 The Budget 06 Analysis How George Osborne is giving It has already been a turbulent year for markets, with the distressing events How the coalition government’s a boost to UK business in Japan and no less dramatic events in the Middle East. We reflect on the first year has affected taxpayers 16 Looking Ahead impact on the global economy and investor prospects as a result of these 08 My Money Why retirement will look a lot history-changing developments. Douglas Rae on his passion different in the future for producing films 17 Fund Update Many individuals’ investments are focused on retirement. But as longevity 10 Why Should I Care About… Your guide to the performance and restrictions on tax relief complicate the pensions landscape, we ask ...Middle Eastern markets? of St. James’s Place funds what retirement may mean in the future. 11 The Issue ETTY G The return of inflation? 14 I do hope there will be lots here to interest you. If you have any queries, please do not hesitate to contact your St. James’s Place Partner. 06 12 STOCKPHOTO/DREAMSTIME/ i MICHAEL CLEMENT/ THIS PAGE: Sir Mark Weinberg Chairman, Investment Committee, St. James’s Place Wealth Management FRANK BARRON/GUARDIAN NEWS & MEDIA LTD. NEWS & MEDIA LTD. FRANK BARRON/GUARDIAN 10 COVER IMAGE: COVER For further information on any of the articles in this issue of The Investor, please contact your St. James’s Place Partner 02 Sir Mark's letter.indd 2 01/04/2011 14:22 03_contents.indd 1 13/04/2011 10:01 04 | The Investor The Investor | 05 IT’S IN THE DIARY... A TYPICAL WORKING DAY IN THE LIFE OF A ST. JAMES’S PLACE FUND MANAGER INVESTOR NEWS Peg McGetrick In wondering what might happen next, comparisons Liberty Square Asset Management have been made with the Kobe earthquake of 1995, then Japan’s worst for nearly 50 years. The post-Kobe period saw a particularly sharp rise in the yen, and the economy followed what is now regarded as a textbook natural-disaster pattern. First came a significant jolt to growth, with the destruction The first thing I do is check in with the office Claire Walton and I head out for lunch. of productive capacity and impediments to normal activity – 06h30 from home. We have a 24-hour desk and our 12h30 Claire is our CFO/COO and, along with loss of power and water, for example. Quite rapidly, however, traders update me on any news relevant to our holdings and Tom Neidermeyer, we co-founded Liberty Square the reconstruction process generated higher economic to companies we are monitoring on our watch lists. I log on Asset Management. growth, helped by injections of liquidity from the central to our network and skim a flood of emails. Reading the bank. And that’s what many economists believe will happen subject lines I get a sense of the day’s top news stories and Back to the office and I log in to our this time around, particularly as the central bank has been how earnings announcements have been going. I pull up the 13h30 in-house research library and bring quicker to act. The general consensus is for a V-shaped FT, Wall Street Journal and New York Times online. I log on to up our latest model on Inchcape, a multinational car aftermath, with a sharp fall in GDP growth in the quarter Bloomberg and check stock prices, news reports, our watch sales and distribution company. We own this stock Regaining ground following the disasters, followed by a rebound as rebuilding lists, currency movements and commodities. and meet with its management frequently. Today begins. Schroders, for example, has lowered its 2011 forecast their CEO and finance director are coming through As Japan recovers from disaster, its rebuilding for Japanese GDP growth from 1.2% to 0.8%, but raised its 08h30 I travel to the office, reviewing the research Boston to see current and prospective shareholders. effort will encourage economic growth figure for 2012 from 2% to 2.4%. and company reports I packed last night to I review our notes from previous meetings, go over Schroders’ chief economist Keith Wade points out that prepare for the day’s meetings. We research every company recent corporate announcements on their website this view depends on matters not getting worse at the badly we meet with, whether we own it or not. Meeting with and read the latest sell-side analyst reports on he anguished reaction of some of those blighted damaged Fukushima nuclear power plant. ‘An escalation in management is a key part of our process and the investment the company. in quick succession by earthquake, tidal wave the nuclear crisis would deepen the downturn, as people stay team sees hundreds of businesses every year both in Boston and nuclear radiation was ‘What have we done?’, indoors rather than go out spending, and delay the recovery as (where Liberty Square is based) and at the companies’ own The management team arrives and and it’s hard to blame them. Just as Japan concerns about radiation hamper rebuilding,’ he says, adding sites. Non-US company managements come through Boston 14h30 Ruth joins us by conference call from Tseemed to be getting back on its feet after two stagnant that widespread power cuts would also slow the upturn. continuously as the city is home to many large equity funds London. We find the update informative and upbeat. decades, it has been cruelly knocked into reverse. This The impact on the rest of the world and on Asia is likely to be with international/global investment strategies. I add to our position. has been a human tragedy on a vast scale. Even so, many less marked than Kobe. Japan’s share of global GDP has shrunk commentators believe that the Japanese economy will, considerably since then, from the mid to high teens to less than Liberty Square is buzzing when I arrive and I meet with a sell-side retail analyst. with some initial discomfort, absorb the shock. 10%. Its share of exports from other Asian countries has also 09h30 take my seat on the trading desk. The US 15h30 He has an excellent track record and The early response from investors in the days after the fallen. But the international insurance sector will feel a direct market opens. Our traders sit across from me and we pick a long history with the sector. We discuss our recent earthquake was to slash more than 10% from Japan’s main impact. One estimate sets the potential insured loss at up to up discussions where we left off. I decamp to my office and management meeting with Debenhams, our view of stock market indices, though these have now started to $35bn. While most of that is insured domestically, much of the resume my focus on emails and company announcements. the sector and his current recommendations. climb back upwards. risk will have been passed on to reinsurers around the world. The effect on the yen was equally dramatic. It strengthened There may even be a silver lining for Japan. The country Our weekly analyst call begins and the I’ve been invited to join a small group to a record high against the US dollar in anticipation of mass has been suffering from deflation since the early 1990s. 10h30 investment team gathers around the 16h30 of Boston-based fund managers to repatriation of Japanese-owned foreign assets – requiring The demands of rebuilding entire towns may well drive up conference table. Our senior analyst, Ruth Jaksic, calls from participate in a discussion with a representative from foreign currencies to be sold and therefore yen to be bought Japanese prices and reignite inflation in the short term. If London. Each week we begin with a review of our latest Oxfam. Legislation has recently been proposed that will in large quantities. After generous intervention by G7 central that was to change longer-term inflation expectations – the quantitative screens and see what new patterns are require all oil, gas and mining companies to disclose what banks, the yen has subsequently started to retrace its steps, assumed inflation rate that people and businesses factor into emerging. Today we note that the ‘quality’ screens are they pay to government officials.