Blevins Franks Financial Tips - The Multi-Manager Investment Approach – Specialists vs Generalists

Multi-manager investment enables your portfolio to be managed by several different fund managers, each selected for their expertise in specific market sectors. This ‘open architecture’ approach reduces your reliance on any one investment manager making the right decisions in all conditions, and provides the opportunity to have some of the world’s best mangers looking after your money.

By Rob Kay, Senior Partner, Blevins Franks
Did you see the athletics at the Commonwealth Games in Birmingham this summer? Or at the World or European Championships? And of course we had the Tokyo Olympics last year. It was great to see British success emerging with the likes of Jake Wightman, Keely Hodgkinson, Laura Muir and Eilish McColgan, but interestingly, there are some aspects of what you may have seen that are directly relevant to investing.

Specialists vs generalists – a sporting analogy

A useful way to explain the benefits of a multi-manager investment approach is to compare the difference in performance between a decathlon champion and the individual champion in each event. 

You may have watched the athletics at the Commonwealth Games or European Championships and marvelled at the decathletes’ abilities. They have to be skilled at 10 different disciplines, quite a Herculean task – speed for sprinting, stamina for distance, strength for the field events and technique for events like the pole vault. 

But while the decathlon champion is obviously an all-round athlete performing at an extremely high standard across ten different disciplines, they are frequently beaten by specialists in each of the individual events.

Let’s compare the performance of the decathlon gold medallist at the 2020 Tokyo Olympics (held in 2021) against the individual gold medallists in some of the individual disciplines.

The decathlon champion Damian Warner ran the 100m in 10.12 seconds.  Lamont Marcell Jacobs took just 9.80 seconds in the individual event. The results of the other nine disciplines tell the same story.  For example, Warner threw the javelin 63.44m, while the individual event gold medallist achieved 87.58m.  Warner reached a height of 4.90m in the pole vault compared to the individual champion’s 6.02m.  The specialist performed better than the generalist every time. 

You would not expect a sprinter like Lamont Marcell Jacobs or Usain Bolt to also specialise in pole vault or javelin; specialists tend to be just that – specialists.  There are many situations in life where a specialist performs more efficiently and delivers better results than a generalist, and this is particularly true in investments.

Just because an investment manager is skilled at managing UK equities, for example, does not mean he will be as successful at managing US or Japanese equities.  Managers also tend to specialise in a certain style of investing, and these styles move in and out of favour according to economic and other factors.  They will therefore produce impressive results in certain conditions, but below average ones in others.

Some investors rely on just one or two fund managers to look after their investment capital. But wouldn’t you prefer to have individual specialists managing the various areas of the market your capital is invested in?

Multi-manager investing

Today most investors agree that holding different asset classes and different regions and sectors in their portfolio spreads risk.  Multi-manager funds add a third, and increasingly important, level of diversification to your portfolio. 

You will benefit from a team of specialist managers, as well as diversification across multiple investment styles within each fund, with different managers looking after one style. So one fund could have five or more specialist managers, covering a variety of styles (growth, value, quality, risk management, market oriented etc).

This complementary blending of managers and styles can reduce investment risk, regardless of what style is in favour, and help provide more consistent returns through different market environments.

Just like a strained muscle would hamper the decathlete in all his events, if prevailing market conditions are unfavourable to a single manager’s investment approach, performance may suffer.  Multi-manager spreads risk as it lowers the investor’s dependence on the success of a single manager’s approach.  

Going back to the sporting analogy, in the world of athletics individual champions can easily change from year to year.  The same can happen with investment managers, but the multi-manager firm’s research is designed to find the next champions.  They constantly monitor their funds, so that managers can be changed as and when necessary to improve performance for clients.

Multi-manager investing is not designed to attempt to win a gold medal in just one particular season.  Rather, it aims to produce consistent results, season by season, over a long-term period. 

This investment approach can prove suitable for various investors with different needs.  However, you should always discuss your requirements with a professional financial adviser, as your investment strategy should be targeted to meet your personal objectives.  At Blevins Franks, we combine investment advice with effective tax and estate planning strategies, to maximise wealth preservation opportunities.

These views are put forward for consideration purposes only as the suitability of any investment is dependent on the investment objectives, time horizon and attitude to risk of the investor. The value of investments can fall as well as rise, as can the income arising from them. Past performance should not be seen as an indication of future performance.

Blevins Franks Group is represented in France by the following companies:  Blevins Franks Wealth Management Limited (BFWML) and Blevins Franks France SASU (BFF). BFWML is authorised and regulated by the Malta Financial Services Authority, registered number C 92917. Authorised to conduct investment services under the Investment Services Act and authorised to carry out insurance intermediary activities under the Insurance Distribution Act. Where advice is provided outside of Malta via the Insurance Distribution Directive or the Markets in Financial Instruments Directive II, the applicable regulatory system differs in some respects from that of Malta. BFWML also provides taxation advice; its tax advisers are fully qualified tax specialists.  Blevins Franks France SASU (BFF), is registered with ORIAS, registered number 07 027 475, and authorised as ‘Conseil en Investissements Financiers’ and ‘Courtiers d’Assurance’ Category B (register can be consulted on www.orias.fr). Member of ANACOFI-CIF. BFF’s registered office: 1 rue Pablo Neruda, 33140 Villenave d’Ornon – RCS BX 498 800 465 APE 6622Z.  Garantie Financière et Assurance de Responsabilité Civile Professionnelle conformes aux articles L 541-3 du Code Monétaire et Financier and L512-6 and 512-7 du Code des Assurances (assureur MMA). Blevins Franks Trustees Limited is authorised and regulated by the Malta Financial Services Authority for the administration of retirement schemes. This promotion has been approved and issued by BFWML. 

 You can find other financial advisory articles by visiting our website here

Blevins Frank Financial Tips - Inflation Concerns Today and Planning for the Future

Inflation is causing concern in across the EU and in the UK. It has been climbing steadily since last summer, hitting over 8% in the Euro area in June and July and expected to climb to 13% in the UK. Even low levels impact your spending power over time, so take steps now to protect your savings and retirement income for your long-term future.

Inflation has been a major news story this year, but we don’t need to read news reports to know the cost of living is going up, we’re only too aware with our weekly shops and electricity bills.

This follows 10 years of benign, easy to ignore inflation, but in fact we were not immune from it then. It is always there, slowly eroding the spending power of the Euro in our pocket and we should always be vigilant about how it impacts our financial security through retirement.

Although this inflation surge is lasting considerably longer than first anticipated, and is likely to get worse before it gets better, it is not still not expected to be long-term. But hopefully people will view it as an eye opener and take this long-term threat more seriously now.  We cannot predict what inflation will be in ten or twenty-years’ time, but we do know that even low levels can seriously reduce your spending power over time if your money does not grow at the same rate.

The Eurozone

The Harmonised Index of Consumer Prices (HICP) was 2.2% in July 2021. This July it hit 8.9%, another record for the single currency.

French consumer prices, as measured by the local Consumer Price Index (CPI) reached 6.1% in July, up from June’s 5.8%.  The acceleration of service prices linked to the summer period has contributed to the increase, as have food prices. Energy prices, however, slowed.

The UK
In the UK, the Consumer Price Index reached 10.1% in July, up from 9.4% the previous month. The July figure was the highest annual CPI inflation rate in the National Statistic series, which began in January 1997. Rising food prices made the largest upward contribution.

Will inflation remain high?

When prices began rising last summer, that was largely caused by the ‘base effect’ (inflation the previous year had been unusually low in the pandemic) and supply difficulties as economies exited from lockdowns. However, the crisis in Ukraine then exacerbated the issues, particularly with energy prices escalating though uncertainty about supply chains has also pushed prices up.

In July, the European Commission revised its Eurozone 2022 inflation forecast upwards, from 6.1% for the year to 7.6% – peaking at 8.4% in the third quarter. It will then ease to 4% for 2023 as a whole, falling below 3% in the last three months of the year.

Its Summer Economic Forecast explains:

“Russia's invasion of Ukraine has put additional upward pressures on energy and food commodity prices. These are feeding global inflationary pressures, eroding the purchasing power of households and triggering a faster monetary policy response than previously assumed.”

In the UK, the Bank of England has issued bleaker forecasts. On 4 August it warned that it now predicts inflation to hit 13% in the last quarter of the year, and that it will “remain at very elevated levels throughout much of 2023, before falling to the 2% target two years ahead”.

In response to inflation, the Bank of England has raised its interest rate six consecutive times since December 2021. At its latest Monetary Policy Meeting on 3 August, the committee voted 8-1 to increase the bank rate by 0.5 percentage points, to 1.75%. This is the highest since December 2008 – but still a long way below inflation.  

Inflation and your savings and retirement income

No-one is immune from inflation.  We all need to plan to protect our savings and future income from the rising cost of living. Making sure your money lasts as long as we do should be an integral part of our financial planning for retirement.

If you’re retiring now at age 60, you need to plan for over 30 years of retirement. Unless your savings grow each year, they will buy you considerably less as the years go by.  

As a basic illustration, if you have €50,000 in a current account with no growth, and inflation is 3% every year, after 10 years its value will have fallen to around €37,000. After 20 years it’s around €27,500 and after 30 just €20,555.  That’s a 59% reduction in purchasing power.

 You therefore need to invest in assets that can be expected to produce enough growth to at least keep up with inflation.  As we know from the last decade, bank interest rates cannot be expected to do this – in fact, many savers have been earning negative real rates of return.

While you may become more averse to investment risk in retirement, remember that inflation is also a big risk to your savings. You can reduce investment risk to comfortable levels by obtaining an objective calculation of your attitude to risk, then building a suitable well-diversified portfolio around your risk tolerance, time horizon, circumstances and objectives.

Holding your investment portfolio within an arrangement that is tax efficient in your country of residence helps protect your capital from unnecessary taxation as well as inflation. Review your financial planning annually to have peace of mind about your future, then get back to enjoying your retirement years.

HICP/CPI inflation data is at 25 August 2022.
By Rob Kay, Senior Partner, Blevins Franks

Blevins Franks Group is represented in France by the following companies:  Blevins Franks Wealth Management Limited (BFWML) and Blevins Franks France SASU (BFF). BFWML is authorised and regulated by the Malta Financial Services Authority, registered number C 92917. Authorised to conduct investment services under the Investment Services Act and authorised to carry out insurance intermediary activities under the Insurance Distribution Act. Where advice is provided outside of Malta via the Insurance Distribution Directive or the Markets in Financial Instruments Directive II, the applicable regulatory system differs in some respects from that of Malta. BFWML also provides taxation advice; its tax advisers are fully qualified tax specialists.  Blevins Franks France SASU (BFF), is registered with ORIAS, registered number 07 027 475, and authorised as ‘Conseil en Investissements Financiers’ and ‘Courtiers d’Assurance’ Category B (register can be consulted on www.orias.fr). Member of ANACOFI-CIF. BFF’s registered office: 1 rue Pablo Neruda, 33140 Villenave d’Ornon – RCS BX 498 800 465 APE 6622Z.  Garantie Financière et Assurance de Responsabilité Civile Professionnelle conformes aux articles L 541-3 du Code Monétaire et Financier and L512-6 and 512-7 du Code des Assurances (assureur MMA). Blevins Franks Trustees Limited is authorised and regulated by the Malta Financial Services Authority for the administration of retirement schemes. This promotion has been approved and issued by BFWML. 

You can find other financial advisory articles by visiting our website here

Blevins Franks Financial Tips - Is it Time to Consider Downsizing your Home?

There are various financial benefits to moving to a smaller property. With careful planning you could unlock retirement funds and potentially tax-efficient income, while still leaving your family and heirs a lasting legacy. France offers fantastic property opportunities in outstanding surroundings, so it is unsurprising that many Britons choose to retire to their own place on the Riviera.

Whether you buy your main home here or just for somewhere to holiday, property may be your biggest asset, with the potential to provide a substantial return on your initial investment over time. For many, their home is also a legacy to help secure the financial future of children and other heirs.

However, there are risks in relying on bricks and mortar for your wealth. After all, you cannot fully realise the financial benefits of a property while you are still living in it. Compared to other investments, property can also prove very costly to maintain.

Size does matter

Generally, the larger the property, the more expensive the running costs. Mortgage payments, rates, utility bills, plus building and maintenance expenses can all add up to generate a relatively high ongoing burden. If you are retired with a reduced or limited income, this can be especially draining on your resources, particularly if you own more than one property.

Affording retirement

With today’s increased life expectancy, you may need your existing wealth to stretch to ten, twenty, or even thirty plus years in retirement. Are your pensions, savings and investments on track to sustain the lifestyle you want for as long as you need? Are they structured to protect you from long-term inflation and provide the increased income you may need in the future as the cost of living rises?

Many people find themselves in an ‘asset rich, cash poor’ situation, owning considerable physical wealth such as property but with substantially less disposable income. Expatriates in particular tend to hold on to UK property in addition to their French home.

While property can be a solid investment, it locks your money away in a highly illiquid way. If you want access to your capital, you may not be able to sell easily, nor for the right price. Also, there is risk in tying your funds up in one asset class – if the value of property drops, so does your investment. 

Property offers potential leveraging opportunities – such as freeing up cash through equity release if this is available – but like any debt arrangement, this comes with costs and risks. For retirees looking to shed debt and leave something behind for children and grandchildren, more borrowing is not the answer.

Benefits of reinvesting your capital

Downsizing property can help increase your accessible wealth, but it needn’t be a compromise when it comes to investment growth. By reinvesting in suitable investment funds, for example, you can still invest in real estate but alongside other assets (equities, bonds etc.) to reduce risk through diversification. And, unlike immoveable property, if you require small amounts of cash you can just sell the amount you need, not the whole investment.

A specialist adviser can help you explore investment arrangements that suit your particular circumstances, goals and risk appetite while being tax-efficient for France. You could also unlock other benefits that property cannot offer, such as a regular income and currency flexibility.

When it comes to estate planning too, there are more opportunities to reduce succession tax for your heirs on investment capital than with real estate.

Reducing taxation

Wherever your home is, charges such as stamp duty and capital gains tax generally increase with the property’s price tag. Higher-value homes can also tip you over the threshold for wealth tax, where applicable, as well as increasing the inheritance tax bill for your heirs.

In France, owning real estate assets worth over €1.3 million attracts annual wealth taxes of between 0.5% and 1.5% (over an €800,000 allowance). For French residents, this applies to worldwide real estate, including UK property.   Since 2018, wealth tax no longer applies to capital investments, which is a considerable tax advantage over property.  

Wealth tax rates seem relatively low, but when applied to property values this can add thousands to your tax bill. By reducing the amount of tax payable, you can make your money go further in your lifetime and maximise the value of your legacy.

Ultimately, while you want to make sure your family are looked after when you are gone, do not forget your own needs. Take personalised, cross-border advice to establish an investment and estate planning strategy that can secure a secure retirement for you in France today and a lasting legacy for future heirs.

Tax rates, scope and reliefs may change. Any statements concerning taxation are based upon our understanding of current taxation laws and practices which are subject to change. Tax information has been summarised; individuals should seek personalised advice.

Blevins Franks Group is represented in France by the following companies:  Blevins Franks Wealth Management Limited (BFWML) and Blevins Franks France SASU (BFF). BFWML is authorised and regulated by the Malta Financial Services Authority, registered number C 92917. Authorised to conduct investment services under the Investment Services Act and authorised to carry out insurance intermediary activities under the Insurance Distribution Act. Where advice is provided outside of Malta via the Insurance Distribution Directive or the Markets in Financial Instruments Directive II, the applicable regulatory system differs in some respects from that of Malta. BFWML also provides taxation advice; its tax advisers are fully qualified tax specialists.  Blevins Franks France SASU (BFF), is registered with ORIAS, registered number 07 027 475, and authorised as ‘Conseil en Investissements Financiers’ and ‘Courtiers d’Assurance’ Category B (register can be consulted on www.orias.fr). Member of ANACOFI-CIF. BFF’s registered office: 1 rue Pablo Neruda, 33140 Villenave d’Ornon – RCS BX 498 800 465 APE 6622Z.  Garantie Financière et Assurance de Responsabilité Civile Professionnelle conformes aux articles L 541-3 du Code Monétaire et Financier and L512-6 and 512-7 du Code des Assurances (assureur MMA). Blevins Franks Trustees Limited is authorised and regulated by the Malta Financial Services Authority for the administration of retirement schemes. This promotion has been approved and issued by BFWML. 

You can find other financial advisory articles by visiting our website here .