Author Archives: Fish Saltus

Investors Return to Europe as Forgotten Continent Shines


Until recently, investors might have been forgiven for shunning European equities. But the past few months have seen the outlook brighten, forcing many to rethink their allocations. Political risks are receding, consumer confidence is back and manufacturers – not withstanding some Brexit-related concerns – are voicing optimism about exports. Add to this some attractive valuations and the potential for pro-growth reform agendas in France and elsewhere, and Europe looks poised to outperform the US says Dean Tenerelli, portfolio manager of the T. Rowe Price Funds OEIC – Continental European Equity Fund.

‘European performance is reflecting these positive developments,’ Tenerelli notes. ‘After continued disappointment for several years, European earnings still remain appreciably below the level achieved a decade ago. Key factors have been sluggish economic growth both within Europe but also more broadly a collapse in commodity prices and the structural erosion of financials’ earnings.’

Tenerelli says many of these headwinds have become tailwinds, and European earnings should comfortably advance at a double digit clip this year. Despite this improving environment, however, Tenerelli is quick to underline the importance of being selective and employing a bottom-up framework.

‘Fundamental, stock-specific research is important to identifying opportunities in today’s markets,’ he says. ‘Applying an intense focus on meetings with companies and seeking to understand which might be able to generate attractive long-term future returns is key,’ he adds. ‘You really need to look beyond where the current market consensus is concentrated.’

One sector that has been overlooked by many investors is telecoms. Although the industry continues to face headwinds such as regulation and competition, Tenerelli has found interesting investment cases in several countries, including the UK, Germany and Sweden, such that it is the fund’s largest overweight at the end of June.

‘We believe valuations do not reflect improving industry fundamentals,’ Tenerelli says. ‘Entities with strong local market positions and well-invested networks are benefitting from the consumers’ exploding appetite for data and the convergence between telephony (mobile and fixed), broadband and broadcasting.’

Meanwhile, European financials are the largest sector allocation in the fund, at a little over 20% of the fund to the end of June this year. Higher interest rates are widely expected at some point and will improve the headline profitability of banks, some of which are still trading at attractive valuations. What’s more, US credit growth has slowed notably in recent months, while Eurozone bank lending is ramping up.

Tenerelli adds that certain markets are likely to see further consolidation, which should aid the pricing environment. ‘In Italy, bank restructuring is underway. But we continue to be very focused on those companies with strong levels of capital, good returns and that are trading at attractive valuations,’ he says.

The veteran fund manager has a preference for lenders that he believes are solid, liquid and well-managed, with France’s BNP Paribas, Nordea bank – the largest financial services provider in the Nordic region – and Dutch bank ABN Amro all stalwarts of the fund. Tenerelli also recently added Spain’s CaixaBank, which he considers a well-managed bank with a strong and growing market share, especially in Catalonia.

As investors’ moods have swung more optimistically, certain corners of the market – especially cyclicals – are offering fewer attractions at the headline level, Tenerelli says. However, even here there are any number of stock-specific stories. ‘Investors may be overlooking the potential where a company may be adjusting its business model, or where we have identified that its end-markets are likely to develop differently to how the consensus currently expects.’

‘For example, we have invested in the Spanish company Cellnex, which is establishing a leading position in the management of mobile towers, with the potential that we believe is not appreciated by the market.’

Tenerelli remains committed to his approach, with a strong focus on good returns and valuation when looking across the broad European landscape. ‘Looking across the style and market capitalisation spectrums, I continue to be heartened by the opportunities we can identify in Europe.’

This bottom-up, sometimes contrarian framework continues to serve Tenerelli well. Year-to-date, the fund has returned 15.58% versus 12.73% for the FTSE All World Developed Europe ex-UK Index1. The firm’s longer running T. Rowe Price Funds SICAV – Continental European Equity Fund, also managed by Tenerelli, has beaten the same index over five years, generating an annualised return of 14.93% versus 13.92% for the index2.

1Data shown is net of fees in GBP terms to 30 June 2017. Inception date 26 September 2016.

2Data shown is for the I share class, net of fees in EUR terms to 30 June 2017.
Past performance is not a reliable indicator of future performance.

Fund performance is calculated using the official NAV with dividends reinvested, if any. The value of the investment will vary and is not guaranteed. It will be affected by changes in the exchange rate between the base currency of the fund and the subscription currency, if different. Sales charges, taxes and other locally applied costs have not been deducted and if applicable, they will reduce the performance figures

Wise Financial Solutions announces new partnership

Farnham accountants Wise & Co have announced a new partnership to give their growing client list access to valuable business and personal financial advice. Joining with neighbours Fish Saltus , the partnership will trade as Wise Financial Solutions.

“Fish Saltusis a well-respected firm of independent financial advisers, whose belief in consistent and proactive engagement with clients mirrors our own,” said Sharmini Woodings, Managing Partner at Wise & Co.

“We have always been careful to select the best partners for our Wise Financial Services offering, so that we can deliver a consistently high standard of financial advice to our clients. Wise & Co clients trust and rely on our service levels and this new venture with Fish Saltusreflects our commitment to maintaining that trust.”

Wise Financial Solutions will offer Wise & Co clients a full range of services, including investment management, retirement and pension planning, and lifetime cash flow planning. They also cover business services such as corporate pension solutions and business or shareholder protection.

“We’re delighted to be working so closely with Wise & Co,” said Ian Colley, Managing Director at Fish Saltus . “They have a great reputation for the quality of advice and for their client care, which are things that really matter to us here. Tax planning and investment strategies are now so interwoven, whether for individuals or businesses. Our partnership therefore makes a lot of sense and we’re looking forward to helping the firm’s clients.”

McDonnell hints high-earner tax reform will be Labour pledge

Shadow chancellor John McDonnell has indicated Labour will make tax reform for high earners a part of its manifesto ahead of the general election in June.

Speaking this morning on BBC’s Today programme, McDonnell (pictured) said said he wants to ensure the ‘rich pay their share’ and said the tax burden has fallen too heavily on middle earners.

The shadow chancellor said Labour defined rich as earning above £70,000 a year.

‘We want a fair system of taxation to pay for our public services. I think there is a general view that middle and low earners are being hit very hard by income tax rises and the burden that is placed on them by stealth taxes. What we want is a system which is fair, so corporations and rich pay their fair share,’ he said.

McDonnell also said Labour will make a pay ratio part of its manifesto for the general election in June.

He said if elected Labour will introduce a system which means the maximum salaries of chief executives and directors are dependent on the average salary of their employees.

‘We have been arguing we will go for pay ratios in our campaign at the local elections,’ he told the BBC. ‘We have raised that we will use public procurement to secure pay ratios – a ratio in regards to the maximum that can be earned by directors and chief executives in relation to the average pay of their workers.’

McDonnell said this would not be a maximum cap, but there would be a cap depending on the salaries of the rest of the employees.

In February Labour leader Jeremy Corbyn said the party would back the introduction of a maximum wage cap. However, the party later said it would not back such a cap.

Woodford pours another £2.3m into alternative lender

Neil Woodford has snapped up more shares in alternative short-term lender, Non-Standard Finance (NSF).

According to a regulatory filing, Citywire A-rated Woodford’s (pictured) eponymous investment firm acquired a little over four million shares in NSF.

The transaction, which took place on the 12 April, lifted his firm’s total interest in the business to 75,430,933 shares, representing a 23.8% stake.

Based on a closing share price of 58p on 12 April, the value of the latest investment was £2.3 million.

Shares in the business have since risen to 59.25p, giving Woodford’s total holding a value of £44.6 million.

Woodford Investment Management has backed NSF – which operates through four divisions: Central, Loans at Home, Everyday Loans and Trusttwo – since its £100 million listing by former Provident Financial chair John van Kuffeler in February 2015.

At the time of its listing NSF said it saw a growing market in the UK for alternative finance, with 12 million people failing to meet the credit criteria of mainstream lenders.

‘Following the financial crisis a significant part of the UK’s population cannot gain access to mainstream financial services’ van Kuffeler said.

‘A number of entrepreneurial start-ups began to fill the gap in the market, but many of these firms lack the capability to reach their full potential.’

Full-year numbers released by NSF last month revealed it intends to pay a maiden dividend of 1.2p.

It also showed a huge swing into a £13.8 million profit in 2016, following a loss of £0.5 million in the previous year.



Markets: US stocks decline amid geopolitical tensions

Wall Street finished lower on Tuesday but well off the day’s lows, as worries about geopolitical risks lured investors out of risky assets like stocks and into the perceived safety of Treasurys, gold and the Japanese yen.

The Dow Jones Industrial Average fell seven points, or 0.03%, to 20,651, the S&P 500 lost three points, or 0.14%, to 2,354 and the Nasdaq Composite fell 14 points, or 0.24%, to 5,867.

Investors remained cautious amid geopolitical tensions surrounding Syria, Russia and North Korea. They were also concerned about the first round of France’s presidential election later this month.

News that Trump is still considering a major rewrite or even complete elimination of the Dodd-Frank banking law helped stocks to trim losses during the session.

Meanwhile, assets perceived as safe, such as US Treasurys, rallied, sending their yields near their lowest levels in months. The 10-year Treasury note yield fell 6 basis points to 2.30%.

Among individual stocks, shares of United Continental Holdings Inc. was one of the biggest losers on the S&P 500 after the company was criticised for forcibly removing a passenger from a plane. Rival American Airlines Group Inc. was up 3.8% after releasing traffic results.

Apple Inc. shares fell after the company lost its top position in Laptop Magazine’s best brand ranking for this year.

Shares of RetailMeNot Inc. soared after the coupon website agreed to be acquired by Harland Clarke Holdings Corp.

Cytori Therapeutics Inc. plunged 35% after the developer of burn treatments priced a stock offering at a deep discount.

In Asia, share markets were mostly lower on Wednesday in morning session, as tensions continue to ratchet up on the Korean Peninsula following a warning from North Korea of a nuclear attack on the US.

Japan’s Nikkei 225 fell 1.19%. Australia’s ASX 200 dipped 0.05% while South Korea’s Kospi was marginally higher and trading up 0.07%.

In mainland Chinese markets, the Shanghai Composite was down 0.38% and the Shenzhen Composite was lower by 0.325%. Hong Kong’s Hang Seng Index was in similar territory, declining by 0.31%.

HMRC software struggles with ‘insanely complicated’ divi rules

Thousands of people are at risk of paying too much tax next year because computer software is struggling to keep up with ‘horrendously complicated’ changes to the taxation of dividends.

Experts have said people could end up paying hundreds of pounds too much due to errors in the software used to calculate tax for the 2016-17 tax year, The Financial Times reports.

Tax experts told the paper problems have been caused by the interaction of the new tax free allowance for dividends and savings and the 0% savings rate band.

It said while HM Revenue & Customs will provide a solution for tax returns relating to the 2017-18 tax year, those affected will in the meantime have to file paper returns.

Giles Mooney of Absolute Accounting Software told the paper HMRC’s own coders could not keep up with the ‘insanely complicated set of rules’.