confidant - spring 2016

CONFIDANTActing for clients as they would want to act for themselves

April-June 2016Published quarterly

HANG IN THERE Why it pays to spend time in the equity market, page 6

Paying for choice Sarah Lord’s advice to new savers p10

Shaking up Silverstone Patrick Allen’s vision for a British icon p14

Small is still beautiful Mike Savage on small cap stock picking p16

An oil market mystery What happened to the “oil dividend”? p20

C O N T A C T S

H E A D O F F I C E46 Grosvenor Street, London W1K 3HN

Private Client Team Simon Marsh/Fred Robinson/Kristian Overend/Mike Pate

Telephone 020 7337 0400 [email protected]

B R A N C H E S

Mayfair Team Julian Spencer/ Jeremy Sheldon Tel: 020 7337 0715

Grosvenor TeamFabrizio Argiolas/

Jan Wood Tel: 020 7602 8423

Killik Asset Management Graham Neale/

Henry EvansTel: 020 7337 0008

Family OfficeJer O’Mahony/Anna Beament

Tel: 020 7337 0554

ChelseaJames Dunn

45 Cadogan Street London SW3 2QJ Tel: 020 7337 0590

Email: [email protected]

ChiswickMichael Berry

23 Chiswick High Road London W4 2ND

Tel: 020 8090 3303 Email: [email protected]

City

Nicholas Crellin 20 King Street

London EC2V 8EGTel: 020 7600 9990


EsherPaul Martin

9 High Street, Esher Surrey KT10 9RLTel: 01372 464877


Hampstead Peter Day

2a Downshire Hill, Hampstead London NW3 1NRTel: 020 7794 3006


KensingtonJulian Chester

281 Kensington High Street London W8 6NATel: 020 7603 3618


RichmondSam Petts

2 Paradise Road, Richmond Surrey TW9 1SE

Tel: 020 8948 7337 Email: [email protected]

Dubai Dan Dowding

DIFC P.O. Box 506606 Dubai, UAE

Tel: +971 (0) 4 425 0354 Email: [email protected]

Wealth PlanningSarah Lord

46 Grosvenor StreetLondon W1K 3HNTel: 020 7337 0788


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This communication has been approved by Killik & Co for distribution to retail clients.

The value of investments and the income from them may vary and you could lose some or all of your investments. Past performance of investments is not a guide to future performance. The tax treatment of investments may change with future legislation. Prior to taking an investment decision based on the content of this publication, investors should seek advice from their Broker on the

suitability of such investment for their personal circumstances. Neither Killik & Co or Killik & Co (Middle East & Asia) LLP accepts liability for any loss or other consequence arising from the use of the material contained in this publication to make investment decisions, where advice has not first been sought from their Broker. Neither Killik & Co or Killik & Co (Middle East & Asia) has an obligation to notify a reader or recipient of this publication in the event that any matter, opinion, projection, forecast or estimate

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F R O M T H E E D I T O R

WHY TRUE CONTR AR IANS AR E R AR E

SECURITIES IN THIS ISSUE

AO Plc p8

Dart Group p17

PPHE p17

Nanoco p17

Sinclair Pharma p17

Facebook p18

Google p18

Microsoft p18

BASF p18

Deutsche Telekom p18

Wells Fargo p18

Johnson and Johnson p18

Heidelberg Cement p18

Airbus p18

Tullett Prebon 5.25% 2019 p21

Bruntwood 6% 2020 p21

ICG 6.25% 2020 p21

Old Mutual Absolute Return p22

Schroders Blue Trend p22

Trojan Fund p23

Schroder ISF Asian Total Return p23

Polar Capital Healthcare Opportunities p23

Schroder Income p23

Law Debenture p23

Fidelity Global Dividend p23

In one of my favourite scenes from Monty Python’s comedy The Life of Brian, Brian addresses a large gathering: “You don’t need to follow me. You don’t need to follow anybody!... You’re all individuals!” A man in the hushed crowd then calls out “I’m not”. That short exchange captures succinctly one of the biggest reasons why most investors don’t get rich quickly – it’s a human trait that we all prefer to follow the crowd and look for confirmation that we’ve made the right decisions, for example about when to buy or sell shares. As a result, we often buy shares that are already popular (i.e. expensive) and only sell them when they are not (but are probably cheap). The result? We buy high and sell low, the exact opposite of what we should be doing.

The problem is this: knowing you shouldn’t always follow the crowd is easy but actually doing it is much harder. A contrarian would, for example, have spotted a buying opportunity in mid-February.

WHAT’S INSIDE?

Paul Killik on the threats to our stock market, p4 | Matthew Lynn analyses the P2P boom, p5 | Simon Marsh tips an online retailer, p8 | Enterprise Investment Schemes under the spotlight, p11 |

An interview with Killik’s New Broom, p12 | Three ways to ride the virtual reality wave, p18 | Why bond buyers should get a grip on spreads, p21 | Our quarterly funds roundup, p22

The FTSE 100 started out at around 6,100 points, fell within two weeks to just over 5,400 points and then climbed all the way back up to slightly beyond its starting point. The mid-month buying opportunity was signposted if you knew where to look – fund managers were holding unusually large cash piles, newspaper headlines were very gloomy, trading volumes were weak and there was lots of “short interest” in some big stocks (translation: predatory hedge funds were laying big

bets on further share price falls). However, it still takes a brave person to buy in such a bearish environment but anyone who did booked some tidy short-term gains particularly amongst commodity stocks.

So, does that one anecdote mean that the average long-term investor should be more gung-ho in the short-term? No. One of our investing mantras is that you should aim to spend time in the market, not trying to time the market. This “get rich slowly” philosophy avoids you having to engage in the time-consuming, stressful and expensive process of getting market timing wrong. On page 16 of the current issue you’ll find an interview with a man who isn’t afraid to be “greedy when others are fearful” as US investor Warren Buffett once put it: smaller companies guru, Mike Savage. I hope you enjoy it along with the rest of this issue of Confidant.

TIM BENNETT

PARTNER AND EDITOR

April-June 2016 — 3

My career as a Private Client Stockbroker spans nearly fifty years and during that time I have witnessed some enormous changes. While some have been for the better, others have not. This quarter I’d like to share a few of my biggest concerns.

The downsides of technologyTechnology is a double-edged sword. On one hand it allows us to be much more effective and efficient in managing relationships with our clients and their records. For example, it has allowed us to get rid of paper-based settlement systems (so that share ownership can be changed electronically), given private investors the ability to trade online and delivered a visible, competitive Order Book at the London Stock Exchange as a primary means of getting deals done: direct interaction between buyers and sellers removes the gap between the buying and selling price (the “bid to offer spread”). The only pity is that it is still difficult for private investors to participate directly in our main market.

However, technology has also facilitated some less welcome changes.

1. The rise of derivativesLargely because they are more profitable, derivative markets are significantly larger than their underlying cash markets (i.e. more trades are being placed on the direction of share prices than are being done in the shares themselves!). I cannot see how this can be healthy. It is happening, in part, because the UK stamp duty tax – paid by buyers of shares – is driving trading towards derivatives such as CFDs, which are stamp-free. This tax is therefore largely suffered only by long-term holders of securities, thereby penalising higher quality investors while benefitting short-term traders.

2. HFT and increased volatilityHigh Frequency Trading (HFT) – market participants harnessing technology to trade in and out of shares

P E R S O N A L V I E W

quickly and in large volumes – was exposed by Michael Lewis in his book Flash Boys. A combination of HFT plus derivatives activity is widely thought to have led to the biggest of all “flash crashes” in May 2010 when the US Dow Jones index fell by almost 9% and then recovered around 30 minutes later. The large number of subsequent smaller flash crashes has yet to trigger any corrective action from regulators even though private investors find the resulting level of volatility highly unsettling.

Competition: the jury is still outAbout 20 years ago the investment banks persuaded regulators and governments that we should have greater competition in markets. However, whilst undoubtedly good for those same banks, I largely fail to see how this has helped our end users.

Markets should be about the consolidation of business, not its fragmentation. The best prices for investors will be achieved when the largest number of deals are brought

together in a single market. This increases both the visibility and depth of that market for everyone. The recent proliferation of exchanges – there are now around 30 here and 50 in the US – is not helpful in this regard.

Retail bonds: more needs to be doneHaving been deeply involved in the creation of the London Stock Exchange’s Order Book for Retail Bonds (ORB), I am proud of its role in facilitating an alternative investment route to traditional bond funds. However, I am dismayed by the paucity of fixed income investments that may be purchased by retail investors.

Over recent years private investors have been increasingly excluded from new fixed income and equity issues. That’s because the investment banks and fund management houses (particularly the continental European ones) have persuaded regulators that private investors don’t know what they are doing and need to be protected from themselves, even if that leaves the playing field very uneven in terms of market access.

Having lobbied heavily on this matter I am hopeful for some positive news when the review of the EU Prospectus Directive is completed.

Last wordIt concerns me that our stock market, the London Stock Exchange, has been put into play. The new chairman has agreed a “merger of equals” with Frankfurt’s Deutsche Borse. This deal has caught the eye of the Intercontinental Exchange, which has owned the iconic New York Stock Exchange since 2013, and is now considering a bid.

Despite some stiff competition, the London Stock Exchange has successfully kept around 75% of trading in London listed securities either on the main market or its alternative called Turquoise. The NYSE on the other hand has now lost 85% of its business to competing exchanges. This is not something I would like to see repeated in London.

WE MUST PROTECT THE QUA LITY OF OUR M A R K ETS

PAUL KILLIK

SENIOR PARTNER

Competition: good for banks, bad for private investors

4 — April-June 2016

O P I N I O N

WH Y PEER-TO-PEER LENDING IS ON A ROLL

Peer to peer: attractive but find out what’s under the hood

MATTHEW LYNN

FINANCIAL COLUMNIST AND AUTHOR

This tax year, investors will be able to consider a new potential home for their money. An ‘innovative finance’ ISA can invest funds with one of the new breed of peer-to-peer lenders. But given peer-to-peer lending can be pretty risky as well as rewarding, what explains its relentless rise? Two things; technology and the behaviour of Central Banks. It is the latter that could one day also pose the biggest threat to this nascent market.

Bankers talk a lot about innovation, but in fact new ideas are fairly rare. The last really significant one was the introduction of the cash machine in the 1970s (the first one was installed by Lloyds in Brentwood in 1972). P2P lending, as it is known in the jargon, would certainly qualify as the latest, and in just a few years has turned into a very big business: the total alternative finance market was worth £3.2bn in Britain last year according to a report from Cambridge University and KPMG. The vast bulk of that was in consumer and business loans. In the US it is even larger, worth more than $5bn a year, and in both countries it is almost doubling in size year-on-year.

The nuts and boltsThe basic idea is very simple: instead of putting your money in a bank, which will then lend it out to someone who wants to buy a new car, or to a company that needs some working capital, you lend it directly to the relevant person, or business. Modern technology means that a P2P website can fairly easily match up and connect people who have spare cash to people who need it: borrowers then pay interest and lenders receive it at a rate that should reflect the relative risk of the underlying loan, or portfolio of loans.

So, once again, the internet is proving very good at stripping out middlemen. It has done it to travel agents, book sellers, and indeed newspapers. Now it is doing the same thing to banks: by reducing costs P2P lenders can offer better rates to borrowers and better returns to savers.

An open door But that is not the whole story. Central Banks are playing a big role in creating what, without care from the regulator, could eventually become a P2P bubble. How? By cutting interest rates. Here, for example, rates were slashed to just 0.5% in 2009, and they have remained there ever since.

It wasn’t ever thus however. Re-wind to the days before the last financial crisis, and it was pretty simple to earn 5% or more on an account from a bank or building society. It was easy to set up, easy to understand, and came with just about zero risk, since as we discovered

in 2008, the government will step in to rescue a bank that fails. So, there was not much incentive to dabble in the new world of P2P lending, or to take on the additional risks (such as a lack of FCA compensation protection) that it could present if and when default rates on individual, or pooled, loans start to climb. However, with savings rates at such low levels in recent years, P2P lenders saw their chance and have taken it: many private investors need a decent income and P2P is one way to get it.

Jam today… For now at least, much of the potential risk of high default rates, as borrowers fail to repay interest and/or capital on their loans, has disappeared – by the middle of next year we will have completed a whole decade without a single rate rise in the UK. Default rates are correspondingly low which means the market will float just about any P2P boat. However, if interest rates do one day start rising again, the industry could suddenly start to look a lot less attractive as default rates climb.

Yet with deflation becoming the norm across much of the developed world, and with some countries even imposing negative interest rates, there is very little sign of that happening. So long as that is true, P2P is likely to continue it’s explosive growth. To would-be investors my advice is therefore as simple as the concept itself: look under the bonnet before you part with your money.

For a free short video on peer to peer lending please go to

killikexplains.com

KILLIKEXPLAINS


Asset Last 50 years 115 years

Equities 5.7% 5.0%

Gilts 2.9% 1.3%

Cash 1.5% 0.8%

C O V E R S T O R Y

TIM BENNETT

PARTNER AND EDITOR

“Buy shares in good companies, try not to overpay and then do nothing” Terry Smith, Founder and CEO of Fundsmith.

In volatile markets, equity investors may be tempted to ignore that advice and run for the perceived safety of cash. However, this can be a costly mistake. One of equity investing’s simplest rules is that the longer you stay invested, the greater the probability your investment will generate a positive return – in short, you need to be in to win. The tables and charts that follow make this point pretty forcefully. Admittedly, these are all based on past performance and as such are no guarantee of the future, but they all nonetheless contain a key message: long-term stock market investing has worked in the past and time in the market is a better strategy than trying to time the market (or outwit “Mr Market” as the father of value investing, Benjamin Graham, once put it).

Long-term returns matter mostFigure 1 is taken from the ‘Barclays Equity Gilt Study’ for 2015 and looks at real returns from three different asset classes over the last 50 years and the last 115 years. One number stands out pretty starkly: the real (that’s inflation-adjusted but before costs) return from equities, according to Barclays, over the last 50 years was around 5.7% (and over the last 115 years 5%). By comparison, cash over the last 50 years has returned around 1.5% annually and over the last 115 years just 0.8%.

So, the big question is how do you make sure you maximise the chances of making those higher returns? There are several answers to this but one of the keys is having the confidence, even during periods of turbulence, to spend time in the market, a point made in the next three charts.

They reckon that the S&P 500 between 1993 and 2013 returned an annualised 9.2%. If you missed the best 10 investing days, you ended up with more like 5.4% – again a huge difference. Why? The reason is that if you miss the best investing days in the market, you miss not only the price rise on those days but also the subsequent impact that compounding them has on your returns over the long term.

For example, if you achieve a real growth rate of just 2%, you’ll double your money in around 35 years if you stay invested. At 5% – that’s more like the UK market’s growth rate over the past fifty years – you’ll double your money in just 15 years. At 8% per year you will get there in around nine years, but only if you’re in the market, allowing compounding to work. If you are sat in cash for too long, you won’t enjoy that doubling effect anything like as quickly, if indeed at all.

Shares often bounce far and fastA related key question is why the market’s best days do often follow its worst. There are a number of possible explanations but here are two key ones. First off, market sentiment can change fast once the underlying economic and corporate newsflow improves. Investors tend to be overly pessimistic during downturns, so sudden buying can fuel a rebound as bargain hunters, sensing a change of

Source: Barclays Equity Gilt Study 2015 – real returns(past returns are no guarantee of future performance)

Figure 2: Cost of missing the best days

Source: Morningstar, MSCI, Fidelity. Past returns are no guarantee of future performance

Missing the market’s best days is costlyFidelity have estimated that the cumulative return from the MSCI World Index between 2002 and 2012 was around 69% (“When doing nothing is best” – October 2015). However, anyone who missed the best 10 investing days, by liquidating their shares and sitting on the side-lines, ended up with -4.64%. That’s a massive difference over 10 years just for missing the 10 best investing days while you were sat on the side lines in cash.

JPMorgan have done a similar study as part of their 2014 Guide to Retirement.

Fidelity estimate the cumulative return from the MSCI World Index

between 2002 and 2012 was 68.96%

JPMorgan estimate the annual return from the S&P 500 between

1993 and 2013 as 9.2%

Anyone who missed the 10 best investing days ended up with -4.64%

Anyone who missed the 10 best investing days ended up with 5.4%

Figure 1: An eye on the long-term

WH Y YOU SHOULDN’T TRY TO OUTWIT

“MR M A R K ET”


P E R S O N A L V I E WC O V E R S T O R Y

mood, flood into stocks. Then there is a technical factor called “short-covering”. During down phases hedge funds can borrow shares to facilitate bets on falling prices. Once they think shares have bottomed out they can get caught in a mad scramble to buy them back in order to close out those loans – that can result in sharp upwards moves. Previously low trading volumes can exaggerate the upward price effect of both bargain hunting and short covering.

Patience is usually rewardedFidelity have come at this from a slightly different angle but end up reaching a similar conclusion (“Time in the Market" – January 2013). Using Morningstar data they have estimated the probability of a negative return for someone who stayed invested in global equities over the period 1980 to 2012 – Figure 3.

An interesting picture emerges: anyone who stayed in the market during at least 11 consecutive years within that timeframe reduced their probability of a negative return to zero. That’s based on taking the number of negative annual returns and dividing by the total number of monthly return periods. So, again, time in the market paid off. By contrast, anyone who only stayed invested for a period of between one and six years saw their chances of a negative annual return leap to 20-25%.

Equity investing’s most important chart?Finally, what happens if we widen the picture out and go right back to 1899 rather than selecting a shorter, more recent period? Barclays’ Equity Gilt Study for 2015 looked at the maximum and minimum real inflation-adjusted returns since 1899 (Figure 4) available from cash,

gilts and equities over different holding periods.

The conclusion they reach is surprising: anyone who stayed in equities over any 20-year period since 1899 enjoyed a minimum and maximum return that was not only positive but also beat both gilts and cash. By contrast, if you stayed in the market for just one year, your equity returns were all over the place. That’s also true over five years which rather enforces Fidelity’s earlier findings.

The right approach is vitalTo make long-term investing work, it is vital to approach it with the right mind-set: above all, investors need to avoid panic selling and forced selling. But how? A methodical approach could be summarised as follows;• Set up a rainy-day fund set to cover

unforeseen expenditure (redundancy or that leaking roof) of say three to six months’ of your net salary. This needs to be mainly, or even exclusively, held in cash

• Identify your future big requirements for capital and estimate when they’ll crystallise. This is all about looking into

the future and projecting when you will need your money back, what you will need it for, and, therefore, when you might have to liquidate some of your portfolio of investments

• If you’re going to need money back within say 2-5 years, you’re probably still going to be mainly invested in cash, with perhaps some money in relatively safe havens that can offer a slightly higher return, such as corporate bonds or gilts

• Beyond five to seven years, which in recent times has been about the length of a full market cycle in the UK stock market, history suggests that you want to be mainly invested in equities

• Monitor your portfolio so that as big cash commitments move inside that five- to seven-year range – i.e. move from being medium and long term to short term – you reallocate your funds accordingly.

To sum up: the key to making decent long-term returns is to commit to time in the equity market and not to dump shares during periods of short-term volatility. As one of my favourite US Presidents, Ronald Reagan, might have advised a nervous equity investor “Don’t do something, just stand there!”

For short videos on this topic please go to killikexplains.com

and try the “Shares” tab

KILLIKEXPLAINS

Figure 3: Persistence paid 1980-2012

Source: Morningstar, MSCI, Fidelity based on MSCI World Index 1980-2012. Probability calculated as number of negative annual returns divided by total number of monthly return periods

-60%1 year?

5 year period

10 year period

20 year period

23 year period

-40% -20%

Cash

Gilts

Equities

20% 40% 60% 80% 100%0%

Figure 4: And since 1899...?

Source: Barclays Equity Gilts Study 2015. Inflation is computed using a cost of living index based on inflation and then RPI data from the ONS. Past performance is no guarantee of future returns.

Maximum and minimum real returns over various periods since 1899

Probability of a negative return, staying invested in global equities

1yr 2yrs 3yrs 4yrs 5yrs 6yrs 7yrs 8yrs 9yrs 10yrs 11yrs

30%25%

20%

15%10%

5%0%


AO World Plc’s stated aim is to be the leading retailer of electrical goods across Europe. At a recent meeting, its impressive CEO and Founder, John Roberts, spelt out his vision: he wants AO to be an online champion that puts the customer at the heart of everything they do, something he describes as the “AO Experience”.

Why here, why now?Unlike competitors AO does not operate through stores – it is a purely online retailer. This gives them control over the customer experience all the way from order to delivery. It also brings visibility over the end profit margin and a lower fixed cost base compared to store-based competitors, such as Curry’s. Roberts is targeting the UK because it is the most technologically advanced country in Europe, with high levels of internet access, online penetration and smart device usage. Around 40% of Major Domestic Appliances (MDA) are purchased online here and AO estimate their own market share, of a segment worth £3.6bn in the UK, at 13%. That leaves plenty of scope to expand as more and more consumers move online: indeed, they see the online market expanding to 50%, a number that I still think is conservative.

A better way to buyThe AO World online site is packed with clever features including animations that allow customers to watch short video clips outlining the key benefits of one product over another. This is a vast improvement on the confusing jargon found in a typical product brochure or a garbled opinion from what, in my experience, is often an untrained assistant on a shop floor! As virtual reality (VR) also achieves greater penetration,

E Q U I T Y R E V I E W

SAY “AO” TO THE FUTURE OF SHOPPING

SIMON MARSH

PARTNER AND EXECUTIVE DIRECTOR OF THE BRANCH NETWORK

Name Market cap (m) P/E (x) Yield (%) Price Risk rating CurrencyAO Plc* 724 - - 170.3 7 GBp

* As at 29 March 2016 (stock not covered by Killik & Co research).

For details of the Killik risk rating system, please refer to page 13. Please speak to your Broker for further details. Shopping is getting simpler

100

150

200

250

300

350

400

Feb2014

May2014

Aug2014

Nov2014

May2015

Nov2015

Feb2015

Aug2015

Feb2016

AO S H A R E P R IC E (GBP)

I question whether anyone will want to buy electrical appliances in store 10 years from now. Add to this AO’s successful expansion into the Audio Visual and Small Domestic Appliances Market and a further build out in Europe (following a successful launch in Germany and the Netherlands) and their addressable market could be worth £100bn annually.

The AO ExperienceHowever, it is a laser-like focus on customer service, the “AO Experience”, that sets them apart and is a critical component of the story for investors. Countless studies show that great customer experience strongly correlates to future revenue growth and it is apparent that this is firmly baked into the AO culture. Here are just two examples. Firstly, unlike many rivals, call centre staff at AO have full discretion to correct problems without seeking a line manager’s approval. This greatly improves their accountability both to the firm and it’s customers. Next, AO runs a “Driver Academy” which develops and trains existing and new drivers to ensure that they are able to maintain consistent service levels, even during peak trading periods. This all adds to consistently high scores in consumer surveys, which is reflected in repeat orders and referrals.

An attractive entry pointFollowing an IPO in Feb 2014, the stock has struggled (see graph) in part thanks to the fallout from a disappointing Black Friday last November. Whilst the company coped with an unexpected and chaotic surge in buying, the cost of successfully handling such a big spike in business meant that they made nothing from it. This is typical of Roberts, who has stated that he intends to run the business as if it were privately owned and focus on building long term value, rather than pandering to the City’s short- termism even at the expense of some share price bumps. Investors might nonetheless think the valuation a bit rich for a business that will be loss making this year. However, if customer ratings are a true guide to future shareholder returns – and I think that they are – you’d be hard pressed to find a more attractive business in this sector. That’s why retail investors who missed out on an IPO that was 11 times oversubscribed by institutional investors should see the subsequent share price pull-back as an attractive entry point.


Where is inflation just as governments need it most?The problem is that after seven years of the most extraordinary monetary stimulus, and literally trillions of dollars, pounds, euros and yen being printed out of nothing, there is still precious little inflation about. Yes, the prices of many financial assets, including stocks and bonds, have clearly been inflated, but the general price level of goods and services remains strangely quiescent.

Cash-strapped governments will ultimately pursue money wherever they can find it. If that means raiding individuals’ bank accounts, so be it. Which is why our monetary authorities are increasingly discussing banning cash altogether.

The case for cutting cashBy dispensing with physical money altogether, banks could impose negative

O P I N I O N

The war on cash is hotting up. What started as a trial balloon floated by the Bank of England’s chief economist, Andy Haldane, in September last year – the outright banning of physical cash – is increasingly gaining traction in the corridors of power. But this is not merely a technological debate: nobody disputes that electronic money is easy to use. What is at stake is a more fundamental issue about personal liberty.

Three ways to reduce a debt mountainMost aspects of the financial crisis that began in 2007 can be traced back to one common source: there is too much debt in the world. And as the McKinsey Global Institute pointed out last year, far from deleveraging, the world has managed to add another $57 trillion of debt to an already unacceptably large debt mountain.

There are only three ways that these vast debts can be addressed.

One is that governments engineer enough economic growth to service them. That may be possible in certain economies, but I suspect it may now be impossible in others.

The second is to default on them. While the world has already weathered some small-scale defaults (from the likes of Iceland and Greece), the economic impact of a debt default by a major sovereign can hardly be overestimated. Heavily indebted governments might be keen, for obvious reasons, to repudiate their liabilities. But it is worth remembering that one government’s liability is another investor’s asset and so a broad-based default, within the context of a debt-based monetary system, hardly bears thinking about.

Which brings us to option number three. This is the time-honoured way in which all governments throughout history have sought to escape from their debtor’s prison: explicit, state-sanctioned inflationism.

ARE WE HEADING FOR THE END OF CASH?

interest rates on savers within a closed system that permits no escape. Savers – so the theory goes – would then logically elect to spend as much of their savings as they could, as quickly as possible, to avoid their capital being explicitly eroded through a punitive interest rate regime. Interest rates have already, bizarrely, been driven through the ‘zero bound’ across several countries. Already 30% of the sovereign bond market trades with a negative yield.

And across the euro zone, banks are now subject to BRRD – the Bank Recovery and Resolution Directive – which means that savers with deposits above the insured minimum will be ‘bailed in’ during the next financial crisis. It’s as if the euro zone’s authorities are almost determined to trigger a bank run.

Beyond placing our hopes in parliamentarians, what other steps can we take to protect our hard-earned capital? The backlash against cash reasserts the relevance of real assets – tangible, non-financial stores of potential value. Holding some gold for example has always made sense to me as insurance against an upsurge in what might ultimately become an uncontrollable bout of inflationary pressure.

One things is for sure: after Quantitative Easing, Zero Interest Rates, and now Negative Interest Rates, future historians will surely conclude that our central bankers have gone mad.

Tim Price is the author of ‘The war on cash: how to survive financial martial law’.

Cash: not dead, just resting

TIM PRICE

AUTHOR AND FINANCIAL COLUMNIST


M A N A G I N G Y O U R M O N E Y

TAKE CONTROL OF YOUR FINANCIAL FUTUR E

Following the success of our most recent Killik Academy, Sarah Lord sums up some of the key messages.

“I need to take control of my money, I’m a smart woman, I just have never engaged with finance and I really don’t know where to start.” Those were the words of a 45 year old female guest at our Killik Academy last month and it struck me that the same words could have been spoken by anyone, of almost any age. The truth is that whatever your gender, whatever your age, you have money to manage and plans for what you want to do with it. So you need a strategy.

Choice comes at a priceIt’s a problem that previous generations could have only dreamed of having: what to do with longer lives and ever more personal freedom and choice. According to the government, the average person born now in Britain can expect, on average, to live until they are 100. The lifestyle choices they face are increasing by the moment. Don’t fancy a 40+ year career with the same employer? No problem: start your own business. Want to take a career break? Fine, organise a sabbatical. Don’t want to live in the UK? Move. And so on. This level of freedom is there to be enjoyed. But you can only hope to take full advantage if you are in control of your finances and have a firm idea about how you plan to enjoy life while still hitting your major life goals such as owning a home and providing for your old age.

We are all marrying later, perhaps because getting a foothold on the property ladder is becoming harder and harder. Meanwhile more of us are on our own than ever before as divorce rates climb: by some estimates well under 50% of British adults are now in a first-time marriage or partnership. So, if we haven’t already done so by now, for all sorts of reasons we must all take charge of our financial lives.

The world is changingWe all know that the UK’s social safety net is not what it used to be: with the State cutting back on welfare, companies removing generous pension arrangements and the boom in Generation Rent (the largest number of 20-45 year olds still living at home) we must all take more responsibility for our own futures.

For anyone who has never felt part of the world of finance, everyone has the ability to get to grips with it: it’s simply a question of gaining the confidence that you have the right tools and support. So where to start? Here are two suggestions from our nine-step Guide to Financial Fitness which Tim Bennett, our Editor, created as a guide to help everyone to get in control.

How much are you worth?It’s something we rarely think about day-to-day but it is the place to start: what you own minus what you owe gives you your personal worth. At the most basic level, anyone’s financial goal over a working lifetime should be to build up a pot of assets that will cushion them later in life and provide financial security. If you consider your personal worth as a “Personal Balance Sheet”, or set of scales, it’s pretty straight forward: the more you weigh, the better!

SARAH LORD

PARTNER AND DIRECTOR OF KILLIK CHARTERED FINANCIAL PLANNERS

Small things make a differenceGiven the volume of transactions that most households make on a monthly basis everyone should keep tabs on their income and expenditure month by month: not only to be confident that we’re living within our means, but also because it can reveal easy ways to save money and opportunities to make that money work harder.

Let’s say you could save £25 per week – infinitely possible for most of us – and invest it to earn the financial regulator’s middle suggested growth rate of 5% per year annually for 25 years. By committing to time in the market and re-investing the interest earned the result could be a pot worth nearly £60,000.

Everyone’s circumstances are different but we can all start planning and growing our wealth at any stage in life. For an introduction to getting started with our free nine-step Financial Fitness Guide, or a chat about a more comprehensive financial planning tool that could help you and your family (Killik SecureLifeTM), please do get in touch with your Broker.

Build your own financial future


I N T H E S P O T L I G H T

Enterprise Investment Schemes

GRAHAM NEALE

PARTNER

What are they?Enterprise Investment Schemes are a way for investors to put their money to work in smaller companies whilst enjoying some significant tax breaks. They were introduced by the UK Government in 1994 as a way of encouraging private investment into smaller companies. Since then plenty of retail investors have taken advantage of the opportunity.

Are they popular?The latest numbers certainly suggest so. In July 2015 HMRC revealed that nearly 23,000 companies have received over £12bn of investment since the scheme was launched. For long-term investors who understand the risks and are looking for tax-effective ways to save they can represent a useful addition to a portfolio.

How do they work?Investors can choose between direct investment in qualifying companies or invest via an EIS service provider such as Killik & Co. The advantage of using us is that our specialist smaller companies investment team can bring their long experience to bear when it comes to selecting EIS investments for a portfolio. Partner Graham Neale, who runs the service, looks for “long-term success stories rather than the latest fads”, and avoid sectors known to be extremely unpredictable, such as Oil and Gas Discovery, Basic Resources and Drug Discovery. The firms his team invests in are small and fast growing, so returns are expected by way of long-term share price growth rather

than dividend income. Get this right and the returns from smaller companies can be significant. Investment guru and author Jim Slater once quipped that “elephants don’t gallop” but chosen correctly, smaller firms certainly can.

Who are EIS suited to?EIS tax breaks are generous but only given in return for a higher level of investment risk associated with smaller, less proven firms. Subject to a full review of an individual’s circumstances, these services could therefore suit someone who has already maximised their ISA allowances and made the full permitted contribution to a personal pension, such as a SIPP. Overall an EIS would typically be a fairly small part of a portfolio but one that has the potential to outperform.

What are the main risks?Smaller company investing can be risky and you may not get back the amount you invest. These types of firms may suffer much higher levels of illiquidity (the inability to buy and sell shares quickly) than their larger peers in the short term: this makes careful stock selection vital.

Also don’t forget that there are various penalties for selling an EIS investment too early in the form of lost tax reliefs. EIS investors should therefore be thinking over long-term time horizons and not rely on these schemes to fund short-term drawdowns. Lastly, it’s worth bearing in mind that future governments may change the tax rules.

How can I find out more?To discuss EIS in more detail and whether or not this type of service could work for you, or to receive a copy of our brochure, please call your Broker or Wealth Planner. If you are new to the firm please call Dan Scott on 0207 337 0777 or email [email protected].

WHAT ARE THE TAX BREAKS?

Tax planning is driven by your personal circumstances, however the main EIS benefits can be summarised as;• Up front income tax relief

of 30% provided an investment is held for at least three years

• Inheritance tax relief after two years provided the investments are still held at the time of death

• Tax-free growth provided income tax relief was given on the full amount invested and has not been withdrawn

• Capital gains tax deferral over the life of the investment

• Loss relief on any holdings that are realised at a loss


What was the key to being a successful gin brand?It’s very simple: you need to be authentic to your core and have a really clear idea of the kind of person you exist to serve: everything you do must be for them. I always joked that we were a Marketing Team that didn’t actually believe in Marketing (or what most people think Marketing is). It was simply about creating products, services and experiences that really served our customers.

Sipsmith drinkers are people who appreciated things well made. They’re discerning, they know quality when they see it and they value it. Sipsmith isn’t the cheapest brand out there – nor is it the most expensive. But it is one of the only gins in the world not to be made from concentrate; being distilled on copper using traditional methods making the end product exceptionally smooth. So much so that we always used to do neat tastings and, once you got people to wrap their head around the idea that you could compare it to a fine single malt, they rarely looked back.

Operationally we were entirely driven by one question; “How do we look at the strategy for the business through a brand lens?” We had to make sure that everything we were doing from the products we were developing, to our external communications, to even how we designed the office and the distillery, all reflected the same vision and values.

I N S I G H T

THINK SM ALL, GROW BIG“We need to get everyone excited about investing again” says our new

Director of Marketing, Zoe Zambakides. Confidant caught up with her to find out more.

who can turn down a job with the title, “Head of Ginspiration”?

At that point their product was a hugely well regarded artisan gin for people who were in the know – available in top bars, retail outlets, Waitrose and some Sainsbury’s. We were a top four trending gin brand when I started and as I left we had made it onto the top-10 selling gin list at the World’s Best Bars, and become one of the top five trending spirits. The growth curve over a two-year period was huge. When the boys launched we were the only new London distillery. Five years later over 100 competitors had entered the market and there were five distilleries in London: to stand out we had to be nimble, focused and seriously smart.

You’ve packed a lot into your career so far: what have been the highlights?I started out as an Omnicom Fast-Track Graduate, which taught me a phenomenal amount about business and what marketing truly is: representing the customer’s needs and making sure that you’re delivering an exceptional experience. However, it was really joining eatbigfish that has to be the first major highlight.

A small consultancy firm set up by Adam Morgan and Partners who (quite literally) wrote the book on Challenger Brands a decade ago, they run the Challenger Project: a decade-long study on what Challengers – businesses and brands who are not the current market leaders – do differently whilst also providing consultancy for brands who want to think like Challengers.

The beauty of the message is in its simplicity: if you are not the market leader you cannot win by following the conventional rules. Instead you have to change the criteria of choice in your favour – and make it ultimately benefit the customer. As Nike’s CEO says – they’re only the industry Goliath because they think like the industry David.

That philosophy has shifted my entire perception of how to view yourself in the market and how to execute strategy. As Strategy Director there I led projects for companies like GSK, PepsiCo and Unilever, to help them to harness that thinking.

My second career highlight was becoming Head of Marketing at the Sipsmith Distillery: combining my love for challenger brands with my favourite gin brand really did seem too good to be true!

I instantly loved the people and I already loved the product and story. It was authentic to its core and driven by passionate pioneers of London’s craft gin revival – Sipsmith was the first distillery to open in London since Beefeater had opened their doors in 1820. Besides,

“This is not the world of Wolf on Wall Street and Gordon Gekko as many people think – it’s a realm for everyone. And fundamentally investing is interesting – it’s a lens through which to view the world, brands, businesses and global trends: we need to get everyone excited about that again.”

Challengers can be winners


I N S I G H T

So what sparked your interest in Killik?After Sipsmith, the huge opportunity to open the world that Killik represents to people who have no engagement with finance was just too good to turn down. Finance is such an important part of our lives, and becoming more so as we live longer and will increasingly have to rely on ourselves: I feel so fervently about it that it even outweighed even the daily free gin and tonics.

So many parallels with Sipsmith apply here: this is a firm with a real reverence for things done well, in an almost timeless manner, delivered via great service. Sipsmith always had a great product and got it into the right people’s hands: that’s exactly what I believe we can do at Killik too.

After the credit crunch, trust in financial services got obliterated to the point where people believe that, once again, capitalism serves only the few. But it’s simply not true – the world is changing and whether we like it or not we need to take responsibility for ourselves. We need to spearhead “Conscious Capitalism”, as it is known in the brand world: investing done right is a force for good (for individuals and

the economy). This is not the world of Wolf on Wall Street and Gordon Gekko as many people think – it’s a realm for everyone. And fundamentally investing is interesting – it’s a lens through which to view the world, brands, businesses and global trends: we need to get everyone excited about that again.

This demands that we genuinely build more services and products around customer needs and the way they want to manage their money in the future. And the reason I avidly believe in our ability to deliver at Killik is because it’s always been a core part of our heritage. Paul Killik founded this business to open up the world of investing to everyone, taking it out of private offices and onto the high street through branches.

The time has now come to look again at how we all want to manage our finances in the future. Killik is in the perfect place to lead this charge as we are not an incumbent bank and nor are we a new FinTech, trying to offer a better service but with no previous history. We have a world class team, with world-class ideas – helping savers and investors is in our DNA – and I’m delighted to be part of it.

KILLIK SECURITY RISK RATINGS

All Killik & Co Research recommendations are issued with a security specific risk rating, represented by a number between 1 and 9. Assessing the relative risk of any security (specific risk) is highly subjective and may change over time. The Killik & Co Risk Rating system uses categories which are intended as guidelines to the specific risks involved, as follows:

Restricted Lower Risk

Securities in this category are what we believe to be lower risk investments such as cash, cash equivalents and short dated gilts, and the collective investment vehicles that invest in those instruments.

Restricted Medium Risk

Securities in this category are what we believe to be medium and lower risk investments including medium and long-dated gilts, investment grade bonds and certain collective investment vehicles investing predominantly in these securities.

Unrestricted

Securities in this category are what we believe to be higher risk and are drawn from across the United Kingdom and international markets. These are normally direct equity investment and collective investment vehicles which predominantly hold securities other than investment grade bonds and money market instruments.

The vast majority of the Killik & Co Research recommendations are likely to fall in the unrestricted/higher risk category (4-9) above.

For further details on the Killik & Co Risk Rating system please see the Killik & Co terms and conditions.

1

2-3

4-9

RISK RATINGS

BUDGET SNAPSHOTHighlights for private investors from the recent Budget were:• From 6th April – Capital Gains Tax

(CGT) will reduce to 20% for higher rate tax payers and 10% for basic rate tax payers but it is worth noting that this lower rate will not apply to gains made on residential property, which will still be taxed at the current rates of 28% and 18%

• From April 2017 – A Lifetime ISA will be introduced for those under the age of 40. It will be possible to contribute up to £4,000 per year and receive a bonus of 25% from the Government. The funds can then be used to buy a first home at any time from 12 months after the account is opened and withdrawn from age 60

• From April 2017 – The overall annual ISA subscription limit will increase to £20,000. It is important to note that this is overall limit will include the new Lifetime ISA allowance

• From April 2018 – Class II National Insurance Contributions paid by the Self-Employed will be abolished

• From April 2020 – Corporation Tax will reduce to 17%

Reminder: 6th April saw the introduction of the Dividend Allowance of £5,000 and the Savings Allowance of £1,000 for basic rate tax payers and £500 for higher rate tax payers. To discuss how these, or any other, changes may affect you please contact your dedicated Broker.


What was your route to your current role? I think my career can be summed up as pretty varied. I started off as a lecturer at the Management School in Bradford, Yorkshire and quickly also developed a successful management consultancy business. I subsequently worked with IBM for a number of years, training them on projects that included how to launch new products into emerging markets. When I met my wife I decided that I didn’t want to be hopping on and off planes so I refocused on developing my own UK-based consultancy.

One of my clients was Yorkshire Co-operatives. The chief executive, Peter Marks, asked me to look at their strategic planning programme, which was pretty much non-existent at the time. He was so impressed with my report that he invited me onto the board at United Co-operative. I subsequently joined the Co-op group as an Executive Director looking after marketing and brand management across 12 operating divisions. I left in 2010 to return to consulting.

In January I was made MD at Silverstone Circuit and have overseen a transformation that has returned it to proper profitability.

What’s your turnaround formula? There are four stages and my job is to get a business through them as quickly and efficiently as possible. They are;

B U S I N E S S P R O F I L E

HOW I DR IVE CHANGEConfidant met Patrick Allen, MD of Silverstone,

to find out how he is transforming an iconic brand.

1. Shock. Employees don’t realise that a business is in trouble and are initially hostile when unpopular measures, such as redundancies, are implemented.

2. Denial. Most people baulk at change and will often try to cling to their old thinking and methods. It is vital to keeping pushing your vision at this point to build some commitment and momentum.

3. Acceptance. The business starts to see the benefit of the turnaround measures being taken and everyone begins to embrace change.

4. Engagement. This is the stage we have reached at Silverstone. Engaged staff don’t look back, are focused on the future and have bought into our new business model.

When I joined, I knew that Silverstone needed a new strategic direction and had to move away from being just a motor racing circuit and become a fully-fledged leisure and entertainment destination. I want people to say, “Let’s go to Silverstone this weekend and have a great time as a family” and not just see it as a racetrack that hosts an annual Grand Prix. Some people still think that we’re only open for four days a year for that one race, when we’re actually a 360-day circuit and

one of the busiest in the country. Part of my role is to get that message out.

We have always been very good at moving people around and putting on a great piece of entertainment. So my view is that we should be applying that talent to everything from rock concerts to food events and car festivals. We need to attract a whole new audience and also engage our existing motor racing fans in new ways. As the saying goes “if you’ve only got a hammer everything looks like a nail.” But I think we have so much more than one hammer in our toolbox.

We will never drop the Grand Prix because apart from making money it also has a huge halo effect that draws people to us. However, it’s no longer enough for us to think “We are Silverstone. They will come.”

You have been highly critical of Formula One – why?I am far from alone in thinking that F1 no longer delivers excitement to a wide enough customer base. Fans should come to watch their heroes fighting in an almost gladiatorial sense on the track – they don’t want to see a procession. These days all the key decisions about race strategy are being made far away from the track and well in advance of race day.

Dynamo with Nigel Mansell


B U S I N E S S P R O F I L E

I want to get us back to a sport in which the drivers race and make the big calls during a race. Racing needs to be about winning, not tactically protecting second place as so often happens now. TV coverage of the front of the pack is sometimes minimal these days as most of the interesting racing takes place much further back.

F1 has lost the magic of the Prost/Senna or Hunt/Lauder days. Until technology takes a back seat to driving again, we won’t get that back and will continue to lose fans. Moto GP is a good example of what F1 could be – it still retains that raw race excitement with the lead changing hands between the first four or five drivers almost every other lap. Meanwhile US Indie racing average speeds can hit 235 miles an hour – far higher than modern F1 – and the excitement is incredible. Then there are events such as NASCAR Daytona which can drum up 400,000 spectators compared to say 100,000 or so here.

F1 fans are increasingly being forced to watch races controlled by a guy sitting behind a data screen. As a result we’ve lost a lot of the essence of racing. I’d make the cars faster and more difficult to drive by putting technology back in its box. I’d also reduce invasive in-race team communication to a minimum and let the drivers get on with racing.

Who is your all-time favourite F1 driver?James Hunt. I just loved his irreverent

approach and his steely determination to win – he embodied the glamour, the spirit of motor racing, and the character that all winners need. Of course, in Niki Lauda, Hunt had his perfect foil – a deadpan Austrian and a brilliantly clinical driver.

Sport needs personalities and must ensure that the fans have access to them. In an F1 paddock you can almost see the tumbleweed as the fans are largely shut out. The nearest personality to Hunt now is Jenson Button – a terrific bloke and brilliant driver. Pity his fans can’t get anywhere near him.

As a result, F1’s “personalities” these days are all technical directors – you may as well put them on the podium and let them spray the champagne around.

Killik & Co’s Family Office, run by Partner Jer O’Mahony,

provides wide-ranging solutions for UK-based and international

families. For example we can source and negotiate cost-effective car

storage and management solutions provided by one of the UK’s leading firms. Please call the Family Office on 0207 337 0554, for more details.

HOW WE CAN HELP

YOU

Where are your three favourite circuits?Firstly, Silverstone because it is one of the fastest tracks and also one of the longest with more corners than anywhere else. Spa-Francorchamps in Belgium is also terrific and one of the oldest heritage sites. My third choice would be Monza, a track that reflects the Italian passion for life.

What car would you like to own?A McLaren P1.

Are you a classic car investor?No, but I think there’s really good money to be made in classics if you know what you are doing – the market is certainly very strong based on what I’ve seen at our Silverstone Auctions. For example, a friend of mine recently bought seven Ferrari Testarossas and paid £50,000-£60,000 per car. They are selling now for £130,000-£180,000 each.

Investors are naturally looking for somewhere to park spare cash as interest rates have been so low for so long. A classic car is something that you can use and drive as well as make money from – it’s a bit of a win-win. One car that I think will attract a lot of money soon is the Lamborghini Diablo – it’s lovely to look at, good to drive and relatively rare.

There are risks though. Recently another friend of mine went to see what looked to me like the perfect Series 1 Jaguar on sale. He put his hand down the back of the front seat, and found a ridge. He said “Those are Series 2 seats, not Series 1.” That meant the car had been rebuilt, which fundamentally changes its value. How many investors would spot that? Then of course you’ve got issues such as maintenance and storage although there are specialist firms around who can look after that for you (see box).

Like Killik & Co, you support the children’s charity Variety – what do you have planned for this year?Thanks to Variety, disadvantaged kids based in Northamptonshire, and near Silverstone, get the direct benefit of our fundraising efforts. Last year for example we had a Rock & Race Friday which was packed with events – we brought in a host of famous drivers to be interviewed on stage with Jake Humphrey. We also invited the magician Dynamo and Dire Straits played a set. This year’s event will be even bigger and better!

Jenson Button in action in Spain


Why smaller companies?I’ve been investing for over 30 years and I’ve always liked the greater potential for uncovering added value when looking at smaller companies (“small caps”) rather than researching, or investing in, larger ones (“large caps”). You get closer to company management, whilst on a risk/reward basis I think there are better opportunities: a big broker such as Goldman Sachs can keep a team of analysts busy poring over large cap stocks and still make the wrong calls, but smaller firms tend to get much less scrutiny. In a less crowded space, we believe we can therefore add more value.

Are small caps much riskier?Investors face short-term risks with companies of any size: large supposedly “safe” stocks can suddenly declare profits warnings or dividend cuts, as we’ve seen recently with Barclays. Smaller firms can be more difficult to trade quickly and their share prices can be subject to large short-term swings, in a collapsing market

S M A L L E R C O M P A N I E S

GOING FOR GROWTHSmall cap investing sometimes requires a leap of faith

as much as a spreadsheet, says Mike Savage.

We like great managers, not story-tellers

MIKE SAVAGE

PARTNER AND HEAD OF SPECIAL SITUATIONS

there could be potential problems getting out at the expected price. However, with the right long-term approach, on a return basis, the case for smaller caps seems clear to me. The Numis Smaller Companies 2016 Annual Review for example, shows that between 1955 and 2016 £1,000 invested in the FTSE All-Share on a total return (capital plus dividends) basis could be worth about £829,000 now, before charges. Alternatively, had you invested £1,000 into UK Micro-Caps – the smallest 2% of the UK market – you could have amassed over £15.5m with dividends reinvested, again before charges.

Why do investors need a small cap service?Some of our investors have a genuine interest in this market and take an active interest in their portfolios – something we can facilitate via our advised service – while the rest may not have the time, or the motivation, to do their own research. Thanks to my background as an institutional broker, we have key relationships with many of the leading investment houses, which is critical to our ability to provide a significant flow of investment ideas and access to primary and secondary fund raisings.

Why is that access important?Unlike the large-cap space, a lot of new issuance in the small to mid-cap arena, is difficult to access. However we are able get retail investors into some of the exciting new issues (“IPOs”) that they might read about in the paper. A classic recent example was Fever-Tree, the premium tonic water business. Many of our clients knew and loved the product before the IPO but wouldn’t have been able to invest straight away.

What are the main lessons you’ve drawn from a long career in small caps? From my early investing career the main one is that just when you think you’re the next Warren Buffett, the Good Lord puts you back in your place!

I have learned over the years to generally avoid banks (too opaque) and more recently oil and gas, and commodities stocks. We also don’t tend to go for unproven “blue sky” technology stocks.

Can small caps offer a decent income?Certainly. The problem with the main market for the larger stocks is that just a handful generate a huge chunk of your income (33% of the market’s income is sourced from only five, for example). Right now we are seeing some cuts from the bigger payers which is a worry for income seekers. Some investors don’t realise that a significant part of the overall market’s income growth actually comes from small to mid-cap dividends: it’s not all about the larger companies.

Do you meet a lot of management teams?Seven to ten a week – it’s a vital part of investing in smaller companies. Whilst we ultimately look at everything on a risk/reward basis, good management is very important. We don’t tick boxes when we see a new management team: we weigh them up on their merits. After all, some managers are just great story-tellers,


FOUR OF MIKE’S PREFERRED PLAYS

Dart Group – nicely packagedA favourite of ours since 2010, the company has transitioned from a low cost airline to become one of the largest branded package holiday players in the UK;• Dart’s margin’s should benefit from its

bias to the holiday hotspots of Spain and Portugal and its relative underweight exposure in Turkey and the eastern Mediterranean

• Given that oil is its largest cost input, we would expect to see a significant cost benefit here

• 30 new Boeing 737-800s will be delivered later this year which are bigger and more fuel-efficient

• The shares still trade on an undemanding rating

Sinclair Pharma – still attractiveSinclair is a specialty pharmaceuticals business with a range of aesthetic products;• In November 2015 management

announced the disposal of its non-aesthetic product range to leave it as a pure play on the higher quality growth business of aesthetic medicine and with £80m net cash

• The more focused business should command a premium rating, particularly given the growth in its end markets

• Sinclair remains in an offer period and we believe that it will sell its remaining assets at a valuation significantly higher than the current share price suggests

PPHE Hotels – a boutique bargainPPHE is the owner, developer and operator of Park Plaza Hotels in Europe, which boasts an installed base of 13m loyalty programme members worldwide and a sophisticated reservation system;• PPHE’s boutique art’otel is gaining

increasing recognition in Holland, Germany and beyond

• The group has a portfolio of 38 hotels, with a focus on London

• The shares look cheap on a range of metrics including P/E, yield and NAV

Nanoco – bright prospectsNanoco produces cadmium-free semiconducting materials known as quantum dots (QDs), which offer significant improvements in LCD screen colour reproduction and power consumption;• QD’s enable LCD TV

manufacturers to extend the life of sunk LCD fabrication equipment capex

• The route to market for Nanoco is via an exclusive, high margin licencing/royalty agreement with Dow Chemical

• Future share price catalysts include: confirmation that the Dow facility in Korea is producing at volume; an update on the already announced LG deal; our expectation that the group will sign up Samsung as a client

S M A L L E R C O M P A N I E S

Name Market Cap (£m) P/E (x) Dividend Yield Share Price Risk rating CurrencyDart Group** 968 14 0.5 680 8 GBpPPHE Hotels** 336 11 2.5 805 8 GBpNanoco** 104 n/a n/a 46 9 GBp

Sinclair Pharma** 164 n/a n/a 34 9 GBp

*As at 29 March 2016 ** stocks not covered by Killik research

For short videos on some of the ratios mentioned in this article please go to

killikexplains.com and try the “ratios” tab

KILLIKEXPLAINSwhereas others are genuinely convincing.

Equally, some may be underwhelming in presentational style but operationally great deliverers, while others are the exact opposite!

Which metrics do you find most useful?We are relative value investors (we like metrics such as the PE, EV/EBITDA and free cash flow yield) rather than slaves to discounted cash flow (DCF).

However, we try to avoid becoming obsessed with valuation as otherwise you can miss some great opportunities. Fever-Tree for example would have looked expensive on any valuation metric when it came to the market but we thought it had a unique product offering and the scope to become a global leader and therefore grow into its rating through upgraded earnings forecasts. Equally we have sometimes bought stocks that have disappointed in what can be a relatively concentrated portfolio: overall, by its nature, small cap investing can demand a leap of faith rather than just a detailed spreadsheet.

How much of your own money do you invest in your ideas?Until recently, I’ve had 100% of my pension in the service although having turned 52, I have recently trimmed that to more like 90%. I agree with Andrew Carnegie, the great US philanthropist, who once said that the best way to become rich is to have all of your eggs in one basket, and then watch the basket.

What keeps you awake at night?Some commentators answer “market volatility” but we’re always happy to buy good quality smaller companies that have been knocked back with everything else. Over 30 years I have seen plenty of market cycles and am happy to keep a cool head while others panic. Investors have also got to adjust their short-term expectations – anyone who makes 5% this year, in any market, will probably have done well.

What do you do to relax away from the office?Cycling and triathlons are my main outlets away from both the office and

a family home that houses four teenagers. IRONMAN in Lanzarote in May is my main competitive event this year: a healthy body is a healthy mind...and I am very healthy!


Virtual Reality (VR) and Augmented Reality (AR) were amongst the hottest topics at this year’s Consumer Electronics Show in Las Vegas and are expected to dominate the technology scene of the future. So what are they, how do they differ and how can investors get exposure to them?

VR or AR?Virtual Reality entirely immerses the user in a virtual world, inside a game or a virtual environment. It can also simulate a real world experience like watching a live sporting event or standing at the top of the Empire State Building. Current hardware being developed in this area includes Facebook’s Oculus, Sony’s Playstation VR, HTC Vive and Samsung’s Gear VR. Augmented Reality is different: it overlays digital information onto the physical world using a transparent display. Current hardware being developed in this area includes Microsoft’s HoloLens, Google Glass and MagicLeap, which recently raised a significant amount of venture capital funding and is partially backed by internet search giant Alphabet.

We expect the technology to follow similar trends to other computing platforms such as the PC or smartphone, where technological advances drive down costs and increase performance, opening up many more potential applications. There has already been significant

E Q U I T Y T H E M E

NICOLAS ZIEGELASCH

HEAD OF EQUITY RESEARCH

Here is a snapshot of some of our Best Ideas. Please contact your Broker for more information

Name Market cap (m) P/E (x) Dividend Yield (%) Share Price* Risk rating CurrencyDeutsche Telekom 73338 18.7 3.7 15.68 6 EURWells Fargo 243000 11.4 3.2 48.70 7 USDJohnson and Johnson 301045 16.7 2.8 108.23 6 USDHeidelberg Cement 14223 13.4 2.1 74.44 6 EURAirbus 47016 16.2 2.4 60.05 6 EURBASF 61804 14.9 4.4 65.93 6 EURFacebook 330567 36.9 - 113.69 7 USDAlphabet 518621 22.2 - 753.28 6 USDMicrosoft 432717 19.3 2.6 53.54 6 USD

HOW TO INVEST IN TOMOR ROW’S TECHNOLOGY

* As at 29 March 2016

investment in VR and AR technology, with Facebook having paid $2bn to acquire Oculus Rift in 2014 and over $3.5bn of venture capital investments across a number of start-ups in the field.

Where the technology can be applied We see a number of compelling uses for these technologies, across consumer, business and public sector applications.In the consumer market, we expect the initial driver of VR adoption to be in gaming. Video games are a massive market, with estimates of total gamers at over 1bn and “hardcore gamers” (the target market, comprising people for whom gaming is their main, or only, hobby) of over 250m. Many game development studios are working on VR titles, aimed at PC gamers at the high-end, console gamers in the mid-market and even smartphone gamers at the casual gaming level.

Other potential consumer uses for VR could be in video entertainment,

All chart data source: Bloomberg

especially around travel or nature documentaries, and live events, where the VR experience will place you at a concert or sporting event. We would expect AR to have uses in areas such as Travel and Leisure, where it could be used for services such as museum guides, and as smartphone replacements, for instance in AR goggles for skiers which have recently been launched.In the business market, we believe that there will be a strong uptake in retail. VR and AR are capable of becoming key tools in product demonstration both in-store and online, allowing shoppers to visualise and interact with products. Lowe’s, a US home improvement retailer, has already demonstrated how VR can help you to visualise what room remodelling would look like. Meanwhile, Volvo is working together with Microsoft to develop AR software for car customisation.

Other business uses include Real Estate, where virtual property tours, already available in the US, could be a strong selling aid for high-end properties and off-plan apartments. In Engineering, VR and AR are already being used to improve design and reduce costs, with leading 3D design software company Autodesk working with Microsoft on the Hololens. Then there is the Services sector where AR has a number of potential uses, for instance allowing electrical repair technicians to see an


E Q U I T Y I D E A S

Three ways to play this key theme

Microsoft is a leading technology firm that develops and markets software, services, and hardware. Products include operating systems for personal computers, servers, and phones; productivity applications; business solution applications; desktop and server management tools; software development tools; video games; and online advertising. In summary;• 1.5 billion people use Windows and

1.2 billion people use Microsoft Office every day

• Microsoft is no longer as dependent on its Windows business and is now predominantly a supplier of software and services to the corporate market

• Its corporate competitive position is very strong, with customers dependent on legacy software and a number of new productivity products and services

• Its server business has been growing strongly, driven by the mega-trends of cloud computing and Big Data. It is a leading player in cloud computing, with annual revenues of $6.6bn and product offerings across a number of segments. It is also the fastest growing, with triple-digit growth rates over the past seven quarters

• Revenue is increasingly being transitioned from packaged software to an annual subscription model which should prove to be more stable and predictable.

Microsoft

Facebook is the world’s leading social networking site. It allows users to connect and communicate with friends, share photos and videos. In addition to its core site Facebook.com, it also owns Instagram, a photo editing and sharing app, WhatsApp, a global messaging platform, and virtual reality headset-maker, Oculus. In summary;• Digital advertising is expected to

grow significantly as media consumption continues to shift online. Within digital, mobile and social media advertising are emerging as the two key areas of spending

• Facebook is the leading media publisher across both mobile and social formats, and is well placed to exploit the growth in digital advertising. It has a global user base of over 1.5 billion people, three times its nearest rival

• The brand can offer sophisticated advertising campaigns with a deep level of audience targeting. We believe this gives Facebook significant pricing leverage

• Instagram is developing into an important fashion brand hub, with the potential to significantly increase advertising, while WhatsApp’s 800m users have yet to be monetised and Oculus continues to lead development on emerging Virtual Reality technology. We believe that these assets can generate both significant revenue and incremental margins for Facebook over the long term.

Facebook

Alphabet is a leading technology company, best known for its Google search engine. It generates the majority of its revenue from digital advertising. The group has expanded into non-search products and services and is also making significant investments in developing or acquiring new technologies through its Other Bets division. In summary;• Digital advertising is expected to

grow significantly as media consumption continues to shift online

• Despite competition from Microsoft, Google has largely maintained its share as the leading online search provider

• Alphabet has developed a number of other products and services that expand its user base, such as the Android mobile operating system, YouTube video streaming, Google Maps, Gmail email and Chrome web browser

• Non-advertising revenues now account for 10% of total revenue as the group focuses on expanding offerings to users through products like Google Play, cloud services and hardware products

• The Other Bets division is essentially a technology incubator, with exposure to potentially high-growth businesses in areas such as the internet of things, high-speed internet access, robotics, virtual reality, artificial intelligence, medical technology and autonomous vehicles.

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overlay of a wiring diagram.In the public sector market, we see Healthcare as being a strong potential market for AR, offering doctors or first responders the ability to pull up relevant medical information while keeping their

hands free. Police forces are also expected to use AR to allow them to see information and record videos while keeping both hands free: we are not too far away from a world of automated face scanning in large crowds and automated number plate scanning for

vehicles. Both VR and AR also have significant potential in the Education market as a teaching tool, allowing students to interact with a virtual world or go on virtual tours. Google has already created a number of virtual tours for use with its low-cost, fold-out Google Cardboard platform.

Share price (USD) Share price (USD) since inception Share price (USD)


Having reached $115 per barrel in 2014, the price of Brent crude plunged below $30 per barrel in January this year to reach its lowest level since 2003. Whilst that’s bad news for oil producers another question remains unanswered: why has such a big drop in the price of a commodity that is consumed worldwide not yet acted as a bigger economic stimulant, especially in the US?

Oil producers have started to reactThe current weakness in the oil price has been caused, in large part, by excess supply, as major market participants have sought to maintain market share through increased production, even as economic activity has slowed. Big oil exporters seem to have assumed that the market would eventually rebalance as cash-strapped, higher-cost producers were forced to exit the market as prices fell. Overall output would then naturally drop to more closely match demand.The problem is that the low oil price has started to put a strain on the finances of some oil exporting nations, particularly where funding for domestic spending

programmes relies heavily upon oil revenues. That probably explains February’s signs of some coordinated effort to counter the oil price slump as Saudi Arabia, together with some other OPEC members, and Russia agreed to a potential freeze of oil production at January’s levels. The mere suggestion of some cooperation between OPEC and non-OPEC members, together with data

T H E B I G P I C T U R E

WHERE IS THE “ENERGY DIVIDEND?”

PATRICK GORDON

SENIOR STRATEGIST AND HEAD OF RESEARCH

showing a decline in the number of active oil rigs in the US, has contributed to something of a revival in the crude oil price recently. At the time of writing (24 March 2016), Brent crude has crept back above the $40 per barrel level, to trade some 40% above its January lows.Nonetheless oil remains well below the $100+ per barrel seen during much of the 2011-2014 period. Furthermore, it is too early to judge how sustainable the recent recovery will prove to be, given that a production freeze at January’s levels would still leave output at near record levels and some major producers, such as Iran and Iraq are still not part of the ‘deal’. Without a strong recovery in global growth, the upside to the oil price may be relatively limited, particularly if excess supply that may have left the market as prices declined, returns as the oil price begins to rise.

Why consumers remain cautiousAssuming that oil prices stay low, households should benefit as a reduction in fuel and energy bills leaves them with a little extra disposable income; the so-called ‘energy dividend’. However, it appears that in the US – where the pass through of lower fuel costs is relatively high compared to the UK, which has a higher tax component – consumers have chosen not to spend all of this windfall. The increase in non-energy related consumer spending has not mirrored the percentage decline in spending on energy goods and services. Furthermore, the US savings rate, which stood at 4.8% of disposable income when the oil price started to fall in 2014, had risen to 5.2% as at January this year.

Consumer hesitancy may be, in part, due to just how far and fast the oil price has declined, prompting concerns about the wider strength of the global economy. These concerns have also been reflected in greater volatility in equity and bond markets, which can have an impact on consumer sentiment. More cautious consumers may have chosen to save any oil-price related windfall, or use it to pay down debt.

Overall, the strength of the labour market and wage increases are arguably far greater factors influencing the outlook for consumer spending. If fuel costs stabilise at these lower levels and consumers become more confident that this situation will endure, then they may yet decide to spend more of the ‘energy dividend’, particularly if the jobs market remains robust and the outlook for wage growth continues to improve.

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OP E C OI L P RODUC T ION ( M I L L ION B A R R E L S P E R DAY )

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During periods of market turmoil, bonds are often expected to perform well as investors pull their money out of ‘riskier’ assets such as equities and invest in ‘safer’ and often less volatile fixed income securities. However, this is only partially true because not all bonds behave the same way.

The highest quality government bonds, which include UK Gilts and US Treasuries, will usually perform well as risk aversion increases, however the relationship tends to weaken when it comes to riskier bonds. Lending to entities other than the highest quality governments brings additional risks so investors will normally ask for higher yields in return. The difference between the yield on a corporate bond and the yield on a similar maturity government bond is called a “spread”. The higher the perceived risk associated with purchasing the underlying bond the greater the spread and it is movements in this spread that will in large part

B O N D S R E S E A R C H

MIND THE GAP: WHY BOND SPREADS MATTER

Risk warning: Note that as with all investments there are risks involved in investing in corporate bonds. This includes the risk that the issuer may default. As a consequence you may get back less than you invest or lose your initial investment. Other factors which may affect the price of the bonds include, but are not limited to, the level of inflation, length of time until maturity, issuer’s financial position, demand for the bonds, and interest rates. Note that if interest rates start to rise then the amount of interest due to be paid on the bonds might become less attractive and as a consequence the price of the bonds could fall. Bonds are negotiable and consequently prices will fluctuate from issue until redemption at par (100). For some bonds the secondary market liquidity may be quite thin and the spread between the buying (offer) and selling (bid) price may be quite wide. Note that, unlike a bank deposit, a corporate bond is not covered by the Financial Services Compensation Scheme (FSCS).

Three retail bonds we currently like

Tullett Prebon 5.25% 2019This bond is issued by one of the world’s largest interdealer brokers, which recently reached an agreement to buy ICAP’s voice broking business. The deal is expected to increase the company’s scale, create cost synergies and improve operating margins.

Bruntwood 6% 2020This privately owned property investment, development and management company provides office space to public and private sector business customers in four UK cities; Manchester, Liverpool, Leeds and Birmingham.

Intermediate Capital Group 6.25% 2020This alternative asset manager specialises in private debt and equity financing. The group manages money for institutional investors including sovereign wealth funds, charitable foundations, fund of funds, pension funds and insurance companies.

Status Unsecured Secured UnsecuredOffer Price 102.75 105.60 103Income Yield 5.1% 5.7% 5.9%Gross Redemption Yield 4.3% 4.5% 5.5%Net Redemption Yield (40% tax) 2.3% 2.2% 3.0%Modified Duration 2.8 3.6 3.7Minimum Size 100 100 100Credit Rating BBB- (Fitch) n/a BBB- (S&P)Killik & Co Risk Rating 4 5 4NISA/SIPP Yes / Yes Yes / Yes Yes / Yes

* As at 29 March 2016 For details of the Killik risk rating system, please refer to page 13. Please speak to your broker for further details.

MATEUSZ MALEK

HEAD OF BONDS RESEARCH

determine how the bond performs in time of market turmoil.

When markets sell-off, particularly during periods of economic weakness, and investors flock to the safety of government bonds, corporate bonds with wider spreads – i.e. those with lower credit ratings and therefore a higher perceived risk – will often underperform, as investors start to question the ability of issuers to service their future obligations. On the other hand, if a bond carries a senior ranking and has been issued by a high quality corporate (typically rated investment-grade, BBB-/Baa3, or higher

by the ratings agencies) it will exhibit lower spread volatility and therefore be more likely to perform well in a ‘risk off’ environment.

Then there are subordinated bonds, often referred to as hybrids, which used to be issued by financial companies but in recent years have also been adopted by non-financial issuers. Subordinated bonds are typically issued by high-quality companies. The probability of default for most subordinated and senior corporate bonds from the same issuer is actually pretty similar: the difference is that, being subordinated to all other creditors, these bonds are likely to have minimal recovery rates. This means that they tend to underperform during periods of market turmoil, despite the fact that many carry investment-grade credit ratings.

Bond investors should therefore always look beyond credit ratings to fully understand what their portfolios are invested in and remember that not all bonds are created equal.


In volatile markets, wealth protection can be as important as wealth generation. Enter Absolute Return funds. We recently added two to our Recommended Buy list.

Both have impressive long-term track records and offer investors exposure to return profiles that exhibit near zero correlation – a statistical measure of how two investments move in relation to each other – to equity and bond markets. Blended into a traditional portfolio that means they can help to preserve overall returns whilst reducing volatility (price risk). This can be demonstrated by comparing the five-year return profile of two portfolios:

F U N D S I N F O C U S

Risk warning: past performance is not a reliable guide to future performance. The value of an investment may fall as well as rise. *Performance of the Schroder GAIA Blue Trend refers to the Cayman Island domiciled, Systematica BlueTrend Fund Limited prior to the launch of the UCITS fund. The Cayman Fund is not a recognised collective investment scheme for the purposes of the Financial Services and Markets Act 2000.

GORDON SMITH

FUND ANALYST, RESEARCH

TWO FUNDS THAT CAN REDUCE PORTFOLIO VOLATILITY

‘trend following’. Quantitative analysis identifies up and downward trend patterns across approximately 150 liquid markets. The investment philosophy is grounded in the belief that momentum and trends in markets exist because of inefficiencies which can be attributed to investor behaviour and the way information is disseminated between them. Since launch, the strategy* has delivered annualised on-target returns of nearly 11% with volatility of 14.0%.

How the two portfolios compareThe annualised returns achieved from these two portfolios over the last five years are broadly similar – the modified portfolio achieved fractionally higher returns than the traditional portfolio (6.1% vs 6.0%). However, adding the absolute return funds to the mix also results in the portfolio showing notably less volatility over the five year period (6.9% vs 8.3%). Another way of describing this is the modified portfolio achieved the same level of returns but with 17% less risk. Better still, the biggest drawdown experienced during this five-year period would have been around 25% less severe than the traditional portfolio (-8.3% vs -11.4%). This is summarised below:

• A traditional portfolio, containing a 60% allocation to equities (using the historical returns of the FTSE All-Share Index) and a 40% allocation to fixed income securities (using the Barclays Sterling Aggregate Corporate Bond Index)

• A similar portfolio but with an additional allocation to our two chosen funds. Here is a snapshot of each fund;

Old Mutual Global Equity Absolute ReturnThis fund features a market neutral portfolio run by the global equity team at Old Mutual. They use a systematic approach to calculate a return forecast for each stock within a global universe. From there a long (bullish) or short (bearish) position is determined. The fund is run with a target volatility of 5-6% (and aims for a Sharpe Ratio of greater than one) giving an expected net return to investors of cash plus 6%. Since launch, the fund has produced an annualised return of 7.0%, with volatility of just 4.8%.

Schroders GAIA BlueTrendManaged by Systematica, the BlueTrend Programme employs a sophisticated computerised system, referred to as

Equities60%

Fixed Income40%

Old MutualGlobal Equity Absolute Return

SchrodersGAIA BlueTrend*

AbsoluteReturn

20%

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10.0%

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Old MutualGlobal Equity Absolute Return

SchrodersGAIA BlueTrend*

AbsoluteReturn

20%

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80%

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T R A DI T ION A L 6 0/4 0 P ORT F OL IO T R A DI T ION A L P ORT F OL IO W I T H A B S OL U T E R E T U R N F U N D A L L O C AT ION

Traditional Historic performance (last 5 years) + Absolute return

+6.0 % Annualised Return +6.1%

8.3% Annualised Volatility 6.9%

-11.4% Biggest Drawdown -8.3%


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Income & Growth Meet-the-Manager

Fidelity Global Dividend

Fund Type UK OEICManager Dan RobertsFund Size £210mOngoing Charges 0.97%Historical Yield 3.1%This fund aims to generate income and long-term capital growth from a portfolio of global shares that offer attractive dividend yields, in addition to price appreciation. The fund targets a yield that is at least 25% above the yield of the MSCI AC World Index. The manager, Dan Roberts, has a distinct value style and focuses on resilient businesses with well covered dividends and strong balance sheets. Risk rating 5.

Income & Growth

Law Debenture (LWDB-LON)

Fund Type Investment TrustManager James HendersonMarket Cap £613mOngoing Charges 0.47%Historical Yield 3.4%Law Debenture is a London-listed Investment Trust which combines an Investment Portfolio with an objective to achieve long-term capital growth in real terms and steadily increasing income. An Independent Fiduciary Services (IFS) business, provides a range of services in the financial and professional services sectors. The trust has a long history of dividend progression and currently trades at a discount to net asset value. Risk rating 5.

Income & Growth Meet-the-Manager

Schroder Income

Fund Type UK Unit TrustManager N Kirrage, K MurphyFund Size £1.4bnOngoing Charges 0.91%Historical Yield 4.2%This fund aims to provide increasing income and capital growth, using a low turnover, value approach to build a portfolio of primarily UK equities. Although since 2013 value strategies have underperformed, the long-term argument for value investing is inescapable. We believe the Schroder’s methodology should deliver outperformance over time. Risk rating 4.

Growth

Schroder ISF Asian Total Return

Fund Type Luxembourg SICAVManager R Parbrook, L King FueiFund Size $2.5bnOngoing Charges 1.26%Performance Fee n/aThis fund aims for capital growth through investment in Asia-Pacific (ex-Japan) companies, while seeking to offer a degree of capital preservation through the tactical use of derivatives. The fund has an impressive track record and we believe provides an excellent way of benefitting from growth opportunities in the region without being fully exposed to the potential downside. Risk rating 5.

Growth Meet-the-Manager

Trojan Fund

Fund Type UK OEICManager Sebastian LyonFund Size £2.5bnOngoing Charges 1.07%Historical Yield 0.5%The Trojan Fund aims to achieve growth in capital and income in real terms over the longer term. Portfolio Manager, Sebastian Lyon, invests across asset classes and has delivered attractive returns with relatively limited downside risk. This strategy provides useful diversification benefits within portfolios. We continue to like the focus on valuation and the importance placed on capital preservation. Risk rating 4.

Growth

Polar Capital Healthcare Opportunities

Fund Type Dublin OEICManager D Mahony, G PowellFund Size £714mOngoing Charges 1.15%Performance Fee 10% of outperformanceThe Polar Capital Healthcare Opportunities Fund aims to preserve capital and achieve long-term growth by investing in a globally diversified portfolio of healthcare companies. The fund can invest across healthcare subsectors in order seek out growth opportunities within the industry. The fund provides exposure to key emerging areas such as digital health technology. Risk rating 6.

F U N D S R O U N D U P

Total return (last five years, indexed)Total return (last five years, indexed)

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All chart data source: Bloomberg Chart data to 14 March 2016 For details of the Killik risk rating system, please refer to page 13. Please speak to your broker for further details.

To view our ‘Meet-the-Manager’ short interviews, please go to

killik.com/insights/blog

MEET THE MANAGERAt a glance Old Mutual Global Equity Schroders GAIA BlueTrend

Fund Type Dublin OEIC UCITS Luxembourg SICAV

Launch 30 June 2009 9 December 2015

Manager Old Mutual Global Equities Team Systematica Investments

Fund Size $5.7bn $96m

Ongoing Charges 0.84% 1.93%


Wealth Manager of the YearKillik & Co

Investment and Wealth Management Awards 2015Winner

Wealth Manager of the YearKillik & Co


Best Wealth Manager for InheritanceTax and Succession PlanningKillik & Co


Best Full Sipp ProviderKillik & Co


Best Discretionary/AdvisoryWealth ManagerKillik & Co


The proof is in the puddingKillik & Co voted Best Wealth Manager 2014 and 2015

Past performance is not a guide to future performance and investments carry risks to your capital as well as potential rewards. Killik & Co is authorised and regulated by the Financial Conduct Authority.

confidant - spring 2016

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