Confidant - Autumn Issue 2015

CONFIDANTActing for clients as they would want to act for themselves

October-December 2015Published quarterly

INVESTING IN INDIA A short guide to an emerging powerhouse, page 6

Little and often Paul Killik on a simple approach for new investors p4

One lump or two? Sarah Lord looks at pension consolidation p11

My all-time Dream Fifteen An interview with rugby legend, John Spencer p12

An investment for all seasons Gordon Smith picks an all-weather fund p22

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 headoff [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


Killik & Co is a trading name of Killik & Co LLP, a limited liability partnership authorised and regulated by the Financial Conduct Authority and a member of the London Stock Exchange. Registered in England and Wales No OC325132. Registered office:

46 Grosvenor Street, London W1K 3HN. A list of partners is available on request. Killik & Co (Middle East and Asia) LLP is regulated by the Dubai Financial Services Authority. Telephone call are recorded for regulatory purposes, your own protection and quality control.

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

contained herein changes or subsequently becomes inaccurate, or if research coverage on the subject company is withdrawn

Partners or employees of Killik & Co may have a position or holding in any of the investments covered in this publication. You may view our policy in respect of managing conflicts of interest on our website.

“It won’t happen to me”. If I had to vote for the most dangerous words in investing, I would expect these to be on the ballot paper! According to the FCA, UK victims of fraud lose an average of £20,000 with as much as £200m being lost every year. Plenty of seasoned investors get caught out too, with the biggest individual loss recorded by the police at £6m. How are so many people being fooled? The main reason is that fraudsters are getting increasingly sophisticated and are smart enough to prey on our desire for a free lunch.

“RE: NON-RESIDENT ALIEN TAXWITHHOLDING REBATE”

This is a good example, highlighted recently by a US member of the WMA. The fraudsters use a three-pronged email attack. First they disguise themselves as someone you do correspond with (in this case, HMRC). Next, they pick a credible-sounding reason to contact you (an important

tax matter) and thirdly they dangle a carrot (the prospect of a tax rebate). The aim of the email is usually to extract personal details from you or perhaps even an immediate payment. The latter may be sold to you as an “administration fee”, “balancing payment”, “release fee” or any other number of vaguely plausible-sounding things.

WHAT TO DO

My advice is simple – never give away personal details, let alone forward money, unless you are 100% sure of the origin of the request and the identity of the recipient. You can

also help others by sending details of any suspicious emails to [email protected]. As to what to look out for on potentially bogus tax emails, here is a short checklist;• A sender address that is similar to,

but not the same as, HMRC’s• A direct offer of a rebate – HMRC

never notify tax rebates by email• A request for personal information

or payment information by email• Urgent requests for action, such as

“you must reply within 3 days”• A generic greeting, such as “Dear

Taxpayer” and/or no further personal ID reference

• A link to a fake website from a legitimate-looking HMRC link

Having been duly warned, I very much hope you will be able to relax and enjoy this quarter’s issue of Confidant.

Tim Bennett, Editor, Confidant

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

DON’T BE FOOLED BY THE FR AUDSTERS

CONTENTS

Matthew Lynn’s plea to firms p5 | Why Simon Marsh is excited by Tesla p8 | Tim Price makes the case for gold p9 | Jack Richardson talks polo p10 | Family Charters explained p13 |

Broker interview with Paul Martin p14 | On the ball p16 | Peter Bate’s small cap picks p17 | How to play online travel, p18 | Patrick Gordon’s big macro themes p20 | Mateusz Malek on bonds p21

KILLIK & CO SECURITIES MENTIONED IN THIS ISSUE

New India Investment Trust p7 | Aberdeen Global Indian Equity Fund p7 | First State Asia Pacific Leaders p7 | Tesla p8 | Conviviality Retail p17 | GVC Holdings p17 | Victoria p17 | Amino Technologies p17 |

Optimal Payments p17 | Horizon Discovery p17 | Marshall Motors p17 | Safecharge p17 | Expedia p18 | TripAdvisor p18 | Visa p19 | Accenture p19 | Goldman Sachs p19 | Travis Perkins p19 | Paragon 6% 2020 p21 |

Bruntwood 6% 2020 p21 | Intermediate Capital Group 6.25% 2020 p21 | AIMS Target Income Fund p22 | MW TOPS Fund p23 | Woodford Equity Income p23 | CF Morant Wright Japan p23 | BH Macro p23 |

Fidelity Global Dividend p23 | THS Continental Growth & Value p23

October-December 2015 — 3

One of the many lessons that I have learned from years of meeting and talking to people of all ages and from every walk of life is that we can sometimes be our own worst enemies. In particular we tend to avoid decisions in the short-term that will actually work in our long-term interest. For example, many of the people that I regularly meet outside the office talk passionately about their long-term goals, such as buying a home, helping their children with college fees, or making provision for a comfortable retirement. Yet, in many cases, they have no viable financial plan in place to ensure that these goals will be met. This is, needless to say, a particular issue amongst the younger people I talk to. Indeed I have often wondered why it is that otherwise perfectly sensible, ambitious people are unable to make this simple link between their aspirations and the steps they need to take in order to achieve them. Let me outline one thought.

At the heart of this problem lies basic human psychology. Numerous studies have shown that, through no fault of our own, we are biologically programmed to focus on our short-term survival and needs at the expense of properly thinking about our future circumstances. We are hard-wired with the ability to make fast decisions – which at one stage of our early evolution could quite literally make the difference between life, or death – without pausing to consider the full consequences. This was undoubtedly useful when dodging predators but is much less so when it comes to making rational choices about our money. The question is, what can we do about this type of innate human flaw?

BEATING YOUR OWN BRAIN

The first step is to acknowledge that they exist and the second is to find ways to circumvent them. That is the premise on which an entire school of thought – called behavioural finance – rests. In a nutshell,

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

it seeks to explain why people act in the ways they do and clusters some of our biases, such as the one I just mentioned, with personality traits – such as the ability to delay gratification. From there you can generate what we call “Financial Mindsets”. These are broad, recognisable descriptions of character types that are likely to behave in similar ways irrespective of, say, their age or income. This is a huge topic, yet I believe that it can ultimately be distilled down to a set of relatively simple principles that can help new savers and investors in particular to both understand what underpins their own attitude to money and adapt their behaviour to achieve better financial results.

THE RIGHT PHILOSOPHY

Over years of meeting and talking to people in all sorts of circumstances I have at times felt a little bit like a family finance GP, as people willingly offer me insights into their personal money concerns in the hope I might be able to come up with a diagnosis and solution. Within

the confines of a short article I’d like to remind you of one piece of advice that recurs during many of these conversations. It reflects what I suspect many GPs tell their clients about diet, exercise and their approach to alcohol – little and often works best! Putting aside regular, small amounts of money, something that many of you will have discussed with me before, will help brand new investors and in particular those with the least amount of willpower to become effective savers. Invested into equities, this drip-feeding approach imposes discipline, reduces the risk of bad timing decisions and brings the benefits that come from smoothing returns when the market dips, as inevitably it does from time to time. This seemingly simple strategy removes much of the irrational decision-making that so often blights long-term returns.

Throughout my career, I have consistently sought to make sensible advice – and the ability to invest appropriately – as accessible as possible. I have also consistently aimed to innovate, whilst understanding that handling other people’s money is a matter of huge trust. I am delighted to be able to mention here that I will soon be able to share with you the exciting results of my latest thinking in a way that embraces the future while placing great store on the values that have led us to where we are now. One principle will always underpin my entire philosophy – as a firm, we must strive for the deepest possible understanding of our clients, both current and future, so that we can best help them to achieve their goals.

SHORT TER M THINK ING CA N H A R M YOUR WEA LTH

PAUL KILLIK

SENIOR PARTNER

To watch our short video “Three ways you can be fooled by your own brain” please go to killikexplains.com and type “brain” into the search bar.

KILLIKEXPLAINS

Not always your friend

4 — October-December 2015

Helping the younger generation is a mantra that we hear constantly from political and business leaders. But what about older people? We should be putting as much effort into encouraging the older generation to work much longer – not just because it will otherwise be hard to pay for our pensions, but because it will be good for the economy.

No one can dispute that the UK is becoming an older society. Right now, there are four working age people for every pensioner. By 2035, that will have fallen to just 2.5, and by 2050 it will be down to just 2. People are living longer because healthcare is so much better, and the huge baby boomer generation born after World War Two is hitting retirement age. This is often portrayed by the media as a looming catastrophe, but with some smart thinking, the UK could turn it into an advantage. Why? Because older workers, it turns out, can be amongst the most productive.

OLDER OFTEN MEANS BETTER

In a traditional manufacturing-led economy, the majority of workers had to be pensioned off when they got past sixty-five – not many seventy five year-olds can, or should, still operate a steel forge or a JCB. But in a largely service based, white collar economy it is a different story. Assuming reasonable health, there is no reason why people can’t carry on working well into their seventies. Plenty of studies show they are just as, if not more, productive than their younger colleagues. One from the Berlin-based Max Planck Institute found that the 65 to 80 age group scored better in areas such as memory and motivation than 20-somethings. They have also been shown to have better social and team-working skills, which are precisely the qualities businesses increasingly need. That’s perhaps because older workers have had longer to get used to co-operating with other people. They have usually established better networks too – simply

HOW WE COULD HELP

So what needs to change to enable those older workers who want to, to make a bigger contribution? First off, firms need to be encouraged and incentivised not to automatically pension off good workers once they hit retirement age. Next, more flexibility needs be built into workplaces to allow older staff to work part-time, or with flexible hours. Thirdly, whilst age discrimination laws have been passed, they are rarely enforced and there is a strong case for strengthening them. Finally, financial institutions need to be more visionary when it comes to older entrepreneurs – one of the fastest growing groups of entrepreneurs is the over-50s but if they haven’t already built up the capital to start a business it can be hard for them to raise it.

In the last thirty years, a lot of progress has been made to put the infrastructure in place, and change attitudes, to make it easier for women to work on more equal terms. Maternity leave, flexible working, and perhaps more importantly, a greater acknowledgement of the pressures they sometimes face, have made a big difference. No-one can dispute the contribution that working women have made to GDP in return. Imagine the economic potential if we could also boost that 10% employment rate for the over-65s.

O P I N I O N

WH Y MOR E FIR MS SHOULD EMBR ACE OLDER WOR K ER S

because they have had decades in which to do so.

Just as women are starting to over-take men in the workplace, because they often excel at the kind of interpersonal and networking skills a modern economy needs, so we should be putting more effort into encouraging older workers to stay employed. The fact is we need them to. 73.5% of 16 to 64-year-olds are now employed, an all-time high. In short, people who want to work can do so to the point where employers often can’t fill vacancies with suitable staff. Yet nationally only 10% of the over-65s are working. Interestingly in London, by far the richest part of the country, the ratio is 12.9%, whereas in the North East it is only 6.4%. So it’s hard to argue that employing older people somehow disadvantages an economy.

MATTHEW LYNN

FINANCIAL COLUMNIST AND AUTHOR

FINANCIAL FITNESS AT 50+

For a free copy of our short, nine-step, guide to boosting your financial fitness over fifty, please contact your Broker.

4

Life for most forty or fifty-somethings is pretty hectic – who has the time to put together

what I call a personal balance sheet? We need to find some, and an adviser can help here.

Knowing what you are worth now is the crucial first step in planning how you will achieve

your financial lifetime goals. Here’s a summary of what you need to do.

Step 1

WHAT AM I WORTH?

THE THINGS I OWN

By the time we reach our fifth decade, most

of us own stuff and in some cases, quite a

lot of it. So, make a list of what you own

and, roughly, what you think it is worth.

I am not talking about a penny-accurate

calculation that tries to put a price on every

dinner plate but rather a sensible estimate

of the current value of your major assets.

These will probably include your home/s

(you may be fortunate enough to own more

than one), your car/s, your investments and

bank accounts, your pension plans, high

value possessions such as jewellery and art

and any business ventures you own either

in part or in whole. Don’t forget about

“hidden” assets, such as cash sitting in a

mortgage offset account.

The value of these assets can, for the most

part, be gathered pretty quickly – you

should have recent valuation statements for

your investments and pensions for example.

Refer to guides such as parkers.co.uk for

an estimate of the value of your car and

mouseprice.com for recent property sales

in your area. And don’t forget that you have

presumably already estimated the value

of many of your household belongings for

home contents insurance purposes.

On page 14 you’ll find an example of

a personal balance sheet that I would

encourage you to try to fill in – section

one deals with your assets. Once you have

completed it you are ready to turn to the

dark side and list your liabilities.

THE MONEY I OWE

In order to get to your net worth you’ll

need to come up with a list of the amounts

you owe to other people. Start with any

mortgage/s you have and then add in any

personal loans and credit card balances.

Again, try not to miss out “hidden debts”

that are easily forgotten such as store card

debts, outstanding student loans and hire

purchase arrangements on cars and/or

furniture.

MY NET WORTH

Once you have a full list of your assets and liabilities the final step is simple –

deduct your liabilities from your assets. Hopefully the result is a positive number that

represents your current net worth. This vital number will form the bedrock for your

future financial planning.

5

Step 2

REVIEW YOUR LONG-TERM GOALS

The next step is a big one and requires some careful thought. The answers you come up

with here will underpin many of the investment planning decisions you make now and in

the future.

In a nutshell you need to identify all of your major life goals so that you can start to

decide how you are going to pay for them. These goals are personal and unique – you may

have just a few, or a long list. Let’s look at a hypothetical family as an illustration of what

you are trying to achieve here.

MEET THE MCMARSH FAMILY

Paul McMarsh is a Partner in a firm of

accountants. He is 51 years old and married

to Sarah McMarsh, aged 50. They live in

a house in St Albans. The couple have a

daughter, Georgie aged 24, who has just

graduated and a son Clem, aged 18, who is

about to start university.

Having drawn up his wish list below, the

tough bit for Paul will be projecting both

the size and timing of his future income

and costs to decide whether he can afford

everything on his list. A decent cash

flow model can help here. The result of

this detailed exercise may be a pleasant

surprise to Paul (a surplus and perhaps an

opportunity to stop working sooner than

he expects) or the opposite. In the latter

case, all is not lost – we’ll look at some

ways to address a cash flow shortfall in

the next chapter.

The process I have summarised here can be

complex and time consuming, so do consider

getting some professional help.

After much thought and discussion with

his wife, Paul has come up with the

following list of financial priorities;

• He plans to retire aged 60 but would

prefer to stop working earlier than that

if possible

• On retirement he would like to pay off

the remaining £280,000 mortgage on the

family home

• Post retirement he would like to

maintain a standard of living which

he estimates will cost around £3,000

per month

• Sarah, who doesn’t work, is keen for

the couple to travel regularly during

their first five years of retirement at an

estimated extra cost of £5,000 per year

• Paul currently drives a company car and

would like to buy a new car costing

around £15,000 in today’s money on

retirement and every three years

thereafter

• The couple would like to gift their

children £20,000 each – Georgie will

receive hers in three years’ time to help

her with a deposit on a flat and Clem

will receive his sum in six years’ time

FINANCIAL FITNESS

FOR THE OVER 50s

YOUR GUIDE TO

STOP PRESS!

Our new guide, for savers aged thirty or over is also now available.


What are India’s strengths?Two stand out. Firstly, a youthful population of some 1.3 billion people helps to support domestic demand as urbanisation and a growing middle class combine to increase disposable incomes. While only one-in-ten Indians were classified as ‘urban’ in the last census, these consumers account for more than 70 per cent of the market for so-called fast moving consumer goods. This suggests there is plenty of room for growth.

Next, education. India has developed industries exporting generic drugs, information technology services and other business outsourcing services to the world, helped by a highly educated English-speaking workforce.

For investors, India offers a way to diversify a portfolio because the country’s capital markets tend to be less correlated with those located elsewhere, and are therefore relatively insulated from global volatility.

And its weaknesses?Decades of under-investment means India has appalling infrastructure. This is a major obstacle to the nation’s growth ambitions, especially if the country wants to be a manufacturing hub like China. Even a casual visitor will quickly realise there’s a desperate need for more

of everything – better roads, modern railways, efficient ports. Unfortunately, getting anything done in India is never straightforward – the country is notorious for excessive red tape, albeit Prime Minister Narendra Modi has made some progress.

Will China’s slowdown drag down India? I doubt it. Overall economic growth has either already outpaced, or is on track to outpace, China’s depending on which reports you read. The economy is in better shape than it was even a couple of years ago – inflation is down, as are interest rates, while the rupee has held up much better than most other emerging market currencies against a resurgent dollar. Foreign exchange reserves of more than US$355 billion are also at record levels.

India has been a key beneficiary of the windfall gains from cheaper oil and policymakers should be given credit for seizing this chance to scale back expensive fuel subsidies. Any progress made on reducing unproductive government spending (e.g. on subsidies) and boosting tax revenues is to be welcomed in a country where government spending has routinely exceeded revenues.

Which sectors most interest you?We hold HDFC, because we like the mortgage lender’s success in expanding in rural areas, its use of technology and conservative lending policies. The lender dominates the retail market and benefits from a liquid balance sheet, increased corporate and public investment in the wake of reform as well as the capitalisation issues at the state banks.

We also like cement stocks, such as Grasim Industries and Ultratech, as well as Holcim subsidiaries Ambuja and ACC,

which should benefit over the longer term from the government’s commitment to public works spending.

Meanwhile, planned welfare schemes for India’s poorest and the focus on reversing the decline in agricultural wages are positive for consumption trends. A rise in rural spending could drive demand for two-wheelers, which would, in turn, support auto-makers such as Hero MotoCorp. Furthermore, consumer stocks, such as Nestlé, Hindustan Unilever and Godrej Consumer Products, should also benefit from increased consumer spending power.

How much of a problem are high interest rates?High inflation is a problem in India. However, it would be harsh to lay the blame for this entirely at the door of the Reserve Bank of India given that poor infrastructure leads to delays and high levels of wastage when moving perishable goods from where they are produced to where they are consumed. Prices are also affected by seasonal factors such as the monsoon, when poor rains can reduce harvests and push up food prices, and global demand for oil (India is a major crude importer).

High interest rates do nonetheless restrict demand and slow economic growth. While bigger companies can cope by seeking new markets overseas, smaller companies struggle. In the long run this is bad for the economy (and consumers) because it stifles competition. In recognition of this, the central bank has now started to target inflation as a key component of monetary policy.

How much confidence do you have in the government’s reform program? India has enjoyed something of a renaissance as an investment destination,

T H E B I G I N T E R V I E W

R ECENT MEDIA ATTENTION ON CHINA HAS OVERSHADOWED ANOTHER EMERGING

M AR KET POWER HOUSE – INDIA.Confidant caught up with Adrian Lim,

a fund manager at Aberdeen Asset Management.


thanks largely to Modi’s election and his promises of far-reaching reforms. Since his election he has made far more progress in a short period of time than anyone could have reasonably hoped for.

However, investors’ love affair with the reform story cooled as the magnitude of Modi’s task became clearer. The obstacles to change are considerable and the government’s approach to reform has been to target incremental progress. Modi’s more ambitious reforms include getting new land acquisition legislation approved that will pave the way for infrastructure investment and implementing a nationwide goods and services tax that will boost trade between states. However political opposition to these initiatives remains strong.

Are Indian stocks expensive?Indian stocks have retreated from record levels earlier this year (chart) nonetheless it’s still hard to justify prices at existing levels unless there’s an improvement in corporate earnings. That said, while progress on reforms hasn’t been as fast as some people may have wished for,

the economy is in better shape and the market’s long term potential remains intact. We were big fans of Indian companies many years before it was fashionable to be so, and we’re still fans. The better Indian companies work hard in the interests of their shareholders, something we wish more companies in Asia would do.

What do you look for when evaluating Indian stocks?We seek out business models that are easy to understand. We also want firms that enjoy industry leadership positions that can be easily defended, have strong balance sheets with manageable debt and whose management teams demonstrate an understanding of the needs of minority shareholders.

Is weak corporate governance an issue in India as it is in China?As with any emerging market, weak corporate governance can be a problem. After years of unproductive investment, state-owned banks and other companies have limited capacity to support Modi’s reforms. That said we don’t think India should be singled out for blame and markets elsewhere are often much worse. Some of the best companies in our Asian portfolios are based in India. They also rank among the best in the region in terms of return on equity and earnings growth.

Will Indian households eventually embrace share ownership?Indians have traditionally preferred to park their spare cash in gold and property,

physical assets that they can see and touch. Even now the amount of money in bank fixed-deposits is almost three times the amount Indian households have invested in stocks.

However, there are some signs this may be changing. Younger Indians especially seem to show a stronger appetite for risk. There were indications, for example, that when foreign investors were reducing their exposure to the country’s stocks earlier this year, domestic investors were able to pick up some of the slack and help support asset prices. Investing in stocks becomes more attractive especially when gold prices are falling and property gains in major cities are losing momentum. Looking ahead, the foundations for a bigger retail investor base are certainly in place as more people become wealthier. However there is a lingering perception that equity investing is an uneven playing field for small investors, following a number of scandals over the past two decades. This will take time to shift.

How much progress is being made to open up India to overseas investors?The government sees boosting foreign investment as a key component of its economic strategy. Since Modi took office he has raised the foreign investment limit in the insurance industry and there have been amendments to some of the most restrictive labour regulations in the world (important if foreigners are to set up factories in the country). These are baby steps, but baby steps in the right direction.

P E R S O N A L V I E WT H E B I G I N T E R V I E W

Aberdeen Global Indian Equity Fund

Type of fund SICAV UCITSDomicile LuxembourgLaunch date 1996Fund size $4.9bnOngoing charges 1.40%This open-ended fund is run by the highly rated Aberdeen Asian Equity team, headed by Hugh Young and Devan Kaloo. The Fund invests at least two-thirds of its assets in equities and equity-related securities of firms with a registered office in India and/or companies which do most of their business there. Risk rating 6.

First State Asia Pacific Leaders

Type of fund OEIC UCITSDomicile UKLaunch date 2003Fund size £7.5bnOngoing charges 0.89%The First State Asia Pacific Leaders Fund aims for capital growth, primarily from quoted equities in the Asia Pacific region, excluding Japan and including Australasia. This fund therefore offer investors broader exposure to the Asia region. India is currently the largest single country exposure (24.5%). Risk rating 5.

New India Investment Trust

Type of fund Investment TrustListing LSE main MarketLaunch date 2004Market Cap £181mCurrent Discount 9% (as at 15/05/15)Ongoing charges 1.60%This London-listed Investment Trust aims for long-term capital appreciation by investing in companies which are incorporated in India or which derive significant revenue or profit from India. Risk rating 7.

Three funds we like

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As at 25 September 2015 For details of the Killik risk rating system, please refer to page 15. Please speak to your broker for further details.


Given the recent chaos at VW, the auto industry is perhaps at first glance, not a natural place to look for transformative businesses. Even if you have the financial clout of the UK government, the sector can be a graveyard for new entrants. In the late 70’s it backed the flamboyant Irish motor industry executive John DeLorean, to the tune of £100m, to build a futuristic sports-car in Belfast. That business folded in 1982, not long after production had begun after a long string of quality and production problems, cost over runs and the arrest of DeLorean on charges of drug trafficking. Car-maker Tesla is also attempting to chart a radical path but here the similarities to the ill-fated DeLorean end.

This time is differentLed by tech visionary Elon Musk, (founder of Pay Pal) Tesla’s aim is a bold one – to bring electric vehicles to the masses and in doing so change the energy market for ever. Musk is even trying to change the buying rules – rather than visit a traditional showroom, customers can view the product in a shopping mall gallery and then place their order on-line. Production is currently focused on the Model S, a £50,000 luxury sedan, which will travel

300 miles between charges. Owners can charge their vehicles at home by simply plugging the vehicle into the domestic electricity supply, or by using Tesla’s national Supercharger network for free.

Heady numbers Key metrics for the company are every bit as ground-breaking as the vehicles themselves. Sales this year should hit 55,000, yet the company is valued at around $32 billion. That’s half as much as BMW, a company that this year will sell in excess of 2 million vehicles.

Such a valuation might at face value appear irrational, however few vehicle manufacturers are forecast to deliver the kind of growth that Tesla is targeting. Deliveries of the company’s new Model X, an innovative gull-wing

doored SUV are due to start later this month and the Model 3, a midsized sedan designed to compete with BMW’s best-selling 3 series, is due to be pre-viewed in March 2016, with the first deliveries set for mid-2017. These launches could get them to half a million units by 2020, with revenues of $35 to $40 billion and profits of $6 to $7 billion. A lot of course can go wrong, but billionaire investor Ron Baron, founder of US fund house Baron Capital, thinks the business could be worth $120 billion in four to five years and a multiple of this after 10 years.

The Special One?Time will tell whether this is pure fantasy, but Tesla does have the feel of something special. When Apple launched the all-in-one iMac in 1998, few would have predicted that the firm would go on to be the world’s most valuable company, transforming whole industries along the way.

Tesla also has the capability to be more than just a car company, with US investment house Oppenheimer describing the company in a recent research note as “a transformative battery-powered product company, with leading expertise in cell (battery) design, packaging, associated software, human to machine and machine to machine interaction design”. A recent video clip of the company’s recent AGM makes it clear that not only is Elon Musk arguably the most visionary CEO since Steve Jobs, but just like Jobs, Musk can claim an equally evangelical customer base.

Today’s global technology industry is dominated by what is often described as the Four Horsemen – Apple, Amazon, Google and Facebook. All demanded a leap of faith from early stage investors. Only time will tell whether Tesla will break into this select group. However, one thing is abundantly clear – the potential is already there. Aug

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CH A RT: T E SL A SH A R E PR ICE

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

A SHARE THAT COULD ELECTRIFY YOUR PORTFOLIO

SIMON MARSH

PARTNER, AND EXECUTIVE DIRECTOR OF THE BRANCH NETWORK

Name Market cap (m) PE ratio Yield Price* Risk rating CurrencyTesla 33,460 111.5 0.0 263.12 ** USD

* As at 25 September 2015. **not covered by Killik & Co

For details of the Killik risk rating system, please refer to page 15. Please speak to your Broker for further details.


Now read that last sentence again. Our central banks and our commercial banks face no practical limit when it comes to money creation. Quantitative Easing creates money literally out of nothing. Commercial banks can issue almost infinite new money by way of loans, and deposits that beget more loans. That rather suggests that investors looking for a true store of value need to look elsewhere.

Do you trust the Central Banks?Andreas Acavalos, a management consultant, once told me that the decision to buy gold is not an investment. Rather, it is “a conscious decision to refrain from investing until an honest monetary regime makes rational calculation of relative asset prices possible”.

O P I N I O N

Gold may be an inert metal, but it can still polarise investors. Sceptics point both to its inability to pay interest, and to its inability to rally even in the face of multiple crises since 2013. True believers aren’t so easily dissuaded. They point to gold’s remarkable ability as an inflation hedge. In ancient Rome, for example, a gentleman could clothe himself more than adequately with the money value of an ounce of gold. The same is true today. So, who is right?

A brief history of goldUnlike today’s paper money, nobody was ever forced to use gold, making the yellow metal a firm favourite of libertarians. As Jörg Guido Hülsmann makes clear in his robust analysis ‘The ethics of money production’, mankind has used many things – including cattle, shells, nails, tobacco, as well as silver and gold – as ‘media of exchange’; that is, as things we can use as money to avoid having to barter. But in most developed societies, the precious metals eventually won over all their competitors as money, thanks to their physical characteristics. They are extremely scarce, highly durable, easily divisible, very malleable, and quite beautiful. Of course, it became impractical to use gold and silver in everyday commercial transactions, so we developed paper tokens that represented precious metal in safe custody elsewhere.

Then, in 1971, everything changed. With the US economy straining under the twin demands of a “guns and butter” economic policy, President Nixon took the US dollar “off gold”. That is, he severed the historic link and exchange value between the US currency and US national gold reserves.

The rise of paper moneyWe now inhabit Planet Finance. As Satyajit Das observes in his book on the topic, ‘Extreme Money’, what we use today as money is almost magically insubstantial:

IS GOLD A TRUE INVESTMENT?

For most gold-bugs, gold-backed money is the only real money. The banker JPMorgan agreed: “Gold is money; everything else is credit.” The gold-bug argument is that money issuance should be limited, because in the absence of limits, central and commercial banks sometimes go mad with money printing. In July 2008, for example, a bank in Zimbabwe cashed a cheque for $1,072,418,003,000,000 (one quadrillion, seventy-two trillion, four hundred and eighteen billion, three million Zimbabwe dollars). It couldn’t happen here, we presume.

At the moment, commodity prices, including gold, are collapsing. Gold itself has lost over 40%, in US dollar terms, since its all-time high in August 2011. Holding gold is deemed to be an act of faith. But ask yourself what is backing the US dollar, other than faith in politicians’ promises.

All eyes on China The Chinese authorities have tried, and recently failed, to use mind games (and printed money) to support their ailing stock market. A slowing China and weakening commodities prices point to softer global growth. Analyst and famous doom-munger Albert Edwards has no doubt that “the western central banks have set us up for an even bigger version of the 2008 Financial Crisis” – but this time “rock bottom interest rates and large fiscal deficits will mean only one thing: QE will be stepped up to such a pace that you will hear the roar of the printing presses from Mars. Gold is a must-have holding in that world.” If you believe we face short term deflation followed by potentially destructive inflation, you may be minded to agree.Tim Price is a columnist and the manager of the VT Price Value Portfolio.

TIM PRICE

VALUE INVESTOR AND AUTHOR

“Less than 8 percent of all dollars are in the form of paper money or coins. The vast majority of dollars exist in the form of entries in the accounts of borrowers or lenders. Paper money is an abstraction or, as most of it does not exist physically, the abstraction of an abstraction. Its sole reason for existence is as a medium of exchange. There are no limits to the amount of money that can be created.”

For our short educational video on whether gold is an investment,

or a pure gamble, please go to Killikexplains.com and enter the word

“gold” into the search bar.

KILLIKEXPLAINS


K I L L I K P O L O

ENGLAND TR IUMPH OVER SOUTH AMER ICA

On Saturday 25th July at Guards Polo Club the England polo team played South America. Killik & Co employees, clients and friends were entertained at the Rosebery Bus and treated to a pre-match briefing from England’s Young Player of the Year 2014, Jack Richardson.

THE TEAMS

England1. James Beim2. Mark Tomlinson3. Max Charlton4. Luke Tomlinson

South America1. Jose Klabin2. Manuel Fernandez Llorente3. Rodrigo Andrade4. Jaime Garcia Huidobro

If you are new to Polo and would like to watch a short video in which Jack explains the basic rules, please go to https://www.killik.com/polo

KILLIKEXPLAINS

POLO

JACK’S MATCH REPORT

On a sunny afternoon, England started the match potently, scoring two unanswered goals in the first chukka through James Beim and Mark Tomlinson. South America were a team that had never really played together and it showed – they looked slow and disorganised. However they sorted themselves out for the second chukka. Great plays from Rodrigo Andrade and Brazilian Jose Klabin put two goals on the board to draw the scores level.

Undeterred by this South American resurgence, England then scored two more goals – a penalty from Luke Tomlinson and a field goal from Max Charlton. South America replied with a goal from Manuel Fernandez Llorente to leave the half-time score at 4-3 to England.

South America appeared to be gaining rhythm with each chukka, but a swift field goal by James Beim and a superb cut shot from Mark Tomlinson put England up by three at the end of the fourth chukka.

South America’s ultimate downfall came in the fifth when, Manuel Fernandez Llorente hard-marked by Luke Tomlinson, the former England captain, missed an opportunity to put

South America within a goal. England’s strong counter-attack proved too much for their opponents as they secured a five-goal lead midway through the sixth and final chukka. A final field goal by James Beim was more than enough to seal a big victory for England against an ultimately disappointing South American side.

THE AWARDS

His Royal Highness, The Prince of Wales, attended the Coronation Cup and presented the prizes.

Coronation Cup debutant, Max Charlton, looked confident alongside the three English veterans, and was deservedly named Most Valuable Player.

Silver Lining, ridden by Rodrigo Andrade and donated by Harald Link, received the Best Playing Pony prize.

Prince Charles presents the cup

England in full swing

A buzz at the Killik bus

The perfect pitch side view


THE SPIRALING COST OF PRIVATE EDUCATIONThe cost of educating more than

one child privately can come as quite a shock. Fees at independent day schools have quadrupled since 1990. As our CEBR-commissioned report reveals they have increased faster than average earnings every year since then, to an average of £13,194 per annum per child, rising to £15,500 in London. So, a family with two children starting day school in 2013 and 2015 respectively can expect

to pay an estimated total of £553,000 over 14 years of education. This rises to around £831,000 where two children move on to board from the age of 13. Some thought needs to be given to how to meet this cost.

If you would like to discuss any aspect of the full report, available at www.killik.com/education and related saving and investing strategies, please contact your Broker.

W E A L T H P L A N N I N G

For a short educational video on the pros and cons of pension consolidation please go to our website at killikexplains.com and enter the word “pension” into the search bar

KILLIKEXPLAINS

ONE LUMP OR TWO?The pros and cons of pension consolidation

SARAH LORD

PARTNER, DIRECTOR OF WEALTH PLANNING

Remember the “job for life”? According to some estimates the average private sector employee now stays put at the same employer for an average of under five years. The problem is that each employer may offer a different occupational (or, “workplace”) pension scheme, which can only take contributions while you remain an employee. That means that regular job-hoppers will accumulate a string of small pension pots from which they will need to fund retirement later. So the question is, does it makes sense to gather all these smaller pots into one (a “consolidation”) or to leave them alone. Here is a summary of the points to consider.

THE CASE FOR CONSOLIDATING

Wider access to investmentsIf you combine your smaller pots into one via a Self-Invested Personal Pension (SIPP) you open up a huge range of investment options that may not have been available to you through an older style of pension (such as a “Stakeholder Pension”). Your bigger pot should also give you access to more specialist investment services that were previously unavailable.

Easier administrationAge UK research indicates that up to £3bn may be sitting unclaimed in pension schemes and that over one in five of us hold a pension that we have lost track of. This is a much greater risk for job-hoppers who build up numerous small pots with different providers especially if they also move house regularly. By consolidating smaller pots into one you make keeping track of your entitlements much easier.

Better buying powerOne of life’s rules, which applies to pensions, is that bigger buyers tend to be able to secure better rates. With a small pot – below say £10,000 – you will struggle to access the best annuity rates on retirement (meaning that the income you are offered will be smaller). Below a certain threshold you may not even qualify for an annuity or the cost of buying one may be prohibitive.

THE CASE FOR STAYING SMALL

Transfer penaltiesThe value of your smaller pot for transfer purposes and the level of any exit charge on transfer will vary from provider to provider so this is always worth speaking to your adviser about first.

Better termsSome older pension schemes may offer either guaranteed annuity rates and/or guaranteed returns. They may even offer more than the standard 25%

tax-free withdrawal on retirement. With some providers you may also lose a loyalty bonus by moving. This is worth checking and discussing before consolidating.

Choice comes with responsibilityWhile most savers welcome the additional investment freedom that SIPPs offer, you need to be thinking about whether you have the inclination, expertise and time to make your own decisions. If you do decide to switch to a SIPP you may also opt to seek help from a professional.

WHAT TYPE OF PENSION CAN I TRANSFER TO A NEW SIPP?

Whilst it is possible to transfer the benefits you have accrued under a final salary scheme into a SIPP, for many people this may not prove to be sensible. You should always seek advice before making any such transfer.

You can, however, consolidate many types of private pension. Here are some of the main examples;• Personal pensions• Stakeholder pensions• Occupational defined

contribution schemes• Retirement annuity contracts• Other SIPPs• AVCs• Executive Pension Plans (EPPs) Please speak to your broker for more information


K I L L I K R U G B Y

Ahead of the Killik Cup match on 21st November between the Barbarians and Argentina, Confidant

caught up with former England Captain and Chairman of the Barbarians, John Spencer.

What were your top three moments as a player?I enjoyed many great moments but my top three would be; winning the British Lions Test Series in New Zealand in 1973, being awarded my first cap for England and scoring a 65-metre try for England against Scotland.

Who has done the most for English rugby over your career?Bill Beaumont. He won 34 caps for England and played 15 times for the Barbarians. He went on the 1977 British Lions Tour to New Zealand and captained the 1980 British Lions Tour to South Africa (playing in 10 of the 18 matches). He then captained England to a Six Nations Grand Slam in 1980 – England’s first Grand Slam for 23 years.

As a non-player, he was the Manager of the 2005 British & Irish Lions Tour to New Zealand and has represented England since 1999 on the International Rugby Board (now World Rugby). He was Vice Chairman of the International Rugby

Board and has been awarded the CBE for his services to the game. He has always administered rugby in a fair, transparent and honest way – the game trusts him and he has commanded utmost respect. Importantly to me, he is also a great humourist and a very good friend.

Which of your post-playing roles have you enjoyed the most?Being England’s representative on the British & Irish Lions Board.

What challenges will the role of 2017 Lions Tour Manager bring?The biggest is probably appointing the right Head Coach and supporting Coaches. Bearing in mind New Zealand’s record as the number one Country in World Rugby, I have to try and find a way of winning a Test series against them on their own territory – that means selecting the best of the best. Being fair and transparent, whilst ensuring that discipline is maintained is also vital.

What are the biggest strengths and weaknesses of the current English game?Our greatest strength lies in the number of players playing top class rugby and the quality of the Premiership Coaches. Our main weakness at present is that we play our players too much at a senior level. The game is now so physical on a regular basis that we need to pay particular attention to player welfare.

What sort of game can we look forward to in the Killik Cup this year?An open, running game. However it won’t be just about entertaining the crowd – the players will be looking to impress their National Coaches. They can afford to take risks because of the quality of the rest of the team. Hopefully, we will get

a competitive, fast game that the whole family can enjoy.

What are the biggest challenges facing aspiring young players?Avoiding injury. The physical “hits” are so hard that injury is inevitable at some time. They must also be able to accept difficult routines including strict diets, repetitive training and austere living. They also face the challenge of finding appropriate employment at the end of their playing career.

What are your biggest passions aside from rugby?Travelling and gardening. Both take my mind off the game, which is no mean feat!

What’s the best piece of financial advice you’ve ever received?I have two. Firstly, own your own home. And secondly, avoid divorce – it can decimate your wealth!

Do you have any tips for today’s players?Here are four important ones;1. Always obtain a qualification

alongside playing – I have never regretted becoming a qualified solicitor for a moment

2. Get onto the property ladder as early as possible

3. Contribute to a pension scheme from an early age

4. Only ever take proper independent financial advice

Who would be in your all-time World Dream-Team? 15. J.P.R. Williams (Wales)14. Gerald Davies (Wales)13. David Duckham (England)12. Brian O’Driscoll (Ireland)11. Tony O’Reilly (Ireland)10. Jonny Wilkinson (England)9. Gareth Edwards (Wales)1. Hannes Marais (South Africa)2. Sean Fitzpatrick (New Zealand)3. Fran Cotton (England)4. Colin Meads (New Zealand)5. Willie John McBride (Ireland)6. Richard Hill (England)7. Richie McCaw (New Zealand)8. Mervyn Davies (Wales)

KILLIK RUGBY INTERVIEWS

To watch our interviews with key figures from the world of rugby please visit our blog page at https://www.killik.com/insights/blog/


Where is the quote from?It is an American version of the Lancashire proverb, ‘there’s nobbut three generations between a clog and clog’. In short, when a first generation makes money, the second spends it and third depletes the balance, leaving the fourth generation to start afresh. Statistics bear this out: according to the Wall Street Journal, in 70% of all wealthy families, the money has been spent, or otherwise lost, before the end of the second generation. By the end of the third generation, 90% of families have lost their money.

What is the solution?Effective family governance. The right strategy can help to preserve and even enhance wealth across multiple generations. In particular, a Family Charter can help to create a sense of unity and cohesion within families operating at today’s fast, disruptive pace of life.

So, what is a Family Charter?It is a document that sets out the interests and objectives of the family and provides a formalised structure for decision making which also encompasses family rules. Given that each family is unique, the subjects addressed within a Charter can vary hugely. There are nonetheless three common characteristics of a robust Charter; 1. Engagement. If family members

are involved in the creation of the Charter they will tend to have greater loyalty towards it

2. Evolution. Families who periodically undertake a review of their Charter are more likely to abide by its rules

3. Fitness for purpose. A successful Charter does not need to be overly complex or verbose

Who would need one?As families become larger and more complex, it can be helpful to formalise the way that they operate. In first generation families, parents are usually the primary decision makers. This relatively straightforward arrangement does not usually merit a Charter. However, by the second generation, leadership within a family may vary considerably. Sibling inheritors have to develop an understanding of the family and define their involvement with their other second generation siblings. From the second to third generation, family governance can get complex – for example, cousins from various branches of the family may be involved. What may have worked effectively for the first generation will almost certainly not work at this point. Family Charters can help to ease the transition of governance from generation to generation.

What sorts of risks do families face?Threats such as fraud, disputes between family members or litigation with third parties can undermine the family unit. In other cases, a death, generational shift of power, or the sale of a family interest may ignite a conflict. Pressure points may also stem from mismanaged investments, divorces and trust disputes. Risks to the family become more acute in the case of multi-generational family structures and those families with international interests.

One example of risk management in operation is the pre-nuptial agreement, which is especially relevant when a member of the family, who has an interest in the family business, marries. This type of agreement is becoming more and more common as a way of managing a couple’s expectations in the event of divorce.

Who enforces the Charter?Family Charters are not legally binding so they work best when they are underpinned by the three key principles of effective family governance: transparency, accountability and participation. In larger families, a family council can fulfil a role similar to that of a board at a company but with the objective of building cohesion and multi-generational connections.

Are they difficult to set up?Family Charters require time, energy and commitment. They usually evolve over a period of 12-18 months, followed by periodic review. Fees can vary depending on the degree of complexity, the family’s remit and the size and complexity of the family. Are the cost and hassle worth it? As the Spanish expression goes ‘those who don’t have it make it, those who have it lose it.’ When families successfully mitigate the latter risk, the answer has to be “yes”.

F A M I L Y M A T T E R S

“SHIRTSLEEVES TO SHIRTSLEEVES IN THR EE GENER ATIONS”

warns Lucy Prichard Jones, a Partner at law firm Spring Law.

For our short video on what parents can teach their children about money please visit killikexplains.com and type “children” into the search bar.

KILLIKEXPLAINS

“Risks to the family become more acute in the case of multi-generational family structures and those families with international interests.”


How long have you been with the firm, and what was your background before you joined?I’ve been at the firm for 14 years in total, with just a short break after six years to do some travelling. After studying Business and Marketing at university I worked for a company that facilitated offshore seismic exploration for the oil and gas industry. A collapse in the price of oil put paid to that and taught me about the harsh realities of market cycles at a young age!

At the time it was quite a shock but it gave me an opportunity to really think about what I wanted to do. I had always thought that stockbroking could provide an interesting and varied career, so when an opportunity came up to join Killik & Co I took it and have never really looked back.

What was your route to Branch Manager?When I first joined the firm, I spent a year in the City branch. I then worked in Chelsea – the first and original Killik branch – for five years. After my short

B R O K E R I N T E R V I E W

PAUL MARTIN

PARTNER AND BRANCH MANAGER

A DAY IN THE LIFE Killik & Co’s busy Esher branch has been winning new admirers following a recent

refurbishment. Confidant met Paul Martin, Partner and Branch Manager.

spell of travelling I came back to the Mayfair Head Office branch for a number of years and then moved out to Esher in 2013.

Who is in your team?I work with two experienced brokers, David Fell and Charlie Maclean. They liaise regularly with Phillip Arbon, a wealth planner, who spends two days a week in the branch. Arifa, our busy team assistant, is the first face most clients see when they come into our branch.

These are exciting times for us as we’ve just refurbished the office and created some extra space so that we can grow further.

What are your main roles?My primary job is still looking after clients and managing their assets – that’s a huge responsibility and a part of my job that is exactly the same as the rest of the Broking team.

On top of that I manage the branch and look for ways to promote Killik & Co. We want to build and maintain strong relationships in the local community, which means that I meet a lot of interesting people and businesses on a regular basis.

What makes a Killik & Co Broker different? It is the fact that they are acting, in many cases, as a client’s trusted adviser.

In addition to advising on, dealing and managing investments, we find that if a client’s circumstances change, we are often the people they turn to early on. That creates a very important level of responsibility and accountability but also helps us to build some great relationships. In short, the more you know about a client and the more they are willing to trust you, the more you can help them.

The toughest aspect of the job these days – for clients and brokers alike – is dealing with increasing regulation. Take pensions as an example – we are bombarded with constant legislative changes and many are frankly not improvements in my opinion. As a result, a number of our clients are continually having to tweak their saving strategy, which takes time and effort.

What types of people come into your branch?Absolutely all kinds! Every client has a unique set of personal and financial circumstances and their background story is always different to the next person that you meet. We constantly meet individuals who are local residents or who work for a local organisation. Sometimes they just pop in having spotted us in the National Press. As a result, although our branch may look relatively small, our catchment area is very wide and includes Surrey, Sussex and South London.We currently meet a lot of people aged 40+ either with young families to finance, or who are looking towards retirement and wondering whether they have done enough to hit their target retirement date. Many of them are financially-savvy professionals looking for someone to take day-to-day investment management responsibility from them. Alternatively they may Come in off the pavement...


B R O K E R I N T E R V I E W

just want a partner to bounce ideas off, steer them along and check their progress towards their financial goals.

What are people most worried about right now?Retirement planning is a very big area at the moment in an environment of low interest rates and annuity rates. Many people who were looking forward to retirement say 10 or 20 years ago were anticipating much higher rates. So they want to know when they can expect to retire, what sort of income they might receive and how they should plan ahead. We can help in a range of areas from lifetime cash-flow modelling to advising on pension consolidation.

We also see a lot of younger clients for whom retirement could be 20-30 years away. They are more likely to want to ask “How can I maximise the returns on a portfolio and invest tax-efficiently?” The answer may involve ISAs or pensions or, in some cases, another solution altogether.

What do you offer that an investor couldn’t do for themselves?We meet many clients who know a lot about a particular part of the market and have tended to concentrate their exposure around it. So often we can help them by reducing their single stock risk and introducing proper diversification, something DIY investors often overlook. In the process they may also rely on us to explain good opportunities that they have previously not fully understood and have therefore avoided.

We also look overseas more often than some DIY investors and we do so with a different approach. Rather than asking “what’s the best pharmaceutical business in London?” we’ll think

“where are the best companies located globally?” They could be listed in the US or Europe for example – our detailed in-house research gives clients the comfort that someone has done the groundwork for them.

We are also good at spotting big investment themes and identifying the best new ideas within them, rather than just recommending today’s expensive market-leaders.

Helping the individual retail investor has been at the heart of the Killik & Co philosophy since the firm was started. How is this being maintained?A key feature of this business is the dedicated Broker – clients value having a direct phone line or email. They like to be able to get in touch and have a conversation about what is happening in the market or what they should be doing next. Our high street branches actually allow anyone to drop in, meet the team and start a conversation.

I also think that our Killik Explains educational videos, and the other educational material that we produce such as our new Financial Fitness Guides, are incredibly helpful. Key ideas are put across in a way that appeals both to people who don’t have much experience, or do but want a bit of a refresher.

What’s the best piece of advice you have ever received?Run your winners and cut your losers. It’s tempting sometimes to take a profit too early because it makes you feel good. Equally we often hang onto poor investments, willing them to go up. The result can be a very odd-looking portfolio.

Do you have a favourite quote? Stock market investors need to understand short-term risk but shouldn’t ever be forced to sell at just the wrong moment. This was summed up neatly by John Maynard Keynes, “Markets can stay irrational longer than you can stay solvent.” I think this is a great reminder of the need to have a long-term time horizon and a well-diversified portfolio.

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

From left to right, Charlie Maclean, Arifa Shaikh, Paul Martin, David Fell


Throughout the Rugby World Cup Killik & Co has run a competition to name the number of England players on the giant Killik & Co rugby ball (pictured). This is as part of Richmond Council’s TRY IT Festival showcasing the borough during the tournament. The ball bears the name of every single capped England player since international rugby began in 1871.

Killik & Co’s Richmond branch manager Sam Petts said: “We were keen to support the local council with promoting the Rugby World Cup Fan Zone and thought the idea of large rugby balls throughout the borough was very innovative. We hope that anyone visiting the Fan Zone enjoys the atmosphere, sees if they can spot our ball and tries to guess how many names are on it.”

Winners will receive tickets to the Barbarians v. Argentina match on 21st November. Entrants can still post their guess, along with a selfie taken alongside the ball, by 1st November 2015 to @killikrugby with #ontheball Terms & Conditions: Entrants must be aged over 18. Closing date 01.11.15. Three winners will be selected at random. Winners will be notified by 02.11.15 through Twitter. Tickets are non-transferrable. No alternative prize is available. Entries limited to one per person.

C O M P E T I T I O N

ON THE BALL

From left to right: Counsellor Meena Bond, Killik & Co Partner Sam Petts and ex-England lock Simon Shaw

How many names appear on this ball?

Are you looking for a highly flexible regular savings product?The Killik & Co Monthly Savings Plan provides investors with an opportunity to access a discretionary managed solution by saving from as little as £200 per month. The service allows you to invest regular amounts at regular intervals, helping to avoid the difficulty of deciding on the best time to invest in the market.

Please speak to your Broker for further information.

The value of your investments and the income from them may vary. There is a risk that you could get back less than you invest.


S M A L L C A P S

FOUR SM ALL-CAP M& A PLAYS

PETER BATE

PORTFOLIO MANAGER

Smaller companies tend to see more takeover activity than their larger peers as £50-£100m bolt-on buys are easier to fund than mega-deals. Many investors assume that having one of their holdings taken over at a healthy premium is the way to benefit. However we have also seen strong gains amongst businesses where we have provided the capital to fund acquisitions. Here are four examples where we think the full value of recent deals has yet to be fully reflected in the share price. Please speak to your Broker for more details.

Conviviality Retail – happy hourAs the owner of the UK’s largest chain of franchised off-licence and convenience stores, this business is sometimes seen as a retailer. However, we believe it should be viewed as a wholesaler, since it buys from drinks manufacturers and then sells on to franchisees. In that context, the recently announced acquisition of Matthew Clark is exciting.

Matthew Clark is the UK’s leading drinks distributor and bigger than the next seven independent competitors combined. The key feature of this deal is the big increase in buying power the combined group will enjoy – it will be buying over £1bn of product per annum.

We would expect the group to take advantage by extracting higher volume rebates. We also see clear short term savings where both businesses separately buy the same product from the same supplier at different prices.

GVC Holdings – game onThis multinational online gaming business derives the bulk of its sales and profits from unregulated markets, including Turkey (via the 2013 acquisition of assets from Sportingbet) and Brazil/Latin America. GVC recently announced a £1.1bn offer for digital entertainment firm, Bwin.Party.

The key feature of this deal is the €125m of cost synergies that have been identified by GVC. It can claim a good track record in integrating and restructuring acquisitions – the Sportingbet deal in particular had a

number of similarities to Bwin (albeit on a smaller scale), with Sportingbet being a significantly loss maker at the time. Following this deal, the enlarged group will generate more than 50% of sales from regulated or locally taxed markets. So, while cost savings will mainly drive earnings, a reduced exposure to unregulated markets should also drive a re-rating.

Victoria – fancy footworkThis firm is a manufacturer and distributor of carpets, carpet tiles and floorcoverings with operations in the UK and Australia. The group targets residential and commercial customers, with a focus on the mid to high-end market. New management, appointed in October 2012, have reduced overheads, overhauled the balance sheet and made a number of acquisitions.

Victoria is aiming to take advantage of a large, fragmented market where sellers are in a relatively weak position and may face liquidation. The company can then extract economies of scale by tackling inventory levels, purchasing, logistics, pricing, and spare capacity. The most recent acquisition, of Interfloor, is a great example.

Amino Technologies – boxing cleverAmino Technologies is a provider of set top box technologies to regional cable operators. The group has a strong presence in North and Latin America and Eastern Europe and has sold more than 5m boxes. Amino typically targets smaller operators, who are unable to develop their own set top boxes or fully supply consumers demanding the latest innovations (such as multi-screen cloud TV).

We got involved via a placing of shares aimed at raising £21m to part-fund the acquisition of Entone, a key competitor, and similar, but slightly smaller, business. Aside from removing a key competitor, the deal will provide a direct sales force in the US, bolster the technology offering and generate cost savings.

Name Market cap (m) PE Yield (%) Price (p) Risk rating Currency

Conviviality 125 14.2 4.6 190.50 8 GBp

GVC 251 8.3 10.0 410.00 8 GBp

Victoria 233 25.9 0.6 1342.50 8 GBp

Amino 111 18.4 3.4 159.00 9 GBp

*As at 25 September 2015

Summary

Name Market cap PE Yield (%) Price (p) Risk rating Currency

Optimal Payments 1,588 19.5 0.4 338.00 8 GBp

Horizon Discovery 149 N/A 0.0 159.50 9 GBp

Marshall Motors 139 N/A N/A 181.00 9 GBp

Safecharge 403 23.8 2.5 266.50 8 GBp

Four more stocks worth watching…


*As at 25 September 2015


Technological disruption – a theme that sees technology enable new forms of competition or industry entrants, is now impacting most industries. Indeed it is something of a “mega-theme” for us given that it is the main driver behind many other themes that we have highlighted over the past few years, including e-Commerce, solar energy, the mobile internet and big data. One area where technological disruption has had a huge impact is the travel industry, where several exciting, strong players have emerged in online travel in particular.

The growth prospects for the online travel market are driven by two powerful trends;• The growth of global travel as the population

ages, leisure spending increases in developed markets and incomes rise in emerging markets

• Ongoing massive technological disruption evidenced in the move away from traditional travel outlets to online research, planning and booking

The total travel market (both online and offline) has grown at approximately 4% in the last four years. However the online travel market has seen much stronger growth, with total bookings rising at around 10% a year since 2011 (see chart). We expect these growth rates to continue for the next few years.

Online bookings now account for roughly 38% of total travel bookings, with penetration in developed markets as high as 45%. However, we believe that online travel bookings will account for over 50% within the next 10 years. Further, because the travel market (online and offline) is fragmented, we believe leading operators can continue to gain market share. Our two favoured ways of playing this boom are Expedia and TripAdvisor (see boxes on the right). For more details on these, including a copy of the full research note, please speak to your Broker.

TripAdvisor gets a positive review

The world’s most visited travel website features listings for over 1.7m hotels and holiday rental properties, 3m restaurants, and 560,000 attractions. The real value of the site lies in its content – over 250m reviews, opinions and rankings that help steer customers towards the travel services and products that suit them best. The company transitioned from a pure listing and review site to a metasearch engine (where customers can compare prices across different vendors) and is now in the process of allowing customers to book directly through the site. In summary;• TripAdvisor’s user-generated content is

extremely valuable and virtually impossible to replicate. According to the company, 40% of people who book a hotel visit TripAdvisor during their research, and we believe this penetration will continue to increase

• The main revenue stream is click-based advertising, where a customer converts from a TripAdvisor search and then books through a partner site. Click-based advertising revenues should rise as visits increase visits and conversion rates rise

• The company is rolling out an “Instant Book” feature, which in time could potentially impact OTAs. It also represents a large opportunity for the company to monetise more of its traffic and content

Expedia compares well

The world’s second-biggest online travel agent (OTA) owns popular travel booking websites such as Expedia.com, Hotels.com and Trivago (a price comparison site). The business started out mainly catering to customers booking flights and hotels in the US. However, in the last few years, Expedia has moved into international travel, with non-US bookings now accounting for 45% of revenues compared with 21% in 2005. It has increasingly become a hotel booking business too, with hotels accounting for 70% of revenues in 2015 and an even greater share of profits. The company also acts as an agent for air tickets, car hire and cruises. In summary;• The travel market (online and offline) is

fragmented and we believe leading operators can continue to gain market share. Despite being the second-biggest player, Expedia accounts for only 5% of gross bookings for the travel industry, leaving plenty of room for growth

• Expedia currently has 257,000 hotels on its sites, compared to larger rival Booking.com, with 700,000 hotels. Expedia is rapidly closing this gap by adding 80,000 hotels a year (many of them in European markets), which will provide a boost to revenue

E Q U I T Y R E S E A R C H

NICOLAS ZIEGELASCH

HEAD OF EQUITY RESEARCH

TWO WAYS TO INVEST IN THE ONLINE TR AVEL BOOM

Global travel market – online travel booking as % of total market

TripAdvisor Share PriceExpedia Share Price

Sources: PhocusWright, Killik&Co

To watch our free educational videos on a range of common investment ratios, please go to our website at killikexplains.com and click on the Ratios tab on the left hand side of the screen.

KILLIKEXPLAINS

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E Q U I T Y R E S E A R C H

Key data

Name Market cap (m) PE Yield (%) Price* Risk rating Currency

Travis Perkins 5,037 15.6 2.3 2022.00 6 GBp

Accenture 63,699 18.6 2.3 97.77 6 USD

Visa 171,981 27.1 0.7 70.24 6 USD

Goldman Sachs 81,225 10.1 1.4 176.91 7 USD

TripAdvisor 9,350 31.5 0.0 65.46 7 USD

Expedia 15,503 28.9 0.7 120.50 7 USD

* As at 25 September 2015

Charts all sourced from Bloomberg


Four other dynamic stocks from our Best Ideas List

Another great play on the theme of technological disruption, the world’s leading global payments technology company does not issue cards, nor does it extend credit to cardholders – instead it generates revenue from over 15,000 financial institutions that issue Visa-branded cards and from the merchants who accept them by acting as a network operator to process card payments. In summary;• In 2013 Visa cardholders spent $4.4tn over Visa’s

network

• Visa’s business model has proved to be remarkably resilient, delivering through-the-cycle growth

• The firm is well positioned to benefit from an increased movement of payments away from cash to electronic forms. This trend is being driven by the emergence of mobile payment systems such as Apple Pay and Android Pay, and the increasing popularity of e-commerce

• Visa’s network allows it to provide a secure, reliable solution that is interoperable with emerging payment technologies

Visa will do nicely Visa Share Price

One of the world’s leading professional services companies, Accenture provides management consulting, technology and outsourcing services to large clients across a broad range of industries. In a nutshell, it exploits its expertise in different industries and technologies to help its clients run their businesses better. In summary;• Technological disruption is rapidly changing the

dynamics of many industries, creating significant opportunities for Accenture to help its clients compete, not only against traditional competitors

but also new entrants using technology as a competitive advantage

• Accenture has significant competitive advantages, blending global industry expertise with deep technology knowledge and services

• Accenture has been an early mover in digital, with specialised solutions such as: Interactive, covering marketing and advertising; Mobility, to help clients develop mobile solutions; and Analytics, helping clients use data

Accenture – transforming through technology Accenture Share Price

Goldman Sachs – invest to bank profits Goldman Sachs Share Price

Once infamously labelled the “Vampire Squid” by Rolling Stone magazine, this global investment banking, securities and investment management firm provides a huge range of financial services to a diversified client base that includes firms, other financial institutions, governments and high-net-worth individuals. In summary;• Unlike many peers, Goldman Sachs is a pure-play

investment bank, with 90% of its revenues derived from institutions. It has lower earnings volatility than its peers thanks to its diversified

revenue streams, a variable cost structure and a strong risk management record

• We believe that the bank is well positioned to benefit from the withdrawal of investment banking capacity from the market as universal banking rivals have struggled to boost their capital positions and reduce earnings volatility

• The bank should be able to capitalise on the expected increase in market volatility as Central Bank monetary policy begins to diverge globally

Travis Perkins – improving all the time Travis Perkins Share Price

This leading company in the UK builders’ merchant and home improvement markets has a portfolio of strong brands, including Travis Perkins, Wickes, Tile Giant and Toolstation. The group’s customer base includes consumers, tradesmen and the contract market. In summary;• The group offers strong exposure to the recovery

in UK housing and construction, with two-thirds of its revenue coming from residential markets

• In a fragmented market, the group can take share

by expanding its branch network, entering new market segments and exploiting multi-channel opportunities

• The company offers a strong exposure to a recovery in the building industry and its high fixed cost structure provides scope for earnings surprises as volumes and prices increase

• The group has a strong balance sheet with dividend growth expected to beat earnings growth

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In the UK, the data have been mixed and the economy remains unbalanced, with the service sector and consumer the driving forces behind the recovery, whilst manufacturers have faced the headwinds of a strong currency and weakness in some export markets. Consumer confidence indicators remain high as UK house prices have risen strongly since the financial crisis, particularly in London and the South East, unemployment has fallen significantly, and wages have started to rise well ahead of the rate of inflation. There is enough in the data to suggest that the Bank of England will follow

the US in raising interest rates. The exact timing of such a move remains uncertain.

The volatility in global equity markets over recent weeks has been largely attributed to concerns about the slowdown in China and the potential impact that a ‘hard landing’ in the world’s second largest economy could have on global economic growth. China’s slowdown is reflected in a number of economic indicators, including declining imports and exports, a deterioration in certain manufacturing and non-manufacturing sector surveys and other ‘real economy’ indicators such as the Li Keqiang Index (Chart 1), which represents a weighted average of annual growth rates in outstanding bank loans (40%), electricity production (40%), and rail freight volumes (20%).

Outside of China, however, indicators from a number of developed economies have continued to paint a picture of further steady, albeit unspectacular, economic improvement. The eurozone continues to make progress, notwithstanding the need for further structural reforms, and the region’s manufacturing and non-manufacturing PMI surveys point to expansion (Chart 2). The likelihood is that the ECB’s monetary policy will remain supportive for a long time yet, with an extension of the current QE programme beyond September next year a possibility if inflation fails to increase from current depressed levels.

In the US, economic activity has also continued to expand, and the labour market has tightened further. The headline unemployment rate (U3), at 5.1% in August, is below the level at which the Fed started raising rates during the last cycle in June 2004, although the under-employment rate (U6) which includes part-time workers who would prefer full-time employment, is still relatively high at 10.3% (August).

…despite US dollar strengthThe strength of the US dollar is proving to be a headwind for those multinationals for whom exports are an important source of revenue (Chart 4). Further policy divergence between the US Federal Reserve (if US rates increase as expected) and other central banks adopting more accommodative stances, could lead to further increases in the US dollar.

However, whilst US dollar strength is having an impact on manufacturers’ exports, the disinflationary effects of the strong dollar, such as cheaper prices of imported goods and lower gasoline prices, together with rising wages, provides a boost to consumers’ disposable incomes. This is important for US economic growth, given the importance of consumption to overall GDP. As the chart below shows (Chart 5), the more consumer-focused non-manufacturing part of the economy has remained robust, even as manufacturing activity has weakened.

I N V E S T M E N T S T R A T E G Y

THE BIG PICTURE

Chart 6 – UK Wage Growth v CPI InflationChart 2 – Markit Eurozone Manufacturing and Services PMI

Chart 3 – US Unemployment (U-3) and Under-employment (U6) Rate, %

3. The US remains resilient…1. China is slowing

4. The UK – unbalanced growth

2. Positive signals continue from Europe

Chart 4 – ISM Manufacturing Export Orders Index

Chart 5 – ISM manufacturing / non-manufacturing divergence

Chart 1 – Li Keqiang Index

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P A T R I C K G O R D O N , P A R T N E R , S E N I O R S T R A T E G I S T

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


We have long believed in the benefits of investing directly in bonds and building bespoke fixed income portfolios. With the US Federal Reserve and the Bank of England mulling the timing of an interest rate rise, this is a good time to summarise why we prefer this approach over investing in a bond fund. In a nutshell, portfolios of directly held bonds have different characteristics and trade differently to bond funds. Whilst both offer diversification, which helps to mitigate issuer-specific risks, bond funds usually do not have specified maturity dates, so investors are tied to secondary market prices when they want to exit. A portfolio of individual bonds can offer better visibility over both the timing and amount of income as well as the principal repayment, provided the bonds are held to maturity. A known final redemption date for bonds within a portfolio offers an investor the ability to

‘ride-out’ bouts of market volatility. This is becoming ever more important in the current market environment.

Since the 2007/8 financial crisis, the whole fixed income asset class has received significant inflows. Combined with central banks’ asset purchase programmes (QE) this has pushed yields to historically low levels. Meanwhile, secondary market liquidity has deteriorated, making it more difficult and costly to trade bonds, particularly for larger market participants. Importantly, the bond market is now starting to reflect the

increasing likelihood of rate increases from the Bank of England and the US Federal Reserve.

In this environment we believe that investors should keep a close eye on the duration of their portfolios (a measure of the sensitivity of the bond’s price to a change in yield). In our view, this is easier to achieve with a portfolio of individual bonds compared to a bond fund where the constituents may change constantly, reducing overall visibility. What’s more, since the London Stock Exchange’s Order book for Retail Bonds (ORB) launched more than five years ago, the single bond list has improved and now features 178 corporate, government and supranational bonds. Recently the ORB also celebrated a major milestone, and its first ‘born on ORB’ bond redemption, when the Lloyds TSB 5.375% 2015, a 5-year bond issued back in September 2010, was fully repaid on 7 September 2015.

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

THE BENEFITS OF A BOND PORTFOLIO

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

Paragon 6% 2020Paragon Group of Companies (Paragon) is a specialist lender of buy-to-let mortgages to landlords and residential property investors in the UK. The group operates Paragon Mortgages, Idem Capital and Paragon Bank.

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

Intermediate Capital Group 6.25% 2020Intermediate Capital Group (ICG) is an alternative asset manager specialising in private debt and equity financing. The group manages €15.6bn for over 200 institutional investors including sovereign wealth funds, charitable foundations, fund of funds, pension funds and insurance companies. Additionally, ICG invests on its own balance sheet. The group generates income from management fees; interest, dividends and capital gains from its investments; and fees from arranging and underwriting debt.

Status Unsecured Secured UnsecuredOffer Price* 102.75 105.40 105.50Income Yield 5.8% 5.7% 5.9%Gross Redemption Yield 5.3% 4.7% 5.0%Net Redemption Yield (40% tax) 3.0% 2.4% 2.6%Modified Duration 4.3 4.1 4.3Minimum Size 100 100 100Credit Rating n/a* n/a (BBB-)Killik & Co Risk Rating 6 5 4NISA/SIPP Yes/Yes Yes/Yes Yes/Yes* As at 25 September 2015 For details of the Killik risk rating system, please refer to page 15. Please speak to your broker for further details.1 Although the bond is not rated, the Paragon Group of Companies is rated BBB- by Fitch, with a ‘stable’ outlook.

MATEUSZ MALEK

HEAD OF BOND RESEARCH


Diversification is a fundamental concept. By allocating money to a variety of asset classes that behave differently (show low correlation), an investor can manage variability, or price risk, of a portfolio, without sacrificing returns in the process. That’s why we recently added the Aviva Investors Multi-Strategy (AIMS) Target Income Fund to our recommended Buy list.The fund’s aim is simple: to deliver regular income, at a target rate of 4% above the Bank of England base rate, whilst preserving capital and managing volatility. At the core of the portfolio is a diverse range of long-term income producing strategies across various asset classes. To help preserve investors’ capital, the managers aim for annualised volatility of below 50% of the MSCI AC World Index over rolling three-year periods.

An unconstrained approach allows the fund to invest globally and seek income from a host of sources that can include, dividends on equities; property rental income from real-estate investment trusts (REITs), coupons from both government and corporate bonds and even option premiums. As chart 1 shows,

the intention is to create a smooth income stream with no single income source dominating. A range of hedging strategies should then protect the portfolio during periods of market stress. These positions are designed to produce insurance-like payouts in the event of unforeseen market disruption.

A focus on riskThe dedicated risk team applies a stringent daily analysis process. This tests the stand-alone risk of individual strategies in addition to their interaction with the rest of the portfolio. No single risk factor dominates – see chart 2. Stress testing and scenario analysis are also a key part of the monitoring process. The fund’s recent resilience during August’s market turbulence was early

evidence that this approach works. Although the fund was launched in

December 2014, the management team is experienced. The team is headed by Euan Munro who joined Aviva Investors in January 2014 from Standard Life where he was responsible for their successful multi-asset and fixed-income funds. The AIMS strategies are also the default pension option for the entire Aviva Investors business and the management team have made sizeable personal investments in the fund.

F U N D I N F O C U S

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21%

Equity dividends25%

Option premia26%

Governmentbond coupons

22%

REIT rental income4%

Cash2%

Duration26%

Inflation5%

Credit13%

Currency18%

Equity29%

Property4%

Volatility5%

CH A RT 1 : PROJ E C T E D AV E R AGE I N C OM E C O N T R I B U T IO N S FOR T H E CU R R E N T Y E A R

( A S AT 31/03/15)

CH A RT 2: P ORT FOL IO W E IGH T I N G S – % OF TOTA L R I S K ( A S AT 31/07/15)

Source: Aviva Source: Aviva

To view our short ‘Meet-the-Manager’ video interviews, please go to killik.com/insights/blog

MEET THE MANAGER

GORDON SMITH

FUND ANALYST, RESEARCH

A SURE-FOOTED FUND OFFERING DIVERSIFIED INCOME

Summary

Fund Type UK OEICLaunch 1 December 2014Manager AIMS TeamFund Size £229mOngoing Charges 0.85%

As at 25 September 2015


Absolute Return

MW Tops UCITS

Fund Type Dublin OEICManager Anthony ClarkeFund Size £1.6bnOngoing Charges 2.16%Performance Fee 20%MW (Marshall Wace) TOPS (Trade Optimised Portfolio System) targets consistent absolute returns via a long/short strategy in European equities. The team believes that the analytical edge of strategists, brokers and analysts is largely unrealised. The resulting strategy has developed into one of the largest proprietary databases of trade ideas in the world, synthesising data from contributors and exploiting trends to create highly diversified and active portfolios. Risk rating 4.

Income & Growth (Meet-the-Manager)

Woodford Equity Income

Fund Type UK OEICManager Neil WoodfordFund Size £6.7bnOngoing Charges 0.75%Historical Yield 4.3%This fund aims to provide income – by targeting a yield 10% higher than the FTSE All Share Index – together with capital growth, from a diverse portfolio consisting primarily of UK equities. Neil Woodford is the lead portfolio manager. Beyond the core holdings in defensive names, the fund also invests in a large number of small and medium-sized innovative businesses which offer strong long term growth potential. Risk rating 4.

Growth (Meet-the-Manager)

CF Morant Wright Japan

Fund Type UK OEICManager Morant Wright

TeamFund Size £668mOngoing Charges 1.15%Historical Yield 0.6%This fund aims to generate absolute returns by investing in a diversified portfolio of equity securities listed on the Japanese stock exchange. Morant Wright is an investment management business which focuses exclusively on Japanese equities. We believe this value orientated portfolio is well placed to capture improvement in earnings and sentiment, as well as the trend of improving corporate governance in Japan. Risk rating 6.

Income & Growth (Meet-the-Manager)

Fidelity Global Dividend

Fund Type UK OEICManager Dan RobertsFund Size £107mOngoing Charges 0.95%Historical Yield 2.7%This fund aims to generate income and long-term capital growth from a portfolio of global shares that offer attractive dividend yields. The fund targets a yield that is at least 25% above the yield of the MSCI World Index. The cautious and contrarian approach used by fund manager, Dan Robert – who tends to avoid cyclical companies, and those with high levels of financial gearing – is reflected in strong risk-adjusted performance. Risk rating 5.

Growth (Meet-the-Manager)

THS Continental Growth & Value

Fund Type UK OEICManager THS teamFund Size £7.1mOngoing Charges 0.60%Historical Yield 2.3%This fund aims to produce long-term capital growth via a portfolio of equity investments in companies listed in, based in, or deriving the majority of revenues from, Europe (ex-UK). The approach is contrarian and employs a Theme, Quality and Value framework to select a focused portfolio. This fund ticks a lot of boxes for us – the investment process is underpinned by a valuation discipline that is reflected in the team’s longer term performance. Risk rating 5.

Absolute Return

BH Macro (BHMG-LON)

Fund Type London-listed Inv Co

Manager Brevan Howard CM

Market Cap £756mOngoing Charges 2.59%Performance Fee 20%This closed-ended investment company provides access to the Brevan Howard Master Fund, a hedge fund with a heavy exposure to global fixed income and FX markets. The objective is to generate consistent long-term growth through active trading and investment on a global basis. BHMG has historically delivered good diversification within portfolios, which could prove particularly beneficial should the current heightened volatility persist. Risk rating 5.

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

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All chart data source: Bloomberg

* As at 25 September 2015 For details of the Killik risk rating system, please refer to page 15. Please speak to your broker for further details.


Killik & Co voted Best Wealth Manager

2014

For further information about our awards, please visit www.killik.com/awards

Authorised and regulated by the Financial Conduct Authority.The value of your investments can go down as well as up and you may not get back the initial sum invested.

Past performance is not a guide to future performance.

Wealth Manager of the YearKillik & Co

Investment and Wealth Management

Winner

Best Wealth Manager for TrustsKillik & Co


WinnerBest Discretionary/Advisory Wealth ManagerKillik & Co


WinnerEditor’s Award for Services to Private InvestorsPaul Killik


WinnerBest Full Sipp ProviderKillik & Co


Winner

We were delighted to win the Best Wealth Manager 2014 award at the recent Investors Chronicle and Financial Times Investment and Wealth Management Awards as well as four other top accolades. Killik & Co would like to thank everyone who voted for us.

Documents

Confidant - Autumn Issue 2015