Tough to be positive in this market

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It is difficult to be in a positive frame of mind. But be careful where you look for good news. That juicy looking extra yield or alternative way to avoid “stock market” risk is almost always not as safe or well structured as it seems.

Markets falling again – red across the board (except for Korea which is weird). More QE in the US. UK may drop rates even lower. Smacks of desperation now. Gold price has fallen and the USD has risen anyway. What does it all mean?

We have just seen the worst quarter in equity markets since 2002. Interest rates cannot come down much lower (although the central bankers may try) but inflation is rising. Greece and Italy are back on the crisis map which is impacting mainstream banks in Europe. Gold is off 15% in recent weeks as well. Maybe everyone should dabble in volatility trading as that seems safer than anything else (facetious comment).

Bottom line? No idea. Heaven help those stock pickers out there who have to try to make sense of it all. Over the last three months, the only sectors to make money again were government debt; over 6 months, government debt and weirdly, Japanese small companies.

It seems prudent therefore simply to look for decent yields in the absence of any clarity of capital growth in the markets. Forecasts are poor for economic growth and it looks bad for Q4 this year. As bad as Q3 was (and it is supposed to be a quiet period in the markets), the last quarter of 2011 could be a shock as more people are talking about a depression again (reminiscent of 2008). They were not really right then and probably will not be correct this time but it is not a good sign.

In the near future, expectations are low. Warren Buffett would rather buy back his own stock than another company. George Soros thinks we may be staring down the barrel of another post-war depression (is that really George in the image?).

The only thing that is CERTAIN… is UNCERTAINTY.

So, yield is the only way forward. Safe haven investing is a must. Aria Protected Funds can offer suitable solutions for clients looking to get the most out of their available funds without putting too much at risk.

ARIA PROTECTED FUNDS LAUNCHES SINGAPORE DOLLAR SHARE CLASS

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Radio Interview with David Barclay-MillerLondon, 16th September 2011
For Immediate Release

Aria Protected Funds, the fund management company,today announced the launch of the Singapore Dollar (SGD) share class of their flag ship fund, the Aria Absolute Income Protected Fund after consultations with clients and experts in Singapore. This is the first time Aria’s fund will be available in Asia to both local and expat investors. Investors are being given an exciting new opportunity today to invest in this fund using the “safe haven” of the SGD for the first time. The current yield of the fund is 4.25% in SGD; offering an unparalleled yield solution in the current
uncertain markets and with cash yields forecast to remain low for the next few years. This launch comes after Aria entered the Singapore market earlier this year and in response to demands by our clients in Singapore to access this fund in SGD. The new SGD share class adds to the list of share
class available (GBP, CHF, USD and EUR).

David Barclay-Miller, founder and Head of Sales, said, “Singapore is a very interesting market with great potential. The fund has already proven to be quite popular with expatriate IFAs in the region and after consulting our clients in Singapore, we have decided to launch the SGD share class to make it even more accessible to clients who choose to hold their assets in SGD. Given the strength of the SGD relative to all major currencies, the SGD has become a very popular currency in Asia for wealth managers. Singapore has become a major regional wealth management hub, where HNWIs around Asia park their wealth there in SGD as it is seen as a safe haven for their money. The launch of the SGD share class is another step in our comprehensive sales and marketing programme for the region and we have many more interesting initiatives lined up for Singapore in the coming months.”

The Aria Protected Funds were launched in 2007 and have consistently delivered high yield, low volatility returns for investors. The Absolute Income Protected Fund is a passively managed UCITS 3 fund domiciled in Luxembourg and is registered in Singapore with the MAS under the Restricted
Foreign Funds scheme. The SGD share class is available through a wide range of tax efficient platforms or for direct investment. For more information on the SGD share class or other currency options of the Aria Absolute Income Protected Fund, please speak to your wealth advisors directly or contact Aria Protected Funds via their website www.protected-funds.com or call us at +44 (0) 845 519 0368 for more information on how to invest.

Can you tell what it is yet?

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Rolf Harris. Much maligned, but perhaps may have hit on the right sentiment for the markets. As the vast majority of fund managers watch the markets and try to work out what is going to happen, we wonder how many sit with furrowed brows trying to work it out. Volatility remains too high and yields too low for most cautious strategies to perform well (FTSE vol at 36% which is the same as global equities which is no surprise as correlation is above 90%).

Inflation in the UK is above 4.5pct and once again credit crisis is on the horizon. Gold continues to lurch about and although many think it will reach 2000+, if you are not a USD investor you could still lose money.

So clients sit in cash; losing real value (5yr fixed rates are only just above 4%) and paying costs of wrappers to be in cash which can reduce any paper yields to negative. How would Rolf sketch uncertainty?

Clients need stable yield across all risk profiles: low risk as the core of their holdings, higher risk portfolios as a cash proxy.

What does a safe haven look like then? Liqudity, stable yield, low volatility and passive. We have stuck by these themes for the last four years and over that period continued to make money for clients. These principles will not change even as the markets continue to challenge more “cautious” investments.

In the near future, if credit tightens or rates rise, this will be good for the funds as the value of the flow of funds to the banks increases. If the markets continue to drift and bounce sideways, then investors will benefit from absolute guaranteed yields.

As core portfolio planning continues to be a challenge, Aria Protected Funds should be that safe haven for client portfolios. Certainty, protection, and diversification look more valuable than ever.

August is a time for Holidays

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Many of us are focussed on holidays at this time of year and we are no different.

The US decided in its infinite wisdom to push their debt limit to the wire. The Swissie skyrocketed and there are more banking losses on the horizon. Are we heading for another credit crisis? If rates stay low and there is no real sign of recovery then we could all be in for a torrid last quarter of the year. Perhaps it is apt that holidays stay on our minds at least until September.

The currency markets however will remain active and this is one point we have not spoken of much recently.

Aria Protected Funds are available in a wide range of currencies, GBP, USD, EUR, CHF and soon SGD. Savers in these currencies continue to be maltreated by the savings banks; but then again, with so few other safe haven options it is understandable why there is so much cash about. For each of these currencies we employ hedging strategies designed to protect our investors. In this regard, there are two things to consider; medium term investing and mean reversion.

Foremost in our minds for hedging is the time horizon of investors. The Aria Protected Funds are not short term investments so we have to look at longer term trends to set the hedges in place. We do not trade currencies, and as such mean reversion is important. Currency volatility is high and that is why people love to trade currency. Single day swings of 1% can make people enormous profits if they get it right. That is not our game. We look at long term forecasts and trends to protect our investors. To this end, we do not bother with short term trends (anything less than 6 months) and certainly will never trade even if they look overvalued. We would not ever short the Swissie despite the fact that everyone, including the Swiss Central Bank, is trying to depress the currency.

The Aria Protected Funds mandate is to provide a reliable, stable long term solution for investors who need somewhere to invest the low risk portion of their portfolios. Safe haven investing will return to the forefront in Q4; we will watch with amusement as long-only funds try to describe safety when their track records just do not stand up.

There is a factsheet holiday in August, as is our usual MO but we are around to chat.

The portal of course is always there for you. Thank you to all of those who have provided feedback.

Hot Times, Summer in the City

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It is hot in the city today. Luxembourg has had some very hot days recently and even in London the weather proved well enough for Wimbledon to complete without too many rain delays.

The weather has been matched by the temperature in the markets. Quite a bit of sweating was done over the bailout of Greece and there are certainly some nervous headlines about the budget in the US. Could the US really be downgraded from AAA to D; well, if they don’t sort out their political mess, then yes. Many believe the impact on the markets would be catastrophic. Others think it is about time the world wakes up to the fact that the US is not the pre-eminent force in global economics. We are inexorably drifting East, so why not let the US take a hit?

On the horizon for the UK: rears of a 2008-style credit crunch. “Looming” is the word we have seen. The end result is that most long-only managers are chasing yield higher further up the risk curve which increases the risks to the fund. Even still, yields remain for most funds below inflation levels.

Notably, Mark Mobius believes volatility will remain high as the levels of uncertainty will continue for some time to come. Major equity markets have had 3 years of sideways movement. 2013 may be another collapse (Roubini’s perfect storm). If you want to read more, you will become more uncertain about where things are going.

Aria Protected Funds continue to do what they are supposed to do. Low volatility, high yield. Nothing is going to rock this boat for some time to come. Even in June when equity markets were up and down by nearly 6%, we held a firm course.

Whether these guys are right or wrong, who knows? What we do know is that all investors can benefit from stability and yield in their portfolios. Core portfolio planning needs certain levels of income.
Aria Protected Funds is the safe haven that allows investors, and their advisors, to sleep soundly at night.

Blood in the water?

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It is easy to be complacent. We have had a couple of good months performance across all the funds. Income is up. Volatility is down and there have been some glimmers of hope on the horizon.

However, it is hard to look forward with any certainty about the general economic climate. Inflation looks like it is not slowing, house prices have fallen in the US and economic output is falling (and just barely holding above recession levels). Cynically it is easy to think with an upcoming US election, there will be some politically motivated decisions made about short-term economic policy. That is never going to be a good thing.

Sovereign issues are shaking the EURO and it looks continually weak against both the swissie and gold (two good indicators of stability). Seems to be more fear creeping back into the currency markets and that is never going to be a good thing either.

What does this mean? Is there blood in the water and the sense of impending trouble.

If equity markets are shaky, then there could be a correction coming and this one might take longer to recover from as the tools of recovery have been tried and not really worked. What next? Recession. Deflation. Major corporate failure (or another nationalised bank)? Probably not but sovereign debt issues could cause real problems for the EURO. Back to the 2009 problems without any new ideas.

We are of course focussing on yield. If there is a liquidity strain again, the good news is that it will help our investors as we offer the banks positive cash flow. In 2009, we were able to raise yield by 0.50%; this time, if it happens, we would look for the same opportunities.

Safe haven investing should be back on the front page.

Higher Yields Available

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Increased Yield for FSA-Recognised Fund
The managers are pleased to announce an increase in the income rate for the FSA-recognised Absolute Income Protected Fund. The new rate for all investors from the 1st of June will be 5.75%. You do not need to do anything (except perhaps tell your clients the good news) as this will automatically happen for all new and existing shareholders.

The new rate has been possible because of negotiations with counterparties and some re-structuring of the assets to capitalise on the improved outlook for rate increases. Your banks may not offer you much more (when the rate rise comes) but we are on top of the curve. Tax efficient, available for retail clients of all risk portfolios and with the daily liquidity everyone likes.
Limited availability of 6.5% income
On a similar theme, we have some A and B share class available on request for new investments. We have had some redemptions which we can match off againsts new subscriptions and therefore for a limited time, we can accept new investments into these otherwise closed share classes.

Applications have to be pre-approved by the Board so if you have clients that might be interested, please contact David (dbm@protected-funds.com) for availability and criteria for incoming new investments.

Happy hunting.
Official Launch of the Portal
We have been slowly rolling out the portal to select advisers for testing. Thank you all those who have helped out with comments.

The valuation portal is now available for general use. When you login, you will be able to see a record of all the investments made in any Aria fund. For new sales (and to help with the whole fee matching process), please add new trades on the system. This way you can track your incoming new investments and see the results, ongoing valuation, and overall get better information about your clients investments, faster. We offer this service as a convenience to help you get more timely information than is sometimes available from providers. However, in most cases they know more than we do so this information is provided on a best efforts basis.

One point of notice, we are constantly evolving the portal. If you have any comments or suggestions, let us know.

To register, follow the link on the website or go direct to www.ifa-portal.com

Updated Research Documents
It is that time of year for Audit and end of year reporting. We have an updated research document from AKG (financial strength rating) and an audit summary available for your files. Let us know if you want copies of these.

Gloomy Outlook Dominates

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Gloomy outlook

Markets are driven as much by emotion as they are by any real economic forces. If one looks at the recent commentary over the past 6-8 weeks, then we are in for a difficult next six months. Most of the headlines are bad, revising down forecasts and resetting expectations. This is not confined to the UK and unfortunately, the correction of May looks set to continue. There will be of course days and maybe a week where markets are perceived to be oversold and markets will jump. This adds further to the uncertainty as volatility rises.

Investors who piled into Treasuries, bunds, gilts, and Japanese bonds on concern that Europe’s sovereign-debt crisis would derail global growth are finding the securities less appealing with yields at about the lowest on record.
Commodities are heading for their worst quarter in more than a year on investors’ concern that slower growth from China to the U.S. will sap demand.
Inflation has been held off for the time being and despite some suggestions interest rates are going to rise, this does not look likely in the near term. Those hardest hit will be savers who are sitting on cash and older clients who rely on income generation as dividends fall so companies can either preserve cash or buyback shares to maintain price levels.

The correction of 2010 (May – June) has yielded some interesting results in terms of comparative performance which are highlighted on the latest fact sheets which will be available on the web shortly.

Compliance Update

For those who need their compliance files updated, now available are the accounts for 2009 for the Aria Protected Funds. If you need a copy, please do not hesitate to let us know and we will email one.

More than 100 children’s lives changed

We are delighted to confirm that through the herculean efforts of DBM and everyone’s generosity, we have raised over 20,000 GBP for SmileTrain. This should ensure we have paid for more than 100 operations which will change the children’s lives. Aria is proud to have supported the Gig in the Garden 2010; watch this space for more opportunities to improve the lives of others.

Absolute Income raises to 5.75%

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Income to 5.75% for A1 and B1

As we suggested earlier in the year, we have taken the opportunity to raise the income from 5.25% to 5.75% effective immediately. All investors in Absolute Income A1 and B1 share classes will benefit. This increase is driven in part by the success of the DRM in preserving capital values and the strength of the counter-parties of the Aria Protected Funds. This change applies to all investors in the both share classes irrespective of the date of investment; equal treatment for shareholders is paramount for the us. What do you have to do? Nothing except communicate the good news.

Double Dip?

The talk of the moment is of a potential double dip with debt contagion spreading beyond the PIGS. If this were to occur, then the growth from the East would be nowhere near enough to sustain the developed markets and we could go back to near 4500 (FTSE) in the not too distant future.

Was May’s performance a surprise? Perhaps. We are now seeing more realistic assessments of the economy, notwithstanding the PM’s talk of decades of debt. The FTSE was down by more than 6% in May; the US and Global Equities by nearly 10% and volatility is rising once again. It is no surprise in these markets that the Aria Protected Funds are down; but on average only 2% across Absolute Income, Enhanced Income, Dynamic Growth, and GEMs.

Is there any good news? For investors who need income, the Aria Protected Funds remain highly compelling. From a growth or market risk perspective, all the funds continue to show that the operation of the DRM works to effectively protect capital positions in volatile markets. The prospects for growth, however, are not what they were six months ago.

Passive is the Future

A recent FT article highlighted the growing trend for pension funds to move away from active managers towards passive for core portfolios. One important benefit which was highlighted was the attraction of passive structures which use “dynamic passive investment strategies”; it is impossible for active managers to replicate this type of risk management. Great to see the industry adopting the message which we have been banging on about for nearly three years. This trend is expected to continue and the benefits of the Aria Protected Funds’ DRM should be part of every client review.

SmileTrain Update

A big thank you to all who through their clients are contributing to the SmileTrain campaign. We only need 5m of subs this month to hit our target of 10,000GBP for this excellent and life changing charity. You can of course donate directly, just follow the link on our website or www.justgiving.com/gigingarden.

Which Way Now?

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Which way now?

It is a good thing we did not come out with our usual commentary the end of April. The first week of May would have shown how tarnished our usually infallible crystal ball had become.
We are facing the threat of debt contagion, demise of the EURO and a new Government all within a month. The reaction of the markets the last week has been highly unsettling. Perhaps back to the JAWS theme a few months ago? Is it safe? How many more surprises will there be in the coming weeks and months ahead? Uncertainty remains perhaps more than people had hoped (will the FTSE test 5200? or 5000 again)? Really… who knows.

Mervyn King supposedly knows that interest rates will remain low for some years. Any small rate rises, you can be sure the banks will be unlikely to pass them on so the quest for income will remain at the forefront of basic portfolio planning. And what about growth prospects? Emerging markets have been hammered this past week; off by almost 10% and yet commodities have shown positive performance when everything else is down.

Available this month on the website will be some in depth research into what the underlying indices for the Aria Protected Funds have done in the past months and as promised previously, this will be updated more regularly to help you with client meetings.

Low Interest Rates – Higher Interest

8.25% or 5.25% net yield, take your pick (with the new tax rates this 10.50% and 16.50% for comparison purposes, as the banks say).
We continue to bang the drum about the need for reliable income levels for all risk profiles. For a low risk client, leaving the money in the bank offers the unappealing prospect of zero or negative real interest rates for the next few years. For higher risk clients, they should not be sitting on any cash (or very little) but still should have some stable elements to their core portfolio where they can afford to take some capital risk in return for above market yields. Older clients who are in drawdown, using their ISA money or their offshore bonds 5% allowance should be looking for as much yield as possible while preserving their capital. The big difference for the Aria Protected Funds is that yield is based on the investment, not on fluctuating capital values.

Certainty of income at a defined level will offer peace of mind.

Uncertainty and Volatility

The recent market fluctuations have resulted in increased volatility in the market. This can be exciting if you are a day trader or trading CFDs or for the investment banks whose margins rise in these markets. It is bad, however, for the average investors who would have seen 3-5% wiped off their investment in a week (or more for emerging markets).
All the Aria Protected Funds use mechanisms to preserve capital values. The result is that you should see lower volatility across the lifecycle of your investments. The is particularly true of the Absolute Income Protected Fund; volatility over the past two years has been below 4.5%. This compares to the lowest risk of government bonds and further justifies our risk rating of 2/10.

Help a Child Smile

We are proud of our continuing association with SmileTrain and are pleased to report that we are almost half way to our target of 10,000 (just over 4,500 to date). If you want more information about SmileTrain, see David’s justgiving site or the link from www.protected-funds.com.

Thank you to all.