More investors are looking at thematic investing as a way to capture growth opportunities and boost returns. The question for many is which theme to back: sustainable agriculture, AI, ageing populations or even cannabis? To help investors Morningstar has compiled an in-depth series of articles looking at all aspects of thematic investing — from busting common myths to what the latest trends are. These articles explain how investors can make the most of thematic investing from categorising different funds, to looking at how best to incorporate them within a diversified portfolio.
Woodford Investors Thrown a Lifeline
The implosion of the Woodford Equity Income fund happened so quickly Elon Musk might have termed it a “rapid unscheduled disassembly”. But it has been a drawn-out process for investors waiting for compensation. This week, almost four years after the fund was initially suspended, the Financial Conduct Authority finally revealed details of its £235 million. compensation package, with this money paid by the fund’s administrator, Link Fund Solutions.
Those who have lost money though shouldn’t bank on a speedy resolution from here though, as there are still a couple of hurdles to cross, including the planned sale of LFS, which means this payment has to be approved by its new owners. If it does proceed as planned – and the FCA announcement seems to indicate a degree of confidence – then investors can expect to receive total compensation equivalent to three-quarters of their holding on the day the fund was suspended. For many this will obviously be significantly less than what they invested as the fund had fallen in value by the time. For more details on how and when payments will be made see Morningstar’s Q&A on this ongoing saga.
Red Card for Yellow Circles
A high court judge has ruled that Tesco infringed Lidl’s trademark logo, by using a similar design for its club card promotions in stores. The legal case revolved around Tesco’s use of a yellow circle on a blue background, which Lidl claim was too similar to its main logo, and misled customers into thinking prices were comparable. The judge said Tesco had taken advantage of Lidl’s “distinctive reputation” for low prices, but said that this had not been deliberate. Lawyers, which don’t have a reputation for low prices, will no doubt be pleased to hear Tesco is appealing the ruling, and seeking permission to carry on using its yellow circle club card logo while the appeal is ongoing.
BP’s ESG Tangle
Tomorrow is Earth Day, which seems timely, given the actions this week by some of the UK’s largest pension funds in trying to oust the chair of BP, Helge Lund, over climate failings. They are frustrated that the oil giant has watered down emission targets without giving shareholders an opportunity to vote on the issue. BP had previously committed to cut oil and gas output by 40% by 2030, but then reduced this to 25% – no doubt taking into account the current sky-high prices it is getting for these fossil fuels. Pension funds see this as an important ESG issue, and say BP’s actions undermine shareholder confidence in the board and corporate governance.
End of the Road for Land Rover
The Land Rover name will disappear in a industry-wide move towards electric zero emission vehicles. The cars are currently made by Jaguar Land Rover, which is rebranding itself JLR. The company is re-launching itself as a “house of brands” with four main marques: Range Rovers, Jaguars, the off-road Defender and the Discovery, aimed at the family market — meaning the road appears to have run out Land Rovers. Sales have been less buoyant since a redesign from the classic model several years ago. JLR said the first all-electric Range Rover will be built in Solihull and will launch next year. However it has not yet revealed where it will source electric batteries for the vehicles.
Would You Trust an AI-bot for Financial Advice?
ChatGPT, Microsoft’s open-source AI product, can “understand” financial information and predict likely market movements — according to a couple of academic surveys from the US published this week. One asked it to interpret business news headlines and say whether share prices would then rise or fall. The other study asked it to decipher “US Fedspeak” by looking at the somewhat gnomic statements from the central bank, and second-guessing subsequent interest rate movements. In both cases answers given indicated the machine-learning tool could use these statements to predicted real-world outcomes in a statistically significant number of cases. This has led to suggestions that AI could be used by investors to help build market-beating portfolios, with ChatGPT giving more useful tips than many professional advisers. See how Morningstar got on when it put AI to the test with its own investment questions:
GSK Coughs up Millions
GSK has bought Canadian pharmaceutical company Bellus Health for £1.6 billion. Usually these deals help pharma companies secure the rights to new blockbuster drugs, often used in the treatment of serious conditions like cancer or diabetes. But here it is a new cough treatment GSK is hoping to add to its portfolio. The drug, camlipixant, if approved by US regulators, could be the first new drug to be approved for chronic coughs since the 1950s. However, a rival drug to treat the same condition is also in development from Merck – leading some analysts to wonder if GSK coughed up a little too much for this would-be wonder drug.
Netflix Cancels DVD Rental Service
The streaming giant might have started out in business posting DVDs to customers, but who knew it was still doing so? This week the company said it was closing its DVD mailing service after 25 years – with the last DVDs due to be posted out by the end of September. In many ways it is a victim of its own success. While this DVD-on-demand service effectively spelled the end of video stores like Blockbuster, its own streaming technology has cannibalised its original business model. Posting its results this week it revealed that its DVD business made just $126 million of its $31.6 billion revenue last year. Announcing the closure Netflix revealed that the first DVD it posted back in 1998 – in those distinctive red envelopes – was Tim Burton’s Beetlejuice. Who knows what the last one will be?
Coming to the UK – Apple Banking?
Apple has moved into the banking market, by launching a new savings account with Goldman Sachs. The account pays a market beating 4.15%. At present it is only available to US savers, and they will need to have an Apple credit card to access this savings product. It is not clear whether Apple is planning to launch a similar savings product for UK consumers soon, but the infrastructure is already in place to do so, with Goldman Sachs already regulated to offer UK savings products through its Marcus brand. There would certainly be demand, given Apple is paying 10 times the interest paid on the average US deposit account (0.37%). And with confidence in many traditional banks at a low point, would customers prefer to give their money to a tech company instead, which certainly doesn’t seem to be short of cash itself?
Consultants Take a Well-Earned Break
It’s nice work if you can get it. Management consultancy firm Bain is paying MBA graduates thousands of dollars to head off to a yoga retreat, learn a second language or work for a charity. The firm wants recruits with business degrees to push back their start dates amid concerns that the consulting sector will be hit by a downturn. While it clearly want to recruit from a pool of new postgraduates with outstanding business degrees, it is hoping an interim pay cheque of $20,000-plus to perfect their downward dog in Mysore, or gain experience working for educational or charitable organisations will encourage them to pursue other “developmental opportunities” in the meantime – not just join a rival firm.
