Investment And Market Updates

What’s the latest news from the world of investing and around the stock market? We monitor all the latest moves and keep you updated regularly with the key developments.

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1 March: Global Dividends At Record High In 2021

Payouts to shareholders made by companies out of their profits surged to a record level in 2021, but global growth in dividends is forecast to slow sharply this year.

According to investment manager Janus Henderson, this trend was in evidence even before Russia’s invasion of Ukraine.

The company’s Global Dividend Index reported that companies paid out $1.47 trillion to shareholders in 2021, an increase of nearly 17% on the year before.

The figure represents a major rebound from the sharp cuts imposed on dividends by companies during 2020, when their preference was to retain cash due to the effects of the Covid-19 pandemic.

Dividends are a common source of income for investors, especially as part of a retirement planning strategy.

Janus Henderson said payouts reached new records in several countries last year including the US ($523 billion), China ($45 billion) and Australia ($63 billion).

In the UK, dividends rose to $94 billion, a 44% increase in 2021 compared with the previous year. The recovery came from a base of particularly severe cuts during 2020 that meant payouts still lagged pre-pandemic levels.

Janus Henderson said that 90% of companies globally increased or held their dividend steady during 2021. Banks and mining stocks alone were responsible for around 60% of the $212 billion increase in last year’s payouts. Last year, BHP paid the world’s largest-ever mining dividend worth $12.5 billion.

For the year ahead, before Russia’s attack on Ukraine, Janus Henderson had forecast dividend growth at a more moderate 3.1%. The figure may now need to be trimmed further.

Jane Shoemake at Janus Henderson said: “A large part of the 2021 dividend recovery came from a narrow range of companies and sectors in a few parts of the world. But beneath these big numbers, there was broad based growth both geographically and by sector.” 

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17 February: Crypto Take-Up Doubles Among Younger Investors 

Investors aged 45 or under who own crypto assets have doubled in number in a year, according to research from Boring Money.

The consultant’s Online Investing Report 2022, based on a survey of more than 6,300 UK adults, also shows that mobile comms is becoming the dominant medium for younger investors buying funds and shares. 

Boring Money said the proportion of adults aged under 45 who own crypto assets has risen from 6% in 2021 to 12% over the past 12 months. Ownership among the over 45s was significantly lower at 3% this year, compared with 2% in 2021.

The Financial Conduct Authority, the UK’s financial watchdog, warned last year about the volume of newer investors who were being attracted to high-risk investments such as cryptocurrencies, and also the risk of ‘low friction’ trading on mobile.

Low friction trading allows investors to start trading within just a few clicks of their smartphone or tablet. The FCA says that adding a small amount of ‘friction’ to an online investment process, through the use of disclosures, warnings and tick boxes, helps investors to better understand risk.

According to Boring Money, 43% of investors say they have used their mobile in the past 12 months as a means of checking the balance on an investment account. This compares with 36% of investors in 2021. 

About one-in-five investors (19%) also reported that they had bought or sold through a mobile app compared with 16% last year.

Boring Money said one-in-five (19%) of the total UK retail investor population is made up of individuals with less than three years’ experience of investing, while 7% have been investing for less than a year.

Holly Mackay at Boring Money, said: “There is a ‘book-end’ effect in the DIY investment market today. At one end we have millions of people in cash, with significant balances and no investments. At the other end, we have some relatively inexperienced, mostly younger investors holding extremely volatile assets.

“There is a more natural middle ground for millions, and providers have to find some answers on how to transition more customers to that more comfortable area.”

• The organisation that makes recommendations to the G20 nations on financial rules has said that the risks posed by cryptocurrencies to global financial stability could “escalate rapidly”.

The Financial Stability Board (FSB) warned that policymakers must act quickly to come up with rules covering the digital asset market, given its increasingly overlapping links with the traditional financial system.

According to the FSB, some parts of the crypto market – worth around $2 trillion globally – are hard to assess because of “significant data gaps”. 

14 February: Bestinvest Spotlights ‘Dog’ Investment Funds

Investment funds worth a combined £45 billion have been named and shamed as consistent underperformers by research from online investing service Bestinvest.

The firm’s latest Spot the Dog analysis shows that fund groups abrdn and Jupiter and wealth manager St James’s Place and were each responsible for six relatively poor-performing funds out of 86 so-called ‘dogs’ identified by the twice-yearly report. 

The research defines a ‘dog’ fund as one which fails to beat its benchmark over three consecutive 12-month periods, and also underperforms its benchmark by 5% or more over a three-year period.

A benchmark is a standard measure, usually a particular stock market index, against which the performance of an investment fund is compared. 

Bestinvest said the funds, despite their underperformance, will generate £463 million in management fees this year, even if stock markets remain flat. 

The analysis highlighted 12 funds that were each worth over £1 billion. These included JP Morgan’s US Equity Income fund worth £3.93 billion, Halifax UK Growth (£3.79 billion) and BNY Mellon Global Income (£3.47 billion).

Also featured in the analysis were Invesco’s UK Equity Income and UK Equity High Income portfolios, described by Bestinvest as “perennially misbehaving funds”.

Bestinvest’s previous Spot the Dog report last summer identified 77 funds worth just under £30 billion. The company says the reason for an increase in the number of poor performers is because of additions from the Global and Global Equity Income investment sectors.

Jason Hollands, managing director of Bestinvest, said: “Spot the Dog has helped shine a spotlight on the problem of the consistently disappointing returns delivered by many investment funds. In doing so, not only has it encouraged hundreds of thousands of investors to keep a closer eye on their investments, but it has also pushed fund groups to address poor performance.

“Over £45 billion is a lot of savings that could be working harder for investors rather than rewarding fund companies with juicy fees. At a time when investors are already battling inflation, tax rises and jumpy stock markets it is vital to make sure you are getting the best you can out of your wealth.”

3 February: Half Of DIY Investors Unaware Of Risk Of Losing Money

Nearly half the people who make investment decisions on their own behalf are unaware that losing money is a potential risk of investing, according to new research from the UK’s financial watchdog.

Understanding self-directed investors, produced by BritainThinks for the Financial Conduct Authority (FCA), found that 45% of self-directed investors do not view “losing some money” as a potential risk of investing.

Self-directed investors are defined as those making investment decisions on their own behalf – selecting investments and making trades without the help of a financial adviser.

In recent years, do-it-yourself trading has become increasingly popular among retail investors. 

According to the FCA, over one million UK adults increased their holdings in high-risk products such as cryptocurrencies or crowdfunding investments in the first seven months of the Covid-19 pandemic in 2020.

The research says “there is a concern that some investors are being tempted – often through misleading online adverts or high-pressure sales tactics – into buying complex, higher-risk products that are very unlikely to be suitable for them, do not reflect their risk tolerance or, in some cases, are fraudulent.”

It added that self-directed investors’ investment journeys are complex and highly personalised, but it was possible to categorise investors into three main types: ‘having a go’, ‘thinking it through’ and ‘the gambler’.

The FCA used behavioural science to test various methods of intervention to help investors pause and take stock of their decisions before committing in “just a few clicks”.

It found that adding small amounts of ‘friction’ to the online investment process, such as ‘frequently asked questions’ disclosures about key investment risks, warnings and tick boxes, helped investors comprehend the risks involved.

Susannah Streeter, senior investment and markets analyst at investment platform Hargreaves Lansdown, said: ‘’The boom of high-risk investing is causing huge nervousness among regulators, with the FCA increasingly concerned that vulnerable consumers are being swept up in a frenzy of speculation. 

“The ‘fear of missing out’ effect which took hold during the pandemic, has been drawing more people into the murky world of crypto investments and almost half still don’t understand the risks involved.”  

26 January: M&G Partners With Moneyfarm On Consumer Investment Service

M&G Wealth is teaming up with financial app Moneyfarm to provide a direct digital investment service aimed at meeting a range of customer risk appetites and profiles.

It will offer a collection of multi-asset model portfolios, backed by a range of actively managed and passive funds. 

Multi-asset investing provides a greater degree of diversification compared with investing in a single asset class, such as shares or bonds. Passive funds typically track or mimic the performance of a particular stock market index, such as the UK’s FT-SE 100.

Moneyfarm will deliver the operating models, including dedicated “squads” to support the technology platform and customer relationship management, together with custody and trading services.

Direct investing in the UK has witnessed rapid growth in the past five years, with an annual average increase in assets under management of 18% to £351 billion at the end of June last year, according to researchers Boring Money.

David Montgomery, M&G Wealth’s managing director, said: “With the launch of a direct, mobile-based investment platform, our customers will be able to access the channel, advice and investment proposition that most suits their financial situation and needs.”

Moneyfarm was launched in Milan in 2012 and has 80,000 active investors and £2 billion invested via its platform. 

25 January: Bestinvest Relaunches DIY Investment Platform

Bestinvest, part of Tilney Smith & Williamson (TS&W), is relaunching its online DIY investment platform with new features including free coaching, ready-made portfolios and a range of digital tools.

The company says it is revamping its existing platform into a “hybrid digital service that combines online goal-planning and analytical tools with a human touch”. Customers can ask for help from qualified professionals through free investment coaching.

If desired, clients can also choose a fixed-price advice package covering either a review of their existing investments or a portfolio recommendation. Bestinvest said one-off charges of between £295 and £495 will apply depending on the package selected.

The new site will go live to coincide with the end of the tax year on 5 April.

A range of ready-made ‘Smart’ portfolios offering a range of investment options to suit different risk profiles will accompany the launch.

The portfolios will be invested in passive investment funds, while being managed actively by TS&W’s investment team. Passive funds typically track or mimic the performance of a particular stock market index, such as the UK’s FT-SE 100. The TS&W team will adjust portfolios’ exposure to markets and different asset classes according to prevailing investment conditions.

Bestinvest said the annual investment cost will range between 0.54% and 0.57% of each portfolio’s value. 

From 1 February, the company added that it is reducing its online share dealing costs to £4.95 per transaction, regardless of deal size.

Bestinvest produces a twice-yearly report on underperforming or “dog” investment funds. It said it wants to bridge the gap between existing online services for DIY investors and traditional financial advice aimed at a wealthier audience.