Personal Accounts

Well it is no surprise that it was announced by Tim Jones, the new head of the Personal Accounts Delivery Authority that the introduction of Personal Accounts (due 2012) may well be subject to delay. I would guess that the creation of a massive new Authority to administer and accommodate some 8 million new savers may well be taxing some minds in light of recent disasters with data. Even so, this is not going to go away and compulsory saving is here to stay. It is just over a year since the government issued its white paper on personal accounts and for the general public there's been very little said about it during 2007. Even if the date is delayed and that there is a three year buildup period where both employers and employees are allowed to increase contributions slowly we should start thinking about how these additional costs will impact our business model if we are employers and our budget if we are employees.

How have hedge funds faired?

At the beginning of 2007 the FSA, in their yearly publication of "Risk Outlook",highlighted the problem of traditional asset classes reacting in nontraditional ways, by remaining relatively correlated. The year has seen a huge inflow into Hedge Funds in search of non - correlated assets. Now perhaps is a good time to look back and see if these funds have done "what they said on the tin," that is, to have performed in a market where long equity funds were very volatile and under performing,and to have done so with considerably less volatility.

As there is no standard definition for a hedge fund, and they are sometimes disguised as alternative investments it is likely that there will have been a whole range of results. However in the main, I believe, that many of these funds will have done OK, depending on the underlying strategies employed. If you hold any of these funds now is the time to take a long hard look at the performance over the last 2 quarters. These funds are rarely priced on a daily basis so it may be some time before you can get the information.

If your performance in this asset class has met, or exceeded, your expectations don't get carried away. Even though they are designed to be less risky, they are difficult to place on a risk spectrum. Transparency issues and failure of any "black box" methodologies do render them susceptible to catastrophe risk so I would keep them as a relatively small part of any overall portfolio.

Merry Xmas and a happy New Year

We are closed now until the 2nd of January. A Merry Xmas and a happy New Year to "one and a" as they say back in Scotland.

How will the year end?

When the FTSE burst through the 6500 mark earlier this year I was asked for a prediction of how it would end up as 2007 came to a close. I voiced my opinion that it would still be hovering around the 6500 mark. Well perhaps I will not be far wrong. At close of play on Friday the FTSE 100 was sitting at 6434 and unless there are huge volumes traded over the last few days of the year there is a good chance that it will creep nearer to my prediction.

The Bank of England meets again mid January and, depending on how the Xmas retail figures look, I should think they will adopt a wait and see policy before taking another 0.25% off the Bank Rate in February. Despite these cuts in Bank Rate it is going to take some time for these to be reflected in mortgage rates and it will be a particularly difficult time for those who are coming to the end of a set term for fixed rate deals.

Despite the gloom in the property markets there still has been plenty of growth in equity markets, provided as always, you have been in the right place. Those invested in property funds will need to think carefully about riding out the storm. Even if you want out you may have to wait as gates are closing and redemptions are being deferred as a result of the rush out of this class (£400M+ in Nov). Friends Provident are the latest to announce that they are imposing a six months waiting period for redemptions on their property fund. With many other property funds going onto a bid to bid basis previous advisers are sure to be tested on the risk warnings issued with their recommendations for investment in this class!

Roll on 2008.

Coming to the end of the year

Our main task has been getting authorised by the FSA. Although we had planned that it could well be into January before our authorisation came through we were delighted that it only took some 20 days which we believe must be, pretty much, a record. So we have been open for business since the 26th of November. Our next priority has been to get all the systems and agencies with companies set up. As a whole of market adviser we must be able to deal with all the providers in the market place. So getting to grips with the agency requirements of just the core ones is a pretty daunting task!

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