Offshore Banking Investment Funds

Written by tolumi

Friday, 05 December 2008 14:14

Offshore Banking Investment Funds

Equity International’s medium-risk International Balanced Portfolio currently has 45 per cent of its holdings in UK equities, 20 per cent in US equities (including venture capital funds from Janus), 15 per cent in European equities (Gartmore European Select Opportunities and Invesco GT European Growth), and only 5 per cent in Japan and Pacific equities.

But its high-risk portfolio raises the Japan/Pacific contingent to 20 per cent and the US contingent to 25 per cent; this time the UK accounts for only 20 per cent of the total portfolio, the same as continental Europe. Hendersons Global Technology Fund provides most of the new-tech buzz, but he’s also been pleased with the performance of his Invesco GT Japanese Smaller Companies (just about the only sector to have been making really good progress in Japan recently).

Offshore Banking Investment Funds - Towry Law

Towry Law’s Graham Duce begs to differ about the wisdom of currently investing in the Far East. Japanese consumers are not spending enough to boost the Tokyo market, he says, and the gains in Japan have been coming from stock-pickers and warrants, rather than from any fundamental revival.
He isn’t very impressed with the rest of the region either. “South East Asia has had a torrid time of late,” he says, and investors are right to be worried about how well the region’s stock markets can survive if the present rush to US equities should continue. He’s also worried by talk of a devaluation of the Korean won, and he points to recent problems with corporate bond issues. So he won’t be encouraging his clients to risk their money on an emerging markets recovery just yet.

Classic’s Graham Reid says that he would encourage his investors to be a little more adventurous than this. They’re seasoned individuals, he says, and they understand the importance of holding their positions for the medium term, so he doesn’t see any particular problem with recommending a holding of 5-15 per cent in Far East and East European funds for all but the most vulnerable investors. (He agrees that retired people in particular are often better off staying away from high-risk sectors.)

Offshore Banking Investment Funds & Reservations

Subject to these reservations, all our panel are agreed that technology is likely to show strong promise over the next few years, both in the US and in Europe. The only perceptible difference seems to be between Duce’s cautious approach (he prefers his tech companies to be actually making profits) and the slightly more speculative approach favoured by some of our other interviewees.

Does our panel think that interest rates are likely to rise in the medium term? Not by very much, they say: the momentum for a stronger euro is coming from shifting market forces, and it shouldn’t take a very big push from the ECB to set the new currency back on the right road against the dollar. Duce says he’s expecting a quarter-point rise in the European base rate. Besides, as some of our panelists point out, there’s no fiscal need for tighter bank rate policies at the moment, because inflation in the Eurozone is barely touching 2 per cent - a full percentage point less than in the US. What happens next may very well depend on whether we get a free-spending US government after November’s election or a tax-cutting one instead.

Offshore Banking Investment Funds - European Currency

Actually, it’s oddly impressive how little our panel think it matters whether the new European currency turns out to be strong or weak. As long as the international investing environment stays both solid and liquid (two words which, just for once, don’t seem to be opposites), the consensus seems to be that portfolios will adjust themselves into permanent balance in the medium term, each according to its needs. Those who rely on the Eurozone, and especially those who live in it, will find themselves with much the same amount of spendable cash at the end of the day even if the new currency stays weak. And those people who intend to spend their investment earnings in dollars will hardly notice the difference, regardless of what happens to the dollar.

This is always assuming, of course, that the European and US stock markets manage to stay moving in step with each other in the medium term; presumably, the current trend toward globally-sectored portfolios (“themed” funds, and so forth) will help to smooth out some of the cross-border imbalances that may be caused by currency movements. But pity the poor Japanese. None of our advisers seemed able to say when, or even if, Tokyo will ever fall into step with the other major markets. Until it does, the gains in Japan may come only from short-term opportunist strategies, or from simple stock-picking. And that’s really not how our panel of investment advisers likes to operate.

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