Tackling The Low Interest Environment
We are currently living in a climate of negative interest rates, bank charges and growing inflation fears. This environment has been generated by the European Central Bank to help stimulate economies across Europe and unfortunately there is no sign of it changing anytime soon.
With negative interest rates on deposit accounts increasing and the lack of returns, we are seeing more and more new investor clients asking “Can my deposit funds give me some sort of a return instead of losing money?”
Property is a popular choice with many Irish investors; however housing prices seem quite inflated at the minute for many. Should you find yourself waiting for the right opportunity to arise in the property market or starting your own business, it would make sense to find an investment vehicle which is liquid with the aim of growing your deposits as you wait on the side-lines. If you are not in need of the funds within 6-12 months, the Cantor Fitzgerald range may be an option.
At our recent “Tackling the Low Interest Environment” webinar in early September, Philip Byrne, Deputy CIO and Head of Equity Investments at Merrion Investment Managers outlined solid foundations for a bull market with earnings per shares. The S&P 500 have recovered above their pre Covid-19 levels, and we have seen record profit margins in 2021 from a range of companies.
This is feeding into the large amounts of share buybacks from US companies which are due to hit $800bn this year. In the wake of the pandemic, we have seen an increase in the amount of savings and a reduction of debt which has been reducing since 2009. The majority of the debt that has been built up has been from governments due to their monetary support methods throughout the Covid-19 crisis.
The Cantor Fitzgerald structured product range has been seen by many investors as a way of diversifying assets and features two main products with a minimum hard capital protection feature of 85%. The Global 85% Progressive Protection Bond has seen returns of just under 16% for any clients that were invested in the product since its launch date last year, while the ESG 85% Progressive Protection Bond which has a strong Ethical, Social and Governance focus, has seen relatively flat returns since its launch during the summer.
Merrion Investment Managers have three flagship funds in the multi-asset fund range: the multi-asset 30, 50 and 70 funds. When seeking low-risk investment options with a track record of decent returns the Multi Asset 30 has been a cornerstone of many portfolios. The Merrion Multi Asset 30 has a 1-year return of 13.9%, 3 years of 8.4% P.A and 5 years of 6.0% P.A with volatility of 6.3% which is relatively low in comparison to some of its competitors*. The Multi Asset 30 gets its name from being able to allocate between 20-40% to equities with the balance in more conservative securities. The Multi-Asset 30 would give clients an active/defensive investment strategy.
If you are seeking more direct exposure to equities, the Global Equity Income Fund is a lower volatility way of accessing certain companies with an attractive dividend yield, strong cash flow to cover the dividend and limited debt with a solid history of growing the dividend. The fund combines conservatism and growth for investors, and has been run by Pramit Ghose for the past 20 years. It has had annualised returns of 7.5% over that period.
The negative narrative of the current environment has become too loud to ignore. There are a number of liquid and low risk opportunities available that may be worth exploring to see if they are a viable option for investors with a cautious appetite for risk.
You can watch a recording of the “Tackling the Low Interest Rate Environment” webinar here (password: 3AW??q:K).
Killian Clarke is Portfolio Manager with Cantor Fitzgerald Ireland.