Report of the Investment Committee 2008 - St James's Place

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But during this severe downturn we have seen no reason to replace any fund managers. All haveadhered to their stated investment style. Stamford have advised us that they continue to maintainconfidence in the managers with whom we currently work. It is the continuous and detailedmonitoring of their activities that is, we believe, a key element in enabling us to create a ‘safe’long-term investment environment for our investors.Whilst the Investment Committee, assisted by Stamford Associates, can create the structure todrive our investment philosophy, it is the individual fund managers who make the day-to-daydecisions about which particular stocks they wish to own and the timing of those investments.We create a positive environment for our managers by allowing them maximum freedom toinvest within the terms of their mandate and we are also prepared to be patient for superiorresults. But ultimately, each manager must take responsibility for the performance of theirportfolios – in good and bad markets alike.As I think back on the numerous meetings I have had with our managers this year I have beenimpressed by the consistency shown by them during these turbulent times. Unlike many otherswithin their peer group, decisions not to own banking stocks for example, have proven to be veryshrewd. Similarly some of the managers eschewed the commodity boom, dismissive of the claimthat we were in a new paradigm. Many managers took decisions to increase liquidity both beforeand during the crisis and are now able to use these reserves to buy stocks they like at verydepressed levels which will be a store of value for the future when the markets recover.Against this very testing backdrop, I have asked each of the managers of our global ManagedFunds to briefly explain what defensive action they have taken to protect, to the extent it hasbeen possible, our investors’ wealth during these turbulent times. Their views are set out in thenext section of this report. As you read their comments I think you will be encouraged thathowever challenging the markets, they have demonstrated high levels of conviction throughout.Throughout this report I have endeavoured to demonstrate that our approach to investmentmanagement is ‘all weather’ and by that I mean we have consciously striven to create a ‘safer’environment by reducing as many of the risks associated with investment as possible. Firstly byencouraging our investors to diversify their assets across the different classes according to theirrisk profile and, secondly as I said earlier, by investment manager style. The monitoring of themanagers by Stamford Associates acts as the ‘early warning’ system, further reducing the risks oflong-term underperformance.So what guidance can we give our investors on timing their investments in our funds – is it agood or a bad moment to cash in some or all of their investments and should they be making newinvestments? This comes back to the starting point of this introduction. Of course, if you knewwhen the market was at its high and when it was at its low, those questions would be easy toanswer, but the reality is that the world is so uncertain that no-one can make decisions on thebasis of short term conditions.6
Can investors take comfort from history or, is it really different this time? In the next section ofthe report, the economist Anatole Kaletsky, one of our most respected journalists, provides histhoughts on the market and the economic and historical context. I hope you find his views bothinteresting and helpful.Whilst we certainly cannot predict with any certainty that the market has reached its low point,it is not unreasonable to assume that at current depressed levels investors prepared to take amedium to long-term view are likely to be ultimately rewarded.Likewise, with global stock markets at such low levels, investors thinking about cashing-in theirinvestments will crystalise once and for all what may be as yet, paper losses. The economicclimate is changing and the era of cash generating real returns is over for now because recessionin the major Western economies during 2009 is certain according to policymakers, who inresponse are cutting the cost of borrowing. The US Federal Reserve recently announced virtuallyzero interest rates and here in the UK it is not unthinkable that a similar thing could happen.Whilst this may be good news for borrowers, for savers it is the opposite and we are at the pointwhere for many people the returns they earn on their deposits, taking account of inflation andtaxation, are either zero or negative. In contrast the yield, net of basic rate tax, on the UK stockmarket is at its highest point for over 20 years at around 4.5%, reflecting current low shareprices. Again experience tells us that this is a situation that won’t last forever and that ultimatelythe intrinsic value of equities will be recognised by long-term investors.Against this changing economic landscape it is hardly surprising investors are looking for guidanceon how best to position their wealth. Longstanding clients will know that our philosophy of ‘buyand hold’ has held good over many years and there is no reason to doubt that once through thecurrent downturn, markets will resume their long upward trend. Are we near the end? No-oneknows so, once again, I will stay with tradition and make no predictions for what the coming yearmay bring. I want, however, to reassure all of our investors that we are completely focused onputting them in the strongest possible position to ride out the current storm. Regardless of theprevailing financial climate, the Investment Committee will continue to ensure the approach wehave to investment means a safer place for our clients’ wealth over the longer term.I wish you all the very best for 2009 and beyond.Sir Mark Weinberg7
Page 1: The 2008 Annual Report of theSt. Ja
Page 4: The strength of Partners’ relatio
Page 9 and 10: How should investors react to this
Page 11 and 12: STAMFORD ASSOCIATES 2008 REPORT TO
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Page 15 and 16: Investment ManagerCommentariesThe f
Page 17 and 18: Neil WoodfordSJP/Invesco Perpetual
Page 19 and 20: Nick PurvesSJP/Schroder Managed Fun
Page 21 and 22: Bernie HornSJP/Worldwide Managed Fu
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