TIME Investments’ flagship long income PAIF, TIME: Commercial Freehold has moved to daily dealing,in response to adviser feedback. The fund, which offers investors the opportunity to access the only open ended long income property fund, has consistently delivered an annual income of over 4% plus capital growth.

The fund doubled in size in 2017 and now in its fifth year, it has seen its AUM grow to over £150 million.

This growth has been driven by investors increasingly looking for an investment providing “ballast” in uncertain times with secure income and low volatility of capital returns – two features offered by long income.

With traditional UK property funds significantly exposed to continued volatility caused by Brexit, advisers are increasingly looking to alternative investments for long term secure income to help make up the difference.Alternative property assets with long leases and strong covenants such as low service hotel chains, Premier Inn and Travelodge, in the right locations provide secure income, inflation linked rents and less volatile capital returns over the long-term.

Nigel Ashfield, fund manager of TIME:Commercial Freehold comments: “The move to daily dealing further enhances the liquidity of our fund, which is a key requirement for many advisers seeking income from alternative investments.

“Advisers are increasingly looking to diversify their allocation away from fixed income to property and other alternatives.  The assets held in TIME: Commercial Freehold have not only demonstrated a secure, predicable income stream but also a lower correlation with more volatile traditional commercial property asset classes, over a period that included the UK’s decision to leave the EU”.

“These characteristics are highly sought after in today’s economic climate and make them suitable for many types of investors, particularly those seeking a robust income stream and low volatility of capital values, such as individuals looking to supplement a pension or those looking to save for school fees.”

Citywire has just announced that TIME: Commercial Freehold fund manager, Nigel Ashfield, has been awarded the coveted Citywire AAA rating. Achieving the AAA rating puts him in the top 2.5% of the 16,000 fund managers that Citywire tracks globally.

David Lumley of London based Arena Wealth Management comments: “I have been a supporter of Nigel and his long income funds for many years now and I’m delighted to see his expertise recognised by Citywire. This triple AAA rating comes as no surprise as the performance of Nigel’s funds over the years has been outstanding. Long income is a popular sector with our clients and the TIME funds offer income security, inflation protection and lower volatility making them a good fit for many investors.”

Central Bank

The Central Bank of Trinidad and Tobago

Other Banks

Bank of Baroda Trinidad and Tobago Limited

Citicorp Merchant Bank Ltd
First Citizens Bank
Intercommercial Bank Limited
Royal Bank of Trinidad and Tobago (RBTT)
Republic Bank
Scotiabank Trinidad and Tobago Limited

Chicago-based RedRidge Diligence Services – a provider of due diligence services to investors and lenders – is pleased to announce the launch of its first international office in London, U.K. The new office marks the first step in a move to expand the company’s network of international client relationships, while offering the reliable service and quality deliverables existing clients have come to expect.

Matthew Reid, Associate Director, has relocated from the U.S. in order to lead the London operation.

“In the U.S. RedRidge has an excellent reputation for a bespoke approach that offers efficiency, flexibility, high-quality service and timely execution in both the lending and equity investment markets,” says Matthew. “Our role now is to transfer that excellence into new markets, starting in Europe from our London base.”

Andrew Robbins

Most recently, the London office has appointed Andrew Robbins as Director as they look to grow their European footprint. Andrew has more than 20 years of asset-based lending (ABL) and insolvency experience, earned at KPMG, Barclays, and most recently RBS Group. He has also worked for independent and high street lenders in audit, relationship management and leadership roles. His experience spans a variety of sectors including retail, finance, manufacturing and distribution, covering assets including receivables, inventory, plant and machinery, and property.

Andrew’s new role will involve leveraging his connections and industry insights to develop RedRidge’s diligence offerings as they expand outside of the U.S., with an initial focus on the U.K. and Western Europe.

“Adapting our due diligence services to the European markets will be a fantastic challenge and an extraordinary opportunity,” explains Andrew. “But given the exceptional level of service I’ve seen first-hand, I’m more than confident we can deliver. I’m honoured to be working alongside Matthew at the start of this exciting new chapter in the company’s story.”

Dave Norris, COO, comments: “Andrew’s knowledge and influence in the U.K. and wider European markets will support RedRidge on its mission to becoming a globally recognised brand.”

“Adding Andrew’s U.K. and European collateral expertise will prove immensely valuable to our clients,” says Managing Director Cory Ryan. “Coupled with RedRidge’s commitment to high quality and efficiency, we are well positioned to serve our clients within the region and those executing on cross-border transactions.”

Andrew holds a Bachelor of Science degree in Economics from Loughborough University. Andrew Robbins (FCA) is a Chartered Accountant with the Institute of Chartered Accountants in England and Wales (ICAEW).

In his latest note, Eoin Murray, Head of Investment at Hermes Investment Management, discusses the four words he dreads more than anything.

There are plenty of words people in investment use to convince themselves – or others – that things are going to be OK. “This trade can’t fail”, “the market is rational”, “equities always go up”, are prime examples.

But for me, the worst is: “This time it’s different.” Why? It invariably isn’t.

The latest use of this maxim is by people unconcerned about the possibility of the yield curve inverting. The yield curve tracks short and long-term interest rates that fuel the traditional banking model. Short-term rates are usually lower, so it is cheaper for banks to take deposits, and the longer-term rates are higher, so they can issue loans and take a turn on the difference. Any disruption to this system sees the model break down. An inversion of the yield curve occurs when short-term interest rates are higher than long-term ones – it has been a reliable predictor of recessions.

Of course there are many different ways of measuring the steepness of the yield curve, or the term spread.  A recent paper by the Federal Reserve Bank of San Francisco suggests that it doesn’t actually matter whether we use 30-year minus 3-month, 10-year minus 2-year, or even attempt to include expectations:

Figure 1: Predictive power of different term spreads:

Source: Federal Reserve Bank of San Francisco, Hermes Investment Management

All are excellent predictors of future recession, even excluding the period of potential distortion given by unconventional monetary policies post the global financial crisis (GFC).

The bad news for those worrying about the current yield curve inverting is that it may be too late, because some versions already have and the direction of travel is pretty clear. Setting aside the nominal yield curve and looking at the real one, calculated by discounting breakeven inflation at each point of the curve, it inverted earlier this summer:

Figure 2: Nominal vs real yield curve (10y-2y):

Source: Bloomberg, Hermes Investment Management

Additionally we know that corporate bonds trade at a slight premium to government-issued debt, and the corporate yield curve has also already inverted. 

Figure 3: Corporate yield curve:

Source: Bank of America Merrill Lynch, Hermes Investment Management

Similarly, the global nominal yield curve is also inverted, suggesting a global recession is on its way.

The counter theory is that there are quite good reasons why long-term rates are being pushed down and causing this phenomenon. Dynamics from QE may be depressing the term premium component of long-term yields – “some part of the flattening may not be worrisome at all”[i].  However, there is sufficient uncertainty around the effects of QE on interest rates that there really is no clear empirical evidence to suggest that “this time it’s different”.

At the same time, in the US, the Fed is raising short term rates as its economy improves – inflation (core PCE has at last reached the magical 2% and earnings are accelerating beyond a comfort zone).  So why is nobody concerned about this potential inversion? Historically, the yield curve inverting has been a phenomenal predictor of recessions – it has usually taken between six and 18 months to filter through after it occurs.

For investors, the anticipated economic malaise associated with a recession can easily erode wider confidence and tends to push down risk assets. Investors also abandon higher-yielding but less sound investments that seemed attractive in good times, favouring a flight-to-quality approach. In credit markets, investors should expect to see covenant weakness exposed, as defaults mount and recovery rates fall from the current relatively high bar. So what can investors do?

History suggests several areas, while not outright prospering, will fare better than others in times of recession. For example, in the property sector, stocks and bonds associated with renovation activity are more likely to prosper than new builds – this holds true for other industries too. Utilities and consumer staples tend to outperform in tougher times. Quality earnings and long-term cash flows become even more valuable, and hint at companies less likely to default. And there will always be opportunities for savvy, long-term investors to pick up the debt stock in good businesses that become undervalued.

Looking on the bright side, there are reasons why we might avoid recession. For the moment, earnings are quite strong globally despite the effects of increasing protectionism and anti-globalisation, and recession prediction based on the nominal yield curve requires an actual inversion, not simply getting closer.

So will it be different this time? Maybe – but not thinking about the possibility is a big risk to take if it’s not.

The above is published solely for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any securities or related financial instrument. The views and opinions contained herein are those of the author and may not necessarily represent views expressed or reflected in other Hermes communications, strategies or products. 

[i]Bauer, Michael D and T M Mertens, ‘Information in the Yield Curve about Future Recessions’, Aug-18, Federal Reserve Bank of San Francisco Economic Letter

Tony Tarquini, Director of Insurance, EMEA, Pegasystems

The increase in the minimum employer contribution to auto-enrolled pensions from 1% to 2% in April 2018 represented an unmissable opportunity for the UK workforce to prepare for a comfortable retirement. However, the simultaneous rise in the minimum staff contribution from 1% to 3% has led to industry-wide concern that auto-enrolment opt-outs will grow, threatening the future of insurance companies.

Despite these concerns, there is no doubt whatsoever that technology can be used to educate, cross-sell, upsell, nudge, influence and encourage customers to understand the need to save, both for a rainy day and for their old age.

Millions of vulnerable consumers

Since auto-enrolment was introduced in 2012, nearly 10 million workers have been auto-enrolled in pensions according to figures from The Pensions Regulator. However, data released by the ONS as part of its Wealth and Assets Survey in August found auto-enrolment has not led to a noticeable change in attitudes towards saving.In the period July 2016 – December 2017, just 17% of 16 to 24s felt that they knew enough about pensions to make decisions about saving for retirement. When taking into account all non-retired respondents, less than half (42%) felt they knew enough.

Insurance group Zurich’s own research found some alarming statistics of its own. The company recently discovered 24% of adults have no savings to fall back on and that 17.6m people in the UK would struggle to recover from a financial shock or loss of income. This suggests that regulatory reform isn’t enough to alter consumer behaviour and highlights the need for inspiring change in other ways before it is too late.

I still get people asking me if auto-enrolment is a “good idea”. Nobody is talking about the upside benefits of employers’ contributions doubling from 1% to 2%. This is all free money and all the contributions are tax free. One way I have previously explained why auto-enrolment is a good idea is by asking the person to put £10 on the table and noting that I would then match it with £10 of my own money. I would then point out that they would receive 100% interest on day one and query how old they would have to grow to match that through normal interest. The answer is infinity at today’s rates! I would also point out that you only have to put up a maximum of £7.50 not £10, as it is pre-tax. It would take (literally) a lifetime to recoup the lost money if people opted out – doing so is like walking into the street and burning £10 notes. They then understand immediately.

Communication is key to behavioural change

I believe the key to behavioural change is effective marketing. Technology can be used to mass personalise every individuals’ pension product and show them how they can protect their lives and not live in penury in their old age. It just needs motivation, good customer engagement and the right tech!

Insurers should be using all forms of omni channel marketing technology to change behaviours. They can do this by providing business-friendly technology interfaces that help companies provide customer-centric, high-value engagements to improve every customer experience, enable more effective retention and achieve high response rates. This can include mobile apps, social media and artificial intelligence-based interactions to foster better engagement and buy-in.

For example, from August 2018, Aviva has been enabling customers to check how much money they have saved towards their pension by asking their Amazon Alexa, an easy way for the insurer to make the idea of saving for retirement much more engaging. Tech such as this can also help contextualise the importance of saving for a pension at every life stage, especially for those at the start of their careers with lots of short-term costs such as rent that they might prioritise over pensions.

AI can help identify the best time to talk

Artificial intelligence is a particularly useful technology in communicating the benefits of auto-enrolment as it can help insurers decide the best time to talk to their customers about pensions – at points of their lives consumers actually want to talk to their insurers. These points are known as “Life Events”. If a consumer is approaching a milestone, whether it be the placing of a deposit on a new home, engagement or new baby, they are far more likely to be ready to review their financial situation and be thinking about the future than they would if they were just thinking about the short-term. Expectant mothers and fathers may also be prompted to change their thinking about saving, as they realise that it is no longer just their futures that would be affected by financial shock but their children’s too.

The future of auto-enrolment

The minimum automatic enrolment contribution from employers is set to rise again on 6 April 2019 from 2% to 3%, but the minimum contribution from staff is due to rise from 3% to 5% on the same date. Insurers should take the opportunity to work with businesses now in an effort to prevent further auto-enrolment opt-outs.

Maya Angelou once famously said “people will forget what you said, people will forget what you did, but people will never forget how you made them feel”. The intelligent application of AI insurers can appeal to people at just the right moment to help guide them to good decisions around auto-enrolment and have the potential for quite significant success.

Technological innovation will be key not only to reducing the number of consumers opting out but also encouraging more to change the way they think about pensions and savings in general.