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Questions for Courtiers at the 2019 Client Seminar

| Investment

Intro from Leo Hallam, Head of Brand & Communication:

Hello and here’s wishing everyone a fruitful year ahead.

2019 was another busy year. It was great to see so many of you attend our annual Client Seminars. Since the seminars began, this annual occasion has extended from one day to three, accommodating growth and demand. Continuing this trend, the 2020 Client Seminar will take place across four days as we aim to ensure a comfortable atmosphere and greater flexibility in dates available. Our Events Team is busy planning the next seminar and we’ll be in touch this summer with dates and your reservation invitations.

A little behind-the-scenes perspective: logistically the 2019 seminars went very well. Each year we look to build on our efforts knowing we can always do something, no matter how small, to improve the overall event and experience. We’ve received some fantastic feedback for which we’re grateful, as it helps us identify tweaks and refinements from the various valuable perspectives of our guests, our clients.

The introduction of a Q&A panel and question card for each guest was well received. We had plenty of questions submitted and naturally, not having time to address all on the day, the panel is back with more answers (please bear in mind some questions were asked prior to the results of the recent general election).

Thank you again for your questions, feedback and continued commitment to Courtiers. We look forward to welcoming you at the 2020 seminar and if you’ve any questions at any time, please contact your adviser.


Click a question below to jump to the answer – or skip to the full Q&A

How would we know if Courtiers were ‘doing a Woodford’ and what protections and early monitoring do we have?


If the UK leaves the EU without a deal, what effect do you envisage this will have on the financial markets of our investments? / What happens if we get a no deal Brexit at the end of December 2020?


James talked about putting company & stock data into a Courtiers investment model. Have Courtiers built their own model (Woodford did) or have they bought an off-the-shelf model and modified?


Do CSR Australia build eco-friendly houses? How much is climate change taken into account? What consideration do you take to being Carbon Neutral?


How can FCA ban sale of mini bonds if there are no regulations, other than if regulated Financial Advisers are selling them?


What exposure does Courtiers have to Trump’s whims?


Would the panel consider investing in Pub Companies as a property investment with considerate cashflow from Food 65% Drink 35% and now an increase in properties after years of closures.


How bad would a Corbyn government really be for us and for inflation – your best assessment! /
What will happen if Corbyn gets in? / How might Courtiers fare under a Corbyn/McDonnell government? How safe are our assets?


Do you see Courtiers substantially increasing it’s investment in enviromental technology in the future?


To what extent are you able- and do you-take into consideration the climate emergency? Should you be doing more in that direction?


Has Courtiers base in Henley-on-Thames been a benefit for your investment thinking and attracting the best personnel?


How and when exactly is the overview graph on the online portal updated?


Value or growth - are the two mutually exclusive in terms of investment style?


Thank you for an excellent presentation. Informative too. However, I have a concern. Obviously, we pay charges to you. Would you be prepared to provide your clients with a spreadsheet showing detailed costs of these seminars? And maybe a graph showing overall costs since you began doing them.


What is the breakdown in Courtiers Investment Portfolio size? Say £0 – 500k, 500k - £1m, £1m-5m, £5m-10m…


What is your view on “Managed v Passive funds”? / Why Courtiers versus a Tracker Fund?


Where do the huge fines go? Who benefits? / What happens to the money that is imposed in fines to companies/persons found guilty of fraud etc?


With the IPO of Aramco this week attracting a value of $2trillion, will investors ever lose their appetite for petrochemicals in time to save the planet from climate change? Should all funds exclude oil stock on ethical grounds?


When does the EU collapse finally? / If Conservatives win are we better with the EU deal or crashing out?


How would we know if Courtiers were ‘doing a Woodford’ and what protections and early monitoring do we have?

Caroline writes:

All Courtiers funds are authorised and regulated by the Financial Conduct Authority. Courtiers uses Citigroup as Depositary and it has an oversight function, partaking in monthly calls with the Courtiers Compliance Team plus at least one onsite visit annually. JTC is our fund administrator and our internal Compliance Team oversees this function. We employ an order management and portfolio management system which allows an independent daily assessment of fund valuations.

Of course, Woodford would have also had such mechanisms in place. However, the company’s investment choices differed widely. While Woodford held unlisted assets in its funds and invested in private, unquoted companies, Courtiers does not. Such companies can be hard to value and a valuation can be discretionary and subject to opinion. All assets held in the Courtiers funds are publicly listed and a price is declared each day - there is no discretion involved in valuing any of the assets held in Courtiers funds.

An internal Compliance Team monitors the Courtiers investment team. Monthly minuted meetings are held to monitor and formally challenge our investment decisions, asset allocation, investment positions, risk data and performance.

Our top 10 fund holdings are published monthly within fund factsheets and are available daily to clients via their Courtiers online accounts. All clients and advisers have access to the positions held 24/7.

Lastly, Courtiers takes care to keep close to clients. We, the fund managers, meet our investors. We know who we manage wealth for. We understand it’s a privilege to care for our clients’ money. We have a close relationship with our advisers, who question us on behalf of clients. Due to the close relationship between Courtiers investment team and Courtiers advisers there is a level of scrutiny and flow of information that isn’t always possible with other fund management groups. Your Courtiers adviser is your early warning system.

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If the UK leaves the EU without a deal, what effect do you envisage this will have on the financial markets of our investments? / What happens if we get a no deal Brexit at the end of December 2020?

Gary writes:

Firstly, I do not think there is even a remote chance that the UK will leave the EU without a deal, as the outcome would be detrimental to the economies that make up the EU as well as the UK. Nonetheless, it is important for negotiators on both sides to be able to walk away from the table with no deal, otherwise the other party would have the whip hand regarding terms. This is why it was preposterous for the UK parliament to insist that the UK could not leave the EU without a deal, which would have greatly weakened our country’s bargaining power.

If, for whatever reason, the UK and the EU parted terms with no deal in place then the pound would tumble and the value of UK shares would fall. Businesses that are heavily reliant on trade with Europe would be particularly badly hurt. Thereafter, the long-term effects would depend on how quickly the UK economy adjusted. Bearing in mind that we run a substantial trade deficit (especially with Europe) one could argue that this would be a forced rebalancing of the UK’s economy that is long overdue. Personally, I think it is preferable to strike a trade deal.

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James talked about putting company & stock data into a Courtiers investment model. Have Courtiers built their own model (Woodford did) or have they bought an off-the-shelf model and modified?

Gary writes:

Our Quantitative Equity Selection Model (QESM) is proprietary and entirely developed by Courtiers. I would prefer to say that it has “evolved” over many years and its main function is to sift the shares in companies that meet our criteria from those that do not.

In his presentation, Jake mentioned that we like to find companies that have a good earnings yield (relatively low price/earnings ratios), decent cash flow and strong balance sheets. The QESM does not get to decide whether we buy or sell stocks. That is the job of Courtiers analysts and they have to put their name to their own views and research. We call this approach “Quants and Common Sense”, because we are using a quantitative model to ensure we stick to our selection criteria, but we do a “Common Sense” analysis, mainly to ensure that a stock that looks cheap is not cheap for good reason – i.e. is not likely to fail in the immediate future.

I met Woodford in the early noughties and at that time he insisted that he worked with no model or predetermined policy, and as far as I am aware he ran the funds in his eponymous company on the same basis.

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Do CSR Australia build eco-friendly houses? How much is climate change taken into account? What consideration do you take to being Carbon Neutral?

Jacob writes:

CSR, a stock held in the Courtiers funds which I talked about at the Client Seminar, do build eco-friendly houses and they are also actively reducing energy consumption and emissions from their factories.

Ultimately, it’s very difficult to consistently apply a rule on how to tackle climate change through an investment portfolio. Companies like Shell emit CO2 but they also invest the most in carbon neutral technologies, as they will be the most affected by these shifts. We try to be mindful of environmental issues when picking investments, without guaranteeing the application of strictly green criteria.

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How can FCA ban sale of mini bonds if there are no regulations, other than if regulated Financial Advisers are selling them?

Caroline writes:

Mini-bonds themselves are not regulated, so there is no protection from the failure of a bond. However, the marketing and selling of mini-bonds is a regulated activity and it is the marketing of mini-bonds (to retail investors) that has been banned for 12 months. Note: the bonds can still be marketed to “sophisticated investors”.

2020 is likely to bring some new rules in from the regulator with regard the marketing of such bonds. I suspect there may be a permanent ban on the marketing of such bonds to retail investors. However, given the steady stream of “disasters” in the mini-bond arena, it is possible the regulator will also seek to regulate the product. The consultation will be out shortly and we will know more in the next 12 months.

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What exposure does Courtiers have to Trump’s whims?

Gary writes:

The problem with Trump is that you know he will be whimsical, but never in what direction. I do not think we have ever taken a decision based on which direction Trump will go, apart from being slightly nervous about long-term interest rates (which I mentioned during my presentation) and that is because populism can, eventually, stoke up demand in an economy to such an extent that inflation returns.

One example of where we do not follow a Trump whim is with regard energy. Trump is a climate change denier and is the world leader that Greta Thunberg likely most has in mind when she refers to politicians being disengaged from the planet. This would suggest that coal and oil companies would be a good place to invest, but we take the opposite view, although we are not necessarily anti-oil companies (we currently hold Shell) but we are wary of their ability to survive if they continue to increase carbon emissions to the detriment of the environment. On the flipside, the oil companies may, as energy providers, be a positive force for good in finding a solution to the increasing use of carbon based energy. So in short, we do not really take much notice of Trump’s whims (presidents are pretty short-lived in any event) and we try to concentrate on the longer term.

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Would the panel consider investing in Pub Companies as a property investment with considerate cashflow from Food 65% Drink 35% and now an increase in properties after years of closures.

Jacob writes:

Yes….as long as they are profitable. If a listed pub company was profitable and was trading at an attractive price we would always look into it with an open mind. It would be tricky as there has been such a long trend in pubs closing due to people drinking less and favouring staying at home for the latest Netflix release. However, there will be a point when the consolidation in the industry stops and the remaining pubs will be in areas of high demand. As this has been a trend for the last two decades, I would expect an analyst to have a couple of years of evidence that closures have stopped and earnings are stable before the investment would be appropriate for the funds.

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How bad would a Corbyn government really be for us and for inflation – your best assessment! / What will happen if Corbyn gets in? / How might Courtiers fare under a Corbyn/McDonnell government? How safe are our assets?

Gary writes:

Thankfully academic questions!

The magnitude of the damage, or good, that a Corbyn government would do for the UK economy would depend on the extent to which it implemented its radical left-wing agenda.

The worst case scenario is that a number of businesses are nationalised which, as we know, would not add to efficiency (under an incoming Labour government more likely the opposite) and would reduce confidence in UK markets. If a Labour government went a step further and sequestrated 10%% of the equity of all medium and larger quoted businesses in the UK then that would be the end of the City. No foreign business would want to list or be based here and foreign investment would dry up. That would be catastrophic and we would be heading towards Venezuela mark II.

Of course, Corbyn has not had the opportunity to form either a majority or minority government, so the aforementioned is academic. Had Labour got into power with either a majority government, or as the lead party in a coalition, and ditched the more extreme bits of its manifesto, then one can argue that with additional public spending the UK economy would benefit from a pickup in demand and that this would drive corporate investment too, in which case it’s a double whammy with GDP growth perhaps getting comfortably above 2% and real wages picking up too.

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Do you see Courtiers substantially increasing it’s investment in enviromental technology in the future?

Caroline writes:

This isn’t an area we will specifically target as that isn’t how we invest. We look for companies with a sustainable business model, which generate strong cash flow, which pay dividends to investors and which have strong balance sheets. We like an unloved company, meaning it has such characteristics but is out of favour so is cheap to buy.

Environmental technology may well form part of our portfolio from time to time, if a company meets our criteria. Or offers a good investment opportunity and improves diversification. But we aren’t looking specifically for that in Courtiers Funds.

Currently we hold a renewable infrastructure position which provides exposure to wind farms, solar farms and battery storage assets. We may look to increase our position here but primarily taking care to ensure our portfolio remains well diversified and managed within its risk parameters.

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To what extent are you able- and do you- take into consideration the climate emergency? Should you be doing more in that direction?

Caroline writes:

Most companies have improved reporting to include a focus on climate change, environmental impact and social impact. This enables us to take such factors into consideration. The Courtiers Funds do not have a mandate to invest specifically targeting the climate emergency. However, we are aware of global issues and we look for companies to invest in which are sustainable, steady cash flow generators as well as strong balance sheets and good governance. We also look for companies which are good value. But we do not ignore wider factors. A good example would be global coal companies. These companies are recently featuring at the top of our screening lists as they are good value. However, we take the view that coal mining is not a sustainable industry and we exclude such companies on that basis.

Climate change is one of the thematic overlays used in our Ethical Equity strategy which employs negative screening in addition, ensuring that oil/gas companies, for example, are not invested in.

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Has Courtiers base in Henley-on-Thames been a benefit for your investment thinking and attracting the best personnel?

Caroline writes:

Being away from the “noise” of the City is a benefit. We have the perfect arrangement where we can easily get into London for meetings / conferences but we are not subject to the constant information overload / “noise” that affects those that work there every day. We are able to focus on what is important and manage client money within the parameters we are given. We are able to attract exceptional investment talent to our base in Henley-on-Thames. We have 5 CFA charterholders in the team, with a new analyst currently undergoing his study towards the CFA charter. The opportunity to work on innovative funds alongside well qualified colleagues is a big attraction.

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How and when exactly is the overview graph on the online portal updated?

Leo writes:

Data is extracted from our internal systems every evening and uploaded to all clients’ online accounts automatically overnight. If accessing your online account at any time during BST working hours, the graph should display portfolio valuations as at the end of the previous working day. Outside these hours, (generally speaking, in the early hours of the morning) accounts may show the day previous prior to completion of the overnight run.

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Value or growth - are the two mutually exclusive in terms of investment style?

Jacob writes:

Ultimately everyone is a value investor in some way. Growth investors believe they are getting the future earnings cheap by investing at today’s price whereas we prefer evidence of profitability by buying proven earnings at low valuations. There are periods when growth investing will outperform value investing and we are in one of those periods at the moment. However, the MSCI World Value Index has outperformed MSCI World Growth Index by 400% (not a typo) since the beginning of the 1980s. There are many theories as to why value outperforms growth in the long run but we subscribe to the view that the past is a better predictor of the future than an analyst or journalist that is paid to make as much noise as possible about the companies that will define the future.

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Thank you for an excellent presentation. Informative too. However, I have a concern. Obviously, we pay charges to you. Would you be prepared to provide your clients with a spreadsheet showing detailed costs of these seminars? And maybe a graph showing overall costs since you began doing them.

Jamie writes:

Thank you for your question raised at the 2019 Client Seminar, and the kind comments.

We have been running seminars since 1999 and the number and costs of the seminars have increased. But as a percentage of the total turnover of Courtiers Group and more specifically the Brand & Communication budget, it has fallen.

The total turnover of the Courtiers Group will be approx. £15 million for the financial year ending 31st March 2020.

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What is the breakdown in Courtiers Investment Portfolio size? Say £0 – 500k, 500k - £1m, £1m-5m, £5m-10m…

Jamie writes:

This is another very good question. I can’t give specific client values as you have requested, but I can provide the following information:

Courtiers Total Funds under influence is approx. £850 million, of which £725 million is directly held within Courtiers’ Discretionary Investment Management Service as at 4th January 2020. The £125 million difference between the £850 million and £725 million are funds held by clients migrating to Courtiers.

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What is your view on “Managed v Passive funds”? / Why Courtiers versus a Tracker Fund?

Gary writes:

Tracker funds track specific indices. When taking exposure to assets within the Courtiers funds we do sometimes choose to track an index, but we are more likely to do this via derivatives, such as futures and options, which are cheaper, track the index more closely and are considerably more liquid than tracker funds.

The argument that generally gets put forward for using tracker funds is that they are cheaper than an active portfolio, but where Courtiers is concerned the “active” part of the service includes:-

  • Tax assessment and management
  • Risk assessment and risk management
  • Succession planning
  • Asset class analysis
  • Stock and security analysis
  • Portfolio construction
  • Portfolio monitoring
  • Tax wrapper provision
  • Valuation and administration

In my presentation I made the point that the smaller private DIY investors that chose trackers tend to favour funds that have been the best performers over the short to medium term, which means they often end up buying asset classes and/or securities that have become expensive. It can also mean that the smaller private investor that focusses on cost savings through DIY asset management drifts into more risk than they were intending and suffers the consequences. In all of the big scams it has tended to be the private investor that has been most badly hurt.

A managed fund would typically cover the asset class analysis, portfolio construction, monitoring and security analysis of the above. A managed fund offers more than tracking a single index. Courtiers service includes all aspects of a managed fund plus the other elements of a discretionary management service (tax wrapper provision, administration, valuation, tax assessment and management and succession planning). Courtiers may choose to use a tracker fund as part of the wider service. We do this typically for efficiency and lower costs. On its own, it would not satisfy the wider objectives.

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Where do the huge fines go? Who benefits? / What happens to the money that is imposed in fines to companies/persons found guilty of fraud etc?

Caroline writes:

The fines meted out to the groups involved in oversight / fund-management / product failures go to the FCA (the regulator) and then are typically ring-fenced into a settlement fund to compensate the investors affected by the product failure.

With regard other FCA fines (for example, where a company breaks an FCA rule but it does not result in a financial loss for an investor), it is reported that the money goes to the Treasury and was distributed to military charities / emergency medicine. However, for the last couple of years there has been no mention of where the money has gone and the Treasury has been seemingly unaccountable for it. Perhaps our new chancellor, Sajid Javid, will give details…..

The fines meted out to the groups involved in oversight / fund-management / product failures go to the FCA (the regulator) and then are typically ring-fenced into a settlement fund to compensate the investors affected by the product failure. Fraud would be an example where an investor would likely lose out so this is the most probably outcome i.e. the fine should be used to compensate the investors.

With regard other FCA fines (for example, where a company breaks an FCA rule but it does not result in a financial loss for an investor), it is reported that the money goes to the Treasury and was distributed to military charities / emergency medicine. However, for the last couple of years there has been no mention of where the money has gone and the Treasury has been seemingly unaccountable for it. Perhaps our new chancellor, Sajid Javid, will give details…..

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With the IPO of Aramco this week attracting a value of $2trillion, will investors ever lose their appetite for petrochemicals in time to save the planet from climate change? Should all funds exclude oil stock on ethical grounds?

Caroline writes:

I was talking to a fund manager recently about the important engagement work done with Royal Dutch Shell and BP on behalf of an ethical fund and they noted how far those businesses have come with regards diversifying the businesses. Both companies are still petrochemical businesses at heart but they are vastly different businesses than they were 10 years ago. So good work is being done without alienating shareholders.

Saving the planet from climate change requires a huge global effort. Whilst I accept we can all do our bit, the key players are the big polluters on the planet – China and the US. And whilst we all buy increasingly bigger petrol guzzling cars (and while electric cars are not always an appropriate, or cost effective, alternative) the demand for petrochemicals will not wane. Education and awareness is the first step and 2019 has certainly raised public attention. Investors are under increasing pressure to make choices that are in line with a global objective to address climate change so companies will also change over time.

Ethical funds of course will continue to exclude oil stock on ethical grounds. Courtiers clients can use the Courtiers Ethical Equity and Ethical Bond strategies if desired.

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When does the EU collapse finally? / If Conservatives win are we better with the EU deal or crashing out?

Gary writes:

Our partners on the European continent are more committed to the EU than the UK, mainly because they see it as providing a prolonged period of peace. As we were not invaded in World War II us Brits do, perhaps, value that EU peace benefit a little less than many other EU members, although we do undoubtedly value it because no-one in their right mind would ever want to get into a military conflict if it can possibly be avoided.

I do not think the EU will collapse, but I think it may branch into different forms. Macron talked about levels of membership of the EU and even suggested that the UK may want to take up a spot in an “outer ring”.

The biggest problem that the EU faces in the immediate future is the one that arises from having a common currency with no common fiscal policy. This means that transfers cannot easily take place between the stronger and weaker parts of the European economy, which can happen within a union that has fiscal and monetary commonality, like the UK. I think that, at some stage, Northern Central Europe may go it alone with France tagging along and with Italy moving to one of Macron’s “outer rings” after restoring the Lira.

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Issued by Courtiers Asset Management Limited, CAM0120333. Courtiers Asset Management Limited is Authorised and Regulated by the Financial Conduct Authority - Register No: 616322. Address: 18 Hart Street, Henley on Thames, Oxfordshire RG9 2AU. Telephone: 01491 578368 Fax: 01491 572294 Website: www.courtiers.co.uk.

Warning – the views expressed by Courtiers in this summary and any video and video transcripts, are reached from our own research. Courtiers cannot accept responsibility for any decisions taken as a result of reading this document, watching the featured video or reading the video transcript and investors are recommended to take independent professional advice before effecting transactions. The price of stocks, shares and funds, and the income from them, may fall as well as rise. Past performance is not necessarily a guide to future returns.

We do not endorse nor accept responsibility for the content of any website not operated by Courtiers which you may visit by following a link from this article.

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