Wealth Investment Strategy

FREQUENTLY ASKED QUESTIONS

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What are the advantages?

Global equities as measured by the MSCI World Index have significantly outperformed the FTSE 100 Index and the FTSE All Share Index for many years. A significant investment in this geographical sector is expected to continue to achieve superior returns in the future.

The CCM Intelligent Wealth Fund is a global equities fund which will invest in innovative and disruptive companies that are shaping our future. It will invest in eight current and future themes including;

Biotechnology
Internet of Things
Robotics
3D printing
Renewable energy
Bank payment systems
Transport
Media

Approximately one third of the fund will be invested in shares including household names such as Facebook, Alphabet (owner of Google), Amazon and Alibaba. These companies are known by the acronym FAAA. Many experts consider these companies to be virtually unstoppable forces that will dominate their sectors for the foreseeable future. About two thirds of the fund will be invested primarily in low cost funds such as ETFs (Exchange Traded Funds) and Investment Trusts.

What are the charges?

The ongoing charge figure of the fund is 1.30% which means that the overall increase in fees annually will be 0.38% (20% x 1.30%=0.26% plus existing charges of 80% x 0.15%=0.12%) for clients who have a medium attitude to investment risk and who are currently invested in the Strategic Passive strategy.

What are the Sub Accounts?

They have been created to hold 20% of your portfolio in the new strategy, 80% is to remain under your existing strategy with Parmenion.

They can also be used for splitting your investment into different objectives as well as allowing investment into non-Parmenion strategies and investments.

What will happen with the existing 80% of Parmenion funds that aren’t being transferred?

For now the remaining 80% will continue to be invested as before in your existing solution which for most of our clients will be the Strategic Passive strategy. The 20% transferred into cash in the sub-account will be re-invested into the Intelligent Wealth Fund.

Who is managing the fund?

Minerva Money Management, Tony Byrne’s fund management company, which is a sister company of Wealth And Tax Management.

Tony has successfully headed up Wealth And Tax Management’s Centralised Investment Proposition WIS or Wealth Investment Strategy for the last 21 years during which it has achieved an average annual return of 9.8%.

Tony also ran a very successful higher risk, higher return strategy called Dynamic Fund Control a number of years ago which achieved average annual returns in excess of 20%.

The FCA approved Minerva Money Management’s FCA application very quickly within 5 weeks of submission which is an unprecedented quick timescale.

The FCA approved the CCM Intelligent Wealth Fund after a very thorough due diligence exercise lasting two months.

Carvetian is the fund’s Authorised Corporate Director (ACD), and they have many years of experience in managing funds for fund managers. Minerva Money Management passed a stringent due diligence process before Carvetian agreed to act as the ACD to the fund.

What is the CCM Intelligent Wealth Fund’s track record?

We have a ghost portfolio made up of the stocks that will form the fund when it is launched. We have recently back-tested the results which have produced impressive average returns of 24.74% a year over the last three years and 29.12% over the last 12 months up until 31 March 2018. It is important to stress that this is not actual past performance nor is it a forecast of future performance, because the fund hasn’t yet been launched.

What are the main disadvantages?

The main disadvantages include the fact that it has higher fees than your existing solution, which for most clients is Parmenion’s Strategic Passive Strategy and it is a specialist fund therefore less diversified in sectors and asset classes. There is also no track record, however the shares and funds in which it is invested have an excellent track record. It is of course a new fund.

Will there be any tax disadvantages?

There will be no adverse tax consequences for pensions and ISAs.

If you have a General Investment Account then you could potentially trigger a capital gain within your portfolio when you transfer 20% of it into cash.

Any such capital gain arising from this switch is highly unlikely, in itself, to produce a capital gain in excess of your annual CGT exemption of £11,700 per person. Furthermore any capital gain from further encashment of your GIA to re-invest up to £20,000 into an ISA is also unlikely to produce a capital gain in excess of your annual CGT exemption. In fact the two combined capital gains are highly likely to be within your exempt annual allowance.

However, if you are likely to have capital gains elsewhere for example from the sale of an investment property, shares or taxable investments then those capital gains when added to your Parmenion capital gains could trigger a Capital Gains Tax liability.

So it is important to take advice from us before you decide to sell any other asset that could create a Capital Gains Tax liability elsewhere.

What is this change intended to deliver and why does Wealth & Tax Management consider it will be better than the current arrangements?

Our new investment strategy has been recommended because we expect it to achieve better returns for clients than our existing Parmenion only strategy. Basically we will be returning to our Wealth Investment Strategy (WIS) which we used to have before we recommended clients to switch from Standard Life two years ago. The difference is that we will be using WIS within the Parmenion wrap only.

What this means is that we will recommending more than one Parmenion strategy in future, rather than just the Strategic Passive Strategy as at present which invests in low cost index tracker funds. The reason for this is that we have discovered at least two other Parmenion active strategies with consistently better returns net of charges than Strategic Passive and because having more than one strategy means there is greater diversification for clients and therefore less overall risk.

In addition to this we have decided to adopt what’s known as a core satellite strategy. What this means is that the core Parmenion funds will remain the majority of the investment (80%). The core element is made up of conservative, predictable, low charging, passive funds which are primarily index tracker funds as well as some active funds with an excellent track record. The satellite element is made up of the CCM Intelligent Wealth Fund which is a high growth, high return, higher risk, active fund with higher though not excessive charges. It is anticipated that the returns net charges from the Intelligent Wealth Fund will be significantly higher than those of the Parmenion funds.

A core satellite strategy is quite a common concept nowadays. We decided to opt for this new approach because we felt that it would not increase the level of risk of a client’s overall investments but that it was highly likely to produce greater returns at a slightly higher total annual cost.

Will the Wealth Investment Strategy investing 20% in the CCM Intelligent Wealth Fund mean higher risk?

The new fund has been independently assessed by our ACDs, Carvetian, to be a global equities fund of medium to high risk.

We believe that the introduction of the CCM Intelligent Wealth Fund will not increase the overall level of investment risk for clients. The fund is a global equities fund with a risk rating of medium to high risk. The majority of our clients have a medium attitude to investment risk. However, every client’s risk level is made up of a mixture of investments that are low, medium and high risk but which give an overall level of risk which is typically medium risk.

We will continue to run the Wealth Investment Strategy in accordance with each client’s declared and agreed attitude to investment risk. Therefore the addition of a medium to high risk fund such as the CCM Intelligent Wealth Fund will simply mean replacing existing Parmenion funds that are of the same level of risk with the new fund.

Furthermore the introduction not only of our new fund but also additional Parmenion strategies will result in not only more funds but a large increase in the number of underlying shares in those funds. As there will be significantly more shares that will mean far greater diversification which is turn will mean lower overall risk.

How regularly will you review the Wealth Investment Strategy and report to clients?

We plan to produce a quarterly WIS report to clients including a review of the previous quarter together with fund switch recommendations including both Parmenion strategies and the CCM Intelligent Wealth Fund.

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