Weekly Thoughts 18 February 2022

I’m talking about capital growth/decline of investment funds this week.  Sorry…. This topic can be a bit boring.  But it’s been an interesting exercise for me, so I thought to share it with you. 

A number of clients have recently asked me about Foord’s investment performance and whether or not I should be switching them out, specifically after their 2021 returns were lower than many others.  It’s a hard thing this: the idea of when do I decide to whole-scale begin switching clients out of a particular fund or fund manager.

As it so happened, on Tuesday morning this week I joined a live, online presentation by Foord Asset Managers.  (Just for some useless information, Foord is pronounced as in the car: Ford).  Then for a few hours the same afternoon, I took three different clients’ investment portfolios and played on a spreadsheet with their own return figures.  (The results will be an indication for me of all my clients in those funds and with the fund manager.) 

My plan was then to compile a long email to my Foord consultant, to ask some questions about the direction their funds were headed for the next couple of years.  Obviously, I had already heard the feelings and opinions on this question from the Asset Managers talking in the morning, but it still helps getting the inside line from the consultant.  All this to try help me decide whether it was time to advise clients that we switch out of Foord.

As it then so happened, my Foord consultant fortuitously happened to contact me on Tuesday afternoon asking if I could meet up on Wednesday for a chat.  And so I had this debate face to face with her about their returns and as to what Dave Foord (the boss man – who I’ve met and had tea with) and his team were thinking about their funds going forward and why should I keep my client’s money with them.

I used various periods of time when I was playing with the numbers:  

  • the single year of 2021,
  • then only January 2022,
  • the 6 weeks so far of 2022,
  • the two years of 2020 and 2021 in one-line measurement,
  • the last 3 years in one measurement,
  • and for three local Balanced Funds, the last 5 years.

This is what I found, using five different Global Equity funds.  An equity fund means a fund that mainly just holds shares of companies on stock markets around the world, it does not hold bonds or cash or property.  [I hope the table comes out legibly for you on your side]

What did I find?  That if I look at two and three and five years, there isn’t much reason to move away from Foord.  And I really should only be looking at 10 years and longer, for funds that are used for growth of capital.

Interestingly, in the last 6 weeks, when world markets have declined already quite a lot, Foord didn’t do too badly by comparison in January and the first 6 weeks of this year. 

My consultant reminded me on Wednesday that Foord say ‘Safety First’.  They say always think of this when you think of us.  Their investment philosophy is a cautious one.  They admit to having moved to a safer stance on money management in 2021 before many other fund managers had done the same.  This made them lose out on some of the growth of the year.  They admit they might miss out on excess returns in the short term and that they did not win the race in 2021.  But 2021 was an unusual year they felt, what with the excess printing and distribution of US money into the US economy.  And with the expected rise in US inflation going forward and the potential draining of global liquidity, it might make them worth holding onto.  This would be the debate I would have in my head.

The honest truth is that my mind is not made up yet on this matter.  Am I going to take my own money in my Retirement Annuities away from Foord?  No.  But that doesn’t mean I shouldn’t consider the alternative for my clients.

These are the things you rely on me to wrestle with, to play with, to debate with and make decisions about.