Our content this month are as follows:-

• The Sweet Sell of Success Seminar
• The Press
• Books We Have Read
• Business Showcase
• Quote of the Month

On Thursday 23rd November we held a seminar at the Coventry Chamber of Commerce, together with the highly respected legal firm of Alsters Kelley, entitled "The Sweet Sell of Success".

The seminar addressed the concerns of business owners when building a business for sale and the steps necessary to ensure that you have explored all of the exit routes, ensuring that the price is right for you, taxation is taken care of in the most efficient way possible and that your core capital is invested efficiently to produce income for you and your family for the rest of your life. If you would like a copy of the slides from the seminar, please contact Jayne Vale who will be happy to forward them to you.

The seminar was attended by clients of both firms and we were fortunate to have, as our moderator, Ed Doolan, who kept things moving very smoothly. Watch this space for announcements about future seminars.

Once again some commentary on articles that have appeared in the press this month; it is gratifying to read so much that backs up our approach to investment.

Fund Managers and Musical Chairs

An article by Nigel Legge in the Telegraph of 25th November revealed that more than 60% of UK equity fund managers have changed jobs within the past three years and that some estimates suggest that more than 80% have changed jobs in the past five years. Other research we have seen suggest that 30% of managers changed jobs every year! Given that managers find it virtually impossible to outperform markets there is probably a very good reason for the constant movement.

Our view is that this is just another factor that makes it impossible for private investors to spot successful managers in advance. When you do not know who is going to be managing the fund from one year to the next you have added in another variable that endorses the conclusion of all the relevant research, which is that you should concentrate on capturing market returns via index funds.

"New" Asset Classes

To read the trade and general press recently one could be forgiven for thinking that a number of new asset classes have been invented and that the smart thing to do is to ensure part of your portfolio is invested in these areas. We are told that hedge funds, private equity and commodities are essential components of any diversified investor’s plans.

We have dealt with commodities previously and would reiterate that buying commodities is speculation and that a lack of correlation does not automatically mean good diversification. Above all, commodities have no expected rate of return and you might as well bet on a horse race as the future price of a commodity.

Warren Buffett famously described hedge funds as "compensation schemes masquerading as an investment"; we agree - it is possible to get rich with a hedge fund, but only if you run it.

We were interested to see the following in Tom Stevenson's excellent article in the Telegraph on Tuesday, November 28th: -

"Many of us now take hedge fund statistics with a pinch of salt, because the reporting of performance is essentially a voluntary affair. Star funds shout about their results while others quietly brush theirs under the carpet. It would not matter much except our pension funds are diverting ever greater proportions of our savings into hedge funds on the back of those statistics."

He goes on to say: -

"Now it seems private equity is equally suspect. According to Citigroup, the apparent outperformance of buyout funds in recent years is simply a reflection of the high levels of cheap borrowings with which acquisitions are funded. If an investor had geared up to the same extent to invest in publicly quoted midcap stocks, the returns would have been just as impressive."

We would add that gearing is a high risk strategy that works in rising markets, but can have dire consequences as markets fall. We have extensive research from the United States which also suggests that hedge funds and private equity funds find it as difficult to beat markets as any other managed funds - there really is nothing new under the sun, including the hunger of active fund managers, of any sort, to take greater and greater fees and commissions from their clients.

This month’s book recommendation is something of a departure, but we thought it might be useful and appropriate for Christmas. It is "If I Don't Write It Nobody Else Will" by Eric Sykes.

This is a guided tour through a pre-war childhood, a fascinating World War II experience and comedy from a gentler age. Whether you enjoy Eric Sykes’ humour or not there is much to admire in the manner in which he overcame many obstacles in order to become one of the most successful writers and performers in British entertainment. There is definite evidence of a steely determination underlying the comedy.

A great read and an ideal Christmas present for fans of humour from the golden age of radio and television.

The book is readily available at bookstores and Amazon, but if you have any difficulty finding it please contact jayne@indexfundadvisors.co.uk.

Remember, we are very happy to showcase any client business in this space so please let us have details of your offering for publication.

"A wise man should have money in his head, but not in his heart."

Jonathan Swift