Shun the property risk, invest in equities

Shun the property risk, invest in equities

Sunday December 10th 2006 by Jane Suiter

THE vast majority of people are saving their SSIAs once they mature. Of course many of these probably have long-term spending in mind, whether on foreign holidays or new kitchens. What does seem likely, though, is that many will choose to invest in equities rather than take the risk on what looks ever more like an uncertain property market.

Less than half of the total value of the SSIAs will mature this year, with some €8.7bn maturing in the forthcoming election year. If you are one of these and have still not made up your mind, you are not alone. In a bid to help you decide, the Sunday Independent has been asking well-known money managers what they are advising their usually wealthy clients to do.

This week it is the turn of Declan Redmond of Appian Wealth Management, which offers segregated accounts for high-net-worth people.

Generally you need half a million to benefit from Appian's advice. In 2005 their investors received average returns of 18.6 per cent and in the first nine months of this year, 8.2per cent.

Mr Redmond says it generally keeps its clients' funds about 35 to 50 per cent in cash and bonds, and 50 to 65 per cent equities. The proposition is generally value investing, in other words picking stocks and shares where the fundamental value of the assets is not reflected inthe price.

This of course sounds like a no-brainer. If the investment manager is right, then it is surely only a matter of time before the rest of the market sits up and takes notice - and then the share pricewill rise.

Of course, it is not guaranteed. If the investment manager gets it wrong, or if there turns out to be good cause for the undervaluation, then you could be stuck with a turkey.

But Mr Redmond insists that at times human nature misperceives and misprices assets and it is opportunities like these that allow Appian to invest its funds. Appian investors have holdings in stocks like Associated British Foods, CRH, Bank of Ireland and AIB among Irish stocks. Pharmaceutical group Novartis also features.

At the moment it is on the lookout to buy into stocks such as Unilever, Royal Bank of Scotland, CRH and Nestle if the price falls a little.

However, Appian now has its own value fund, which allows clients to benefit from gross roll-up; in other words, gains can be reinvested without being taxed. According to Mr Redmond this idea of longer-term investing is proving popular with their regular clients. It also allows many who are going liquid from property to do something sensible with the money.

The entry level for this is also far lower, with a minimum investment of €25,000. However, the investing proposition is the same. So far it is only 23 per cent invested in equities and 3 per cent in commodities as the team wait to spot the right opportunity to buy into stocks. It will eventually be about 60 per cent in equities with the rest in cash and bonds.

At the end of the day the fund is expected to provide a return of between 6 and 8 per cent, after taxes and charges. So far this year it has returned some 6.25 per cent after charges, which are now 1.5 per cent.

So there it is. Look for big companies which are already well-known and where the share price has come off the boil - then invest. Keep a good bit back in cash. Or sling the lot into Appian, and let them do the work for you.

< Prev		Next >