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Expatriate Funds commentary
by Matt Verdon
A review of headlines over the past month shows that markets
continue to be in a constant state of flux at present, and the
summer of our discontent continues to grind world markets lower.
The United States economy has, however, begun to show early
signs of a recovery, with confirmation that a number of leading
indicators appear to have stabilised.
Europe may well be in for a continued period of weakness given
that European interest rate cuts have not been forthcoming.
What is needed in both the US and Europe is an indication that
earnings among corporations are beginning to improve. Expatriate
investors can take strength from the stabilising trends in the
US. However the golden rule for expatriate investors at this
time must be to “adopt a risk averse strategy”.
With this in mind, the types of funds that would be suitable
are those that offer a high level of global diversification.
Funds that have a high technology or telecommunications content
should be avoided and instead those funds comprising a high
proportion of global multinational corporations and leading
alpha stocks selected.
There is also much to be said for investing in bond funds over
the next few months. The bond markets should continue to perform
well as the global economy continues to suffer from the after-effects
of excess investment and over capacity.
Further interest rate cuts may be forthcoming in both the US
and Europe, and as the market for global government bonds has
improved those funds that offer expatriate investors a spread
of high grade global corporate bonds and global government bonds
should be considered.
US bond funds may also prove something of a haven for expatriate
investors at this time given the demand recently for US Treasury
stocks.
Investors seeking to invest in funds at this time should be
prepared to adopt a long-term view and look for those types
of funds that offer a good global diversification, either of
equities or bonds or a combination of the two. If the asset
allocation within their portfolios is not right, then now may
be the time to review and restructure, perhaps adopting a more
cautious approach. Fund charges vary according to the fund management
group; however, typically ‘front-end’ fees of between
four and six per cent will apply on purchase. Some companies
may well be prepared to discount this to the investor, but this
will depend on the amount the investor is looking to invest
and will be at the discretion of the company concerned. If choosing
to invest through a broker or financial advisor, an expatriate
investor may be able to reach an agreement with the broker concerned.
In this way, the broker may negotiate on behalf of the client
to gain a discount or a rebate of a part of the front-end fee,
allowing the investor to
purchase extra units in the fund. Once again, this will be subject
to an arrangement between the investor and the broker or financial
advisor concerned. It should be said that some fund management
companies do offer funds without the usual front-end fee; however
in these cases the annual management fee may well be higher
than the 0.70 per cent to 1.5 per cent that is usual. In addition
there may be a fee payable by the investor on redemption within
a certain period, typically three to five years.
For further information on investment opportunities in Barclays
International Funds Group prod-ucts, please contact Barclays
International Investments (Malta) Limited at Level 9 Portomaso,
St Julian’s, telephone 389458 or email investments@barclaysmalta.com
Matt Verdon is Sales director Barclays Investment Management
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