16 minute read
investment portfolio
Money Matters Diversification puts a portfolio ahead of the curve
Jason Stather-Lodge, managing director of OCM Wealth Management in Northampton, says that diversified investments offer risk mitigation in turbulent times.
Akey principle in modern-day investment management is to ensure that an investor maintains a well-diversified portfolio of assets. With a desire to protect themselves against changes in risk sentiment and swings in market conditions, investors have utilised traditional diversification strategies across asset classes, sectors and geographic regions to remove unsystematic risk from their portfolios.
During times of rapidly changing market conditions, investors are consistently reminded of the importance of diversification and the first four weeks of 2022 provided an example of this. That being said, increasingly globalised markets have strengthened the correlation among these traditional diversification strategies in recent years and a growing number of institutional investors are looking to utilise additional diversification methods to protect portfolio performance in 2022 and beyond.
Economists have been discussing the benefits of diversification for some time. In the traditional sense, diversification refers to the strategy of building an investment portfolio containing a variety of asset classes such as cash, fixed income, equities, and real assets. In addition, investors will often reduce risk by diversifying their asset allocation between the company sizes, geographic regions, as well as industry sectors.
Despite a plethora of studies reinforcing the need for diversification in modern markets, in recent years investors have seen the impact of traditional diversification strategies beginning to wane, with traditional asset classes beginning to move in the same direction.
Using this year as an example, while market sentiment has been heavily impacted by a rapid increase in geopolitical tensions, bonds and equities have also struggled as expectations for inflation and interest rate hikes have risen, causing investor portfolios to face heightened headwinds across asset classes.
Considering this, with traditional diversification techniques not providing investors with the peace of mind that they had come to expect in previous crises and periods of uncertainty, investors are increasingly considering other strategies such as Jason Stather-Lodge
risk factor diversification.
Risk factors can be understood as the underlying risk exposures that drive the return of an asset class. The adoption of a risk factor-based approach requires a forward-looking macroeconomic view on a range of variables such as monetary policy, geopolitical developments, inflation, interest rates, and economic growth trends.
While risk factor diversification is similar to other diversification strategies, it places a greater focus on forward-looking macroeconomic expectations, encouraging investors to identify whether seemingly different exposure within a portfolio truly mitigates certain risk factors. From our perspective, risk factor diversification has always been ingrained within our flagship OBI strategy, with our experience in understanding risk factors differentiating our offering from more traditionally diversified asset managers.
In recent years, risk factor diversification has been key to generating higher risk-adjusted returns throughout the economic cycle.
By diversifying across risk factors, investors could be better protected from the selling contagions that have occurred at times over the past two years. This approach was examined in Ilmanen and Kizer’s 2012 Journal of Portfolio Management paper on diversification, which observed a stronger performance from riskfactor diversification relative to the traditional asset-class approach for the period of 1973 to 2010.
Having said this, adopting riskfactor diversification can sometimes entail higher trading fees for investors, which could deter investors at times when macroeconomic conditions remain favourable. Nevertheless, the 2012 study found that adopting a risk-factor diversification strategy is still beneficial as the increase in the Sharpe ratio - a measure of risk-adjusted return - is significant enough to account for the trading cost differential.
OUR VIEW
Most investors will consider at least some level of diversification within their portfolios. However, the level to which they diversify could vary greatly.
The growing importance of considering other diversification strategies is encouraging investors to get ahead of the curve by making changes to their portfolio management processes and we have subsequently observed an increase in interest in more actively managed portfolio strategies like ours over the past 18 months.
Although requiring greater resources, given shifts in investor behaviour and given the changing relationship between key asset classes in recent years, it is our view that an investment strategy that incorporates risk-factor diversification within its portfolio asset allocation is likely to be better positioned to mitigate market turbulence throughout 2022 and beyond.
To discuss our actively managed portfolio options, don’t hesitate to contact the OCM Wealth Management team on 01604 621467.
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Property Portfolio
Rent arrears: Covid does not count, Court of Appeal rules
Two cases in the Court of Appeal regarding rent payments during the closure of 'non-essential' businesses have resulted in welcome decisions for landlords. Mohammed Rahman, property solicitor at Northamptonshire law firm Borneo Martell Turner Coulston, assesses the implications.
The Court of Appeal has handed down judgment in two cases involving commercial rental arrears that had accrued in the Covid-19 pandemic, during the time when 'nonessential” businesses had to close.
The two cases are Bank of New York Mellon (International) Ltd v Cine-UK Ltd and London Trocadero (2015) LLP v Picturehouse Cinemas Ltd. Both were dealt with by the court at the same time.
The defendants in both cases were tenants of two commercial premises run as cinemas. Both argued that the rent due under the leases should not be paid during the period where government's Covid-19 regulations forced non-essential businesses to close as it was unlawful to trade. The tenants had already lost in the High Court but appealed the decisions to the Court of Appeal. In the appeals, the tenants made the following arguments: n An implied term existed in their lease which suspended rent during periods in which cinemas could not lawfully be used for their permitted use due to Covid-19 restrictions; n The rent suspension provisions in the lease should be interpreted broadly and not limited to purely physical damage to the premises; n Because the leases had been entered into on the basis that the premises were to be used as a cinema and that the Covid-19 restrictions had prevented this, there had been a complete failure of consideration.
The Court of Appeal Mohammed Rahman
24 Bridge Street, Northampton NN1 1NT
Chartered Surveyors and commercial property consultants
18/20 THE DRAPERY, NORTHAMPTON
TO LET
• Town Centre
Retail 2,300 Sq.Ft. Plus Basement • Upper Floor Offices 4,800 Sq. Ft.
PRIME LOCATION £ CONTACT US
PIONEER HOUSE, 7 RUSHMILLS,
OLD BEDFORD ROAD TO LET
• 9,475 Sq.Ft. • Prestigious Office Building • Air Conditioning • Ample Onsite Parking 11 CIRRUS PARK, MOULTON PARK
TO LET
• 1837 Sq.Ft. • Parking for Seven Cars • Well Maintained Development
£24,000 PA
SOUTHBRIDGE CAFE,
NORTHAMPTON NN4 8BS TO LET
• Fully Fitted Ground Floor Café Unit • Prime Location • Parking to the Rear
unanimously rejected the tenants’ arguments and agreed with the landlords that the government’s restrictions did not mean that the tenants were relieved from paying the rent. Further, the Court held that the rent suspension clause only applied where the premises were physically damaged or destroyed by an insured risk, which was not the case in these two cases.
Finally, the Court held that for the failure of basis and consideration argument to have succeeded, there would have had to have been a gap in the lease which did not cater for the circumstances of the case.
It was found that the leases did not have any gaps in this regard and if the tenant had been released from obligations to pay rent during the periods of closure this would have resulted in an unlawful reallocation of risk.
The Court of Appeal dismissed both appeals. The outcome will be welcome news for landlords.
The Court has now ruled twice that the arguments raised by the tenants do not merit a relief from rent arrears. However, landlords and tenants must be mindful that there are other cases in the court pipeline waiting to be heard, which may lead to a judge or judges taking a different approach.
We will be alive to any further developments in this regard.
£ CONTACT US £15,000 PA
For enquiries call 01604 604050
n For advice or assistance on this or any other commercial property matters, please contact Mohammed Rahman at mohammed.rahman@ bmtclaw.co.uk or speak to the commercial team at Borneo Martell Turner Coulston on 01604 622101. The commercial property market is staying strong despite challenging economic times... and nowhere more so than in Kettering. Ika Castka, partner and head of commercial property at Wilson Browne Solicitors, explains
In an enviable position to attract investment
There continues to be a real buoyancy in the commercial property market at the moment and the large commercial property team at Wilson Browne Solicitors - recognised by Legal 500, the leading independent guide to law firms - are seeing no signs of things slowing down.
Lawyers at Wilson Browne Solicitors have been serving the businesses of Northamptonshire and beyond for many years with offices across the county and in Leicester. The firm has always been active in the Kettering area, having its head office on Kettering Venture Park. While our clients are far and wide, we look upon Kettering as one of our ‘homes’. Whether it is the sale of multiple industrial units, the lease of a new independent restaurant, a lease of substantial offices on a Kettering business park, the sale of land for infill residential development, whatever the nature of the business or property it is clear that Kettering’s economy continues to thrive
Ika Castka
in what has been difficult times. There is of course much commercial development going on in and around Kettering, as well as substantial residential development, bringing new people and businesses into the town. With easy access via the A14 to all parts of the UK Kettering is in an enviable position to attract investment. We have national clients too in various sectors, including a chain of dentists, a trade union, a toy retailer, logistics companies and more. With a
Kettering's economy client base locally and across the country, continues to Wilson Browne thrive in difficult Solicitors really times is the local practice with
national reach.
For the latest news from the property sector in Northamptonshire, visit www.business-times.co.uk
Take a look inside Northampton's historic Vulcan Works as it unveils the results of its £14 million transformation into a hub for creative businesses
Magnetism of old ironworks draws creative sector
Originally a Grade II listed ironworks factory, it was built in 1875 for engineering company Mobbs & Co and was later turned into a leather warehouse. Vulcan Works is considered one of the best surviving engineering works for production of boot and shoe industry machinery but has undergone a £14 million regeneration in order to become home to up to more than 60 startup and growing businesses in the creative sector.
The building has been transformed; the old iron stonework factories and museum store refurbished, a threestorey building constructed on the corner of St John’s Street and Fetter Street and a new block built on Angel Street. Inside are 68 lettable units - office, studio and managed workshop space for young and expanding creative businesses.
During its first ten years of operation, Vulcan Works is forecast to support up to 150 businesses across the county in its first ten years, creating around 500 jobs.
Oxford Innovations, which supports businesses as they grow, has been appointed to manage the space, deliver business expertise and raise the finance that entrepreneurs need for their businesses to thrive.
The South East Midlands Local Enterprise Partnership facilitated a Local Growth Fund contribution of £6.3 million and £3.06 million from the European Regional Development Fund towards the project. West Northamptonshire Council covered the remaining costs.
Councillors and council officials joined funding partners and Northampton South MP Andrew Lewer on a tour of the completed premises within Northampton’s Cultural Quarter. As well as office space, tenants will receive business support in the form of workshops, seminars, one-to-one coaching, networking and facilitation.
“We have high level of growth businesses and start-ups in Northamptonshire but unfortunately we also have a really high failure rate, higher than in some areas of the rest of England,” said Cllr Daniel Lister, cabinet member for economic development, town centre regeneration and growth. “This building and the practical support on offer under its roof with will help to address this problem. With proper support, start-ups, scale ups and small businesses will be enabled to maximise and accelerate their growth and fully contribute to Northampton’s business community.”
SEMLEP chief executive Hilary Chipping added: “This is about nurturing the vibrant entrepreneurial culture so prevalent in Northampton. It has created the space dedicated to helping businesses to share ideas, collaborate and grow.”
The Vulcan Works project has already stirred interest among digital and creative arts businesses keen to take space. “I have no doubt the units will fill up very quickly,” said Cllr Lister. Pictured during their tour of the Vulcan Works: (from left) Cllr Daniel Lister; Hilary Chipping; West Northamptonshire Council chairman Cllr André González De Savage; deputy leader and cabinet member for housing, culture and leisure Cllr Adam Brown; Jane Carr, the council's director of communities and opportunities; council leader Cllr Jonathan Nunn
Town Centre Retail Unit
Car Park Opposite Three Shire Hospital
Prime Location In Northampton Watling Street
Towcester NN12 6BD
Asking rent of £13,500 per annum exclusive
849 ft² (78 m²) 2 parking spaces
• Available on a new lease.
• Single storey unit attached to a converted chapel. • Town centre location.
Cliftonville
Northampton NN1 5DR
Offers invited
1.36 Acre site (0.551 hectres)
• Outskirts of Northampton town centre. • Site accessed via a private road. • Residential developments on two sides.
George Row
Northampton NN1 1DF
Asking rent of £18,500 per annum exclusive
Net internal area approx. 405ft² (37.64m²)
• Refurbished retail unit.
• Includes rear store and WC.
• Opposite the popular All Saints Plaza.
Investment Purchase Retail Unit To Let In Popular Town
Brooklands Ct
Kettering NN15 6FD
Achieving £26,950 rent per annum, asking price based on approx. £165 ft²
2,158ft² - 2,234ft² (200m² - 216m²) 9-11 parking spaces
• Choice of two units available.
• Popular business park close to Junction 9 A14.
Modern Warehouse To Let Opposite Rushden Lakes St. Pauls Street
Stamford PE9 2BE
Asking price of £35,000
Approx. 1,299 ft² (121m²)
• Ground floor retail unit with basement storage room. • Prominent position in attractive market town.
• Opposite M&S food hall.
Brindley Close
Rushden NN10 6EN
Asking rent of £50,000 per annum exclusive
GIA 6,772ft² (629m²)
• Modern warehouse with spacious mezzanine. • Direct access to A45 link near to A14, A6 and A509.
• Offices, kitchen and sales trade counter.
Look the part as you get down to business
Are you ready to get back to business this autumn?
With lockdown now firmly behind us so many businesses are ‘returning to face-to-face meetings’, requiring full business attire or at the very least smart jacket and trousers. No hiding behind a zoom camera with just a shirt and a pair of shorts or jogger bottoms on anymore! Even if smart office dress is not on a daily basis the need to leave home for the office is becoming more and more pressing. Begging the question when did you last try on your suit, shirt and possibly a tie? There is no point ‘assuming’ they will still fit or look the business. So many customers we have found have changed shape through the past couple of years.
For anyone who has been looking for suiting it has become very difficult to find. The distinct lack of demand through COVID has caused many companies to stop manufacturing suiting all together and in other cases a far more limited selection of styles and size ranges. This is why so many potential customers are now making enquiries to get a few well-made stylish garments that fit them correctly ready for their return to work. As a result, we are getting many more calls to book an appointment to view the new fabrics and order suiting for September & October. From the point of ordering the process can take between 6-8 weeks, hence the urgency to plan ahead! Unfortunately, some leave it far too late, make sure you are not one of those.
At Saint Crispin we are always looking to provide you with a well thought out, capsule wardrobe of clothing that will take you to the office, the boardroom, networking with customers or any social occasions outside of work as well.
Start with the all-important suit that provides you with that unique impact, so important still, in the world of business. We know that suit trousers get far more wear that the suit jacket so we always suggest an extra pair of trousers to make your suit jacket last much longer. As a very special introductory offer we would like to offer you an extra free pair of trousers with every suit purchased making sound economic sense.
Extend the lifetime of your bespoke suit
An extra set of trousers with every two piece suit ordered*
*O er available until the end of September 2022
Stand out from the crowd with a bespoke made to measure suit, made for you. All occasions catered for: Business | Weddings | Events 10 years at St Crispin Retail Village
Tel: 01604 589907 instagram.com/saintcrispin_bespoke | enquiries@saintcrispin.co.uk | saintcrispin.co.uk 22 Kents Road | Northampton | NN5 4DR
