Investment Articles

We all use timber on a daily basis, in our houses, our furniture, our floors and our roofing, and institutional investors, hedge funds and pension funds have been investing in timber as a long-term growth asset and inflation hedge for decades. However, as more investors discover the little-known fact that timber investments have generally outperformed stocks, bonds, and commodities over the long run, there are now many opportunities for the smaller investor to participate in this alternative asset class.

The demand for timber is growing in line with an ever-expanding population, as the human race multiplies in number we require more timber for construction, yet at the same time, fundamental limits to the supply of natural forests limit the amount of timber we can grow and harvest for our own use.

Deforestation has destroyed 1/5th of the world’s forests since 1950, and new global legislation is in place to protect the forests that remain as they play a vital role in carbon sequestration and the ecosystem.

This imbalance between supply and demand creates an outstanding opportunity for investors to acquire assets in short supply and profit from undeniable fundamental trends of population growth and resource scarcity.

Investment Performance
The vast majority of return on investment generated by timber is derived from the biological growth in size of the timber source, from seedling to sapling to fully fledged tree. On average, a single tree’s volume of wood will increase by between 2% and 8% every year depending on species, age and climate. On a very basic level, this gives the tree owner more timber to sell as time passes, and hence generates a greater return in the long-term.

Aside from this basic observation there is more to consider, as trees yield a greater sale price when they grow into bigger product classes. As an example, a small tree would only be suitable for paper products or biomass for fuel, where a larger tree can be harvested for sawn-timber which will fetch dramatically higher prices per tonne and can be used for products such as plywood or telephone poles.

A study by Professor John Caulfield of the University of Georgia found that biological growth counts for more than 60% of total financial returns, whilst increases in the price of timber, and capital appreciation of the land account for the remainder of returns generated from a timber plantation.

This goes to show that it is an effective strategy to lease land on which to grow timber, as well as purchase outright as only 6% of profits are derived from capital appreciation in the value of the land. This also shows that fluctuations in the price per cubic metre or tonne of timber have limited influence on the overall performance of timber investments. The majority of return is generated from the growth in the size of the tree itself.

The standard benchmark for timber is The NCREIF Timberland Index, which increased 18.4% in 2007, versus a 5.5% rise for the S&P 500. In the long-term, the Timberland Index has outperformed all major asset classes including, large-cap stocks, International equities and corporate bonds.

Whilst small-cap equities have outperformed timber in the long-term, after factoring in risk (as reflected in the Sharpe Ratio), timber has exhibited the highest risk-adjusted returns of any major asset class. When compared to the S&P 500, timber has displayed a low risk characteristic. Since its 1987 inception, the NCREIF Timberland Index has fallen in only one year: – 5.25% in 2001, at the same time, the S&P 500 has fallen four times, including -22.10% in 2002.

One of the main reasons investors, especially large institutional investors, turn to timber, is the fact that the asset displays low to zero correlation with other assets, especially those linked to financial markets. It has been demonstrated over a long period of time that adding timber to a portfolio of investments has the effect of improving overall risk-adjusted returns. This low correlation reflects
the fact that the primary driver of returns-biological growth-is unaffected by economic cycles.

Institutional Investor in Timber

In 2007, Jeremy Grantham, Chairman of Grantham Mayo and Van Otterloo, a Boston-based firm that oversees $60bn in assets, predicted the impending financial crisis, one of very few Investment Managers to do so.

At a conference in June 2007 Mr. Grantham announced that equities were overpriced to such an extent that the market was as risky as he has ever seen it. “The next few calendar years,” he warned, “look like a black hole as overpriced markets, dangerous leverage and a gigantic hedge-fund business collide with the house-building phase of the US presidential cycle, plus the contraction phase of a long interest cycle.” His prediction? He said he could see the Standard & Poor’s index falling 38% over the next two years.

He went on to say that Investors should allocate capital to timber investments as a stable and predictable asset with a low risk profile where returns are generated outside of any market. It is the only asset class in existence that has gone up in three out of the four major market collapses of the 20th century. It
should be noted that Jeremy Grantham holds 20% of his personal investment portfolio in timber assets.

Institutional investors have recognised the benefits of timber investments for some time, Pension funds such as Calpers, led the way in the 1980s, however it was the big university endowment funds such as Harvard and Yale that saw the true potential and invested heavily in a move to diversify their portfolios globally. In 2009 the Harvard Endowment Fund invested $500m in forestry and carbon credits in New Zealand.

PKA, the DKK 114bn (€15.4 bn) Danish collective pension scheme for employees in the public social and health sectors, raised its forestry investments to about €335m by the end of 2007, raising its commitment to timber from 1.5 to 2% of total assets.

ABP, the €211bn Dutch pension fund made its first timber investment in 2007 with a $60m (€41m) allocation to the Global Solidarity Forest Fund (GSFF), which will develop three sustainable forestry projects in the Republic of Mozambique, in south-eastern Africa, and Angola.

Both the £1.5bn (€2.1bn) UK Environment Agency pension fund, the £31bn Universities superannuation Scheme and the £3.6bn London Pension Fund Authority are reviewing whether to inject money into forestry investments.

European Investment Bank (EIB), the €26.3bn Ilmarinen Mutual Pension Insurance Company and seven medium-sized Finnish pension funds have all invested in timber via the Dasos Timberland Fund.

Massachusetts Pension Reserves Investment Management Board (Mass PRIM) decided to make a $500 million timber investment just three years after selling a $700 million section of its timber portfolio.

More recently there has been a spate of new timber investment by major asset managers, not least the $1 billion takeover of Canadian timber business TimberWest by two large asset management firms acting on behalf of institutional pension funds.

At the time of writing this report in December 2010, there looms the prospect of a second round of quantitative easing (QE2) by both the US Federal reserve and possibly the Bank of England too.

QE2 should help to shore up the US housing market. Construction accounts for roughly 70% of the total value of timber resources and as the US property market recovers, inflation will rise as houses increase in price once more.

One such asset is timber which has a proven history as an excellent hedge against rising prices.

The US housing market (construction accounts for roughly 70% of the total value of timber resources and QE2 should help to sure up the US housing market. As the US property market recovers, inflation will rise. As house increase in price once more.

Timber as an asset class presents unique characteristics. The performance of forestry assets is driven primarily by the natural growth rate of trees independently from the macro economy. As a tree matures its size and usefulness increases and subsequently so does the price. In a difficult economic climate timber companies have no need to discount their crops because if simply left to grow the value of the asset only increases.

This makes timber much less volatile in the long run and more resilient in difficult times compared to most other commodities as the investment is backed by the underlying real asset value of timber. Timber is recognized as an inflation hedge as trees grow in size, and therefore value each year. If inflation were 3% and your trees grow in size (value) by 5%, you have grown your wealth in real terms ahead of inflation.

As the rate of inflation increases, so to do timber prices, as well as the volume of timber you have to sell. This creates a double-buffer for investors and makes timber investment an ideal balancing tool to diversify portfolios.

There are a number of different opportunities for retails investors to participate in timber investment in various forms. In this section we will focus on direct investment within commercial timber plantations, although the reader should be aware that there are other, market-linked opportunities such as forestry funds and listed timber companies.

The basic premise of all of the investment offerings from various companies that we have researched remains relatively static,in that investors are usually invited to purchase either a lease on a plot of land within a commercial timber plantation, therefore owning cropping rights to any timber produced within their plot or woodlot. An alternative to this is where investors are offered direct ownership of a fixed number of trees.

The cost for plots varies from project to project between £5,000 (GBP) to £22,500 (GBP) depending on the size, location and species of timber being grown.

Sometimes, annual fees are required from the investor to service the costs of on-site management, and of course the occasional thinning that is always required within a commercial plantation.

With other projects, sufficient management fees for the period of time up to the first harvest are paid up-front by the vendor and held in escrow, fees for future harvests are deducted from the revenue of each preceding harvest, therefore creating an investment where no further cash input is required from the investor.

With some projects the land is leased by the forestry company and investors enjoy a sub-lease, with others the land is owned outright by the forestry business and investors have a direct lease and the land held in trust in favour of investors until their lease expires, this mitigates the risk of the forestry business ceasing to trade in the future and the investor left with a sub-lease with a business that no longer exists.

Download your free guide to timber investments and forestry investments at http://www.dgcassetmanagement.com

Ever considered diversifying your assets to other economies? If so, you better check out the Chinese economy.

Over the past few years, China has established an emerging market at par with the western economies. After all it boasts of being the worlds most heavily populated country. International businesses and companies have seen the growing influence of the Chinese economy. Thus, many investors are seeing the possibility of penetrating this market. Before any foreign business can conduct transactions in the country, they need to have proper work permit which includes business-class China visa. A China visa allows businessmen to visit the country and see where their investments go to.

In 2008, China visa applications skyrocketed with the hosting of the Olympic Games. Many business tycoons holding a China visa gained profit out of the lucrative investments they made. As the Chinese economy continues to gain tremendous influence in the global market, most CEOs are now considering China visa as an essential trade document. The growth of the economy will continue to propel people and businesses. With the unlimited opportunities in this vibrant market, there is no reason to hold off on investing in China.

Foreign investors need to understand that for them to be allowed to participate in and enter China; they need to have a China visa. Take note that there are specific types of Chinese visa which they have to avail to be permitted to conduct business in the country. For individual investors, there are three ways of penetrating the Chinese economy: mutual funds, individual stock exchange and foreign companies with base in China. Of these three ways, success is more guaranteed in mutual funds investment.

Mutual funds offer several advantages for foreign investors. First, your assets are diversified in the Chinese economy particularly on the Chinese stocks. You can gain access to different Chinese companies which may not be listed in your original countrys roster of international companies. Second, this is a convenient way of investing money in China. There are several brokerages which have simple account setup interface. Third, mutual funds are managed by financial experts in the Chinese economy. They are far more knowledgeable in terms of investing your money.

However, not all companies are equal. Some offer faster return of investment as compared with other companies. Make sure that you check necessary details like fee structures, expense ratios and recent performance history. Most successful investors prefer visiting the company using their Chinese visa. You should be particular with the history of the investment manager. A reliable fund manager must have over fifteen years of experience in the Chinese and international market. You can get to know them in person if you have a Chinese visa and you actually visit the country. Also pay close attention to the investment strategy of the fund manager. A more conservative investment strategy may be beneficial but it can also prolong the return of investment. Some managers follow a high-risk, high-growth strategy. Either way, you can get to choose which strategy fits your own personal investment pattern.

To ensure that your money will be invested properly, you can choose to stay in China using a China Visa, this way you will learn hands-on the business climate in the country.

After discussing Differences between Savings and Investments, we will further discuss Investments to see what important factors an Individual Investor must keep in mind before making actual Investment decisions. From First and Seconds Lesson on investment, we have darted down certain points which classify investments from savings, and have noted few factors there that an individual investor must keep in mind to make wise investments, or even, to make investments at all or not.

This Lesson will cover in detail, factors and checks that are or should be backbone of investment decisions.

1. Avoid Hasty and Un-Planned Decisions. In a volatile market and financio-economical situation like present, it has been observed that investors are making rapid investment decisions without involving much planning and analysis. Investors, out of fear and/or lust factor, seem to have ignored and put aside their long term financial goals and all that long planning they had done in a normal market situation. This kind of behaviour must be avoided as it may, and mostly does, add to the already piling up losses. You financial plans may be revived, trimmed and modified but should not be completely ignored as you have had put some hard work and thinking while making those financial plans and setting your financial goals.

2. Draw or Re-Draw a Personal Financial Road Map. As discussed previously in my post on Having a Plan before Writing a Business Plan, we discussed how important it is to know and analyze one’s personal financial position before making any kind of financial decisions. We stressed there that an investor(which in that case was for a proprietor) should first thoroughly analyze his current personal financial position, keeping in mind his future plans regarding his personal life, future major expenses, future earning options i.e. both expected amount and timings. One should have enough cushion for one’s near and far future personal plans, and then see how one can set aside to invest into a new investment)

If you are already very much vulnerable to a financial crisis, based on your current financial condition and future expectations, you should avoid the idea of risking your finances even more by even thinking of a new investment.

3. Knowledge, Expertise and Skills related to Investment. It is always advisable to invest in something you have yourself knowledge and expertise of, instead of completely relying on Investment Managers(if you are going to hire one). If you think you have keen interest in an investment and it is not very technical to handle, you can even yourself manage your investment and save costs. But again it is more advisable to at least have some guidance from one. Having knowledge and expertise of a particular investment class will enable you to make better decisions and look for more innovative and modern ways of investments. So even if you don’t have know how and you trust a particular investment management company, before investing do detailed research and try to get as much as knowledge as possible of the subject, which in this case is an investment.

4. Asses you Risk Tolerance Capacity. Every investment involves some sort of risk, as this is something that differentiates Savings from Investment. If you are investing in stocks, bonds, real estate–there is definitely risk involved. As compared to depositing in Secured Banks. The reward for taking on risk is the potential for a greater investment return. If you have a financial goal with a long time horizon, you are likely to make more money by carefully investing in asset categories with greater risk, like stocks or bonds, rather than restricting your investments to assets with less risk, like cash equivalents. On the other hand, investing solely in cash investments may be appropriate for short-term financial goals. The principal concern for individuals investing in cash equivalents is inflation risk, which is the risk that inflation will outpace and erode returns over time.

5. Timing of Investment. Based on your Financial Position and your long term or short term financial goals, you should assess if this is a right time for you, financially, to make an investment decision. Jumping into an investment decision just for the sake of it can destroy your hard-earned earnings.

Moreover, you should also consider the timings of the economic cycle. You would need to check whether it is the start, mid or assumed end of a financio-economic cycle as you cannot make investment decisions in isolation from the current market conditions.

Muhammad Khurram Shahzad is a Chief Accountant and a Business Advisor in one of the rapidly expanding IT solution firms in MENA region. He writes on different investment and finance related topics in blogs, articles and other forums.

http://www.financialadviceme.blogspot.com

Hedge Fund is a fund which involves a selected range of investors who invest their funds directly or indirectly in shares. Bonds and commodities thereby getting better return on their investment in a way such that the capital is preserved and the return is positive. The investors pay a due amount as performance fee to their investment manager who invests the funds.

As per the recent news, the average return of it is approximately 5.2 percent in May, which is considered the best hedge fund giving its best performance in span of about nine years by attracting more money and better investors globally. Hedge fund reduces your risk factor and at the same time gives you better return. According to the Eureka hedge fund index which keeps a record of more than two thousand funds climbed to 9.2 percent this year. This industry recorded a profit of 1.5 billion dollars.

The top and best hedge manage 1.3 trillion dollars as per the recent report. After going through an undesirable financial crisis, these will recovered at a great pace. They are attracting more investors and giving better and higher gain on investment.

America’s hedge fund managed 1.297 trillion dollars as of first January 2011 i.e. 115 billion dollar or 10 percent high compared to the previous year. After the severe financial crisis, there are a lot of it underwent a huge loss. Some of them have even out of business. But that industry is recovering at a pleasant rate. The recent report showed that this industry is blooming with the biggest of it is becoming even bigger. The ten biggest and best of it saw a combined 309 billion dollars as of January which is 15 percent higher than last year.

Bridgewater associates were ranked the biggest hedge fund in the United States with 58.9 billion of dollar in assets under management. The Westport, Conn-based fund also had a gain of 15.3 billion dollars, as per the recent survey.

JP Morgan Asset Management, the second best of it, experienced an alarming gain of 7.1 billion dollars thereby pulling 45.5 billion dollars of money under management.

Paulson & Co ranked the next in the best hedge fund list with a profit of 36 billion dollars under management whereas the D.E Shaw Group deteriorated with a loss of 9.37 billion dollars or 40 percent of its assets in the year 2010.

This is the best hedge funds today. It promotes a lot of exemption and benefits to all investors. It offers right return to its investors.

One year investment bonds can be used to produce a long term capital growth or to generate an income. These bonds are a good way of saving money because they have a fixed rate annually, and the access can be restricted for that period. Before I think of buying the bond, the first thing I would consider is security and whether I can be paid off the bond before maturity date.

Money grows and good returns are produced at the end of the year. To get the investment bond I must pay a minimum deposit and a fixed rate for one year. There is guaranteed returns and the interest is paid annually or monthly. In case I get an emergency, the bank can lend me some of the money although I will have to pay a small charge fee. The money is secure since it is protected and managed by professional investment managers. When compared with stock, the bond does not get much press thus, a better alternative method of investing. If I buy the bonds from the government or municipal bonds, I will enjoy the tax benefits that are quite attractive. It easy to get these investment bonds in the banks or over the internet, and they are commission free.

The best thing is to buy and hold on the bond investment until it matures because I will get paid exactly what I expected. One year investment bonds are safe and highly predictable. I would prefer to buy the bond directly from the government because if I buy through a broker I must pay a commission fee.

Imagine doubling your money every week with no or little risk! To discover a verified list of Million Dollar Corporations offering you their products at 75% commission to you. Click the link below to learn HOW you will begin compounding your capital towards your first Million Dollars at the easy corporate money program. ( http://www.onlinewealthking.com )

One writer to document this was Charles Mackay, author of ‘Extraordinary Popular Delusions and the Madness of Crowds’, published over 150 years ago in 1841 and often referred to as the greatest book on investing ever written.

In it he chronicles the waves of irrational behaviour that seem to affect mankind at regular intervals, what happens is that some individual or company of standing decides to do something, say buy or sell shares, if they have a good audience some will follow suit, this leads to then more people jumping onto the idea and so on until following suit is no longer the best option, yet we continue to feel the need to anyway! It is this Keeping up with the Joneses mentality that is the killer.

Always Remember – As an individual investor you are ideally placed to stand outside the crowd. No one can sack you from your job as your own investment manager for failing to follow a fad.

Experienced investors always watch for signs of market tops. The rushing in of the public is invariably an indication that such a top has been reached, shortly to be followed by a crash.

Joe Kennedy, Millionaire father of JFK, is reputed to have got out of the market before the great crash in 1929 when a shoeshine boy offered him tips, his rationale being that if a lowly shoeshine biy had become an expert it was time for the real experts to get out!

Recognising market cycles will help you to stand aside from the naive investor who believes that rising markets go on forever. Equally, you will realise that bad times always end. In fact, they provide the best opportunity to prepare for successful investing in the fearful market that’s sure to follow.

I guess my underlying point in all this is to advise you to stay away from listening to the negative talk we have been bludgeoned with over the past number of years. Sure, it is true a lot of people have been caught out with investments that have not done well, but this is because they bought at the height of the markets, not because they were shrewd and stuck their head above parapet. They followed the crowd and got burnt, its that simple.

On the contrary, now is absolutely the correct time to be getting involved in some sort of investment product, before the crowd. Things are settling, people are beginning to think towards their future again not back at the gloom, our window is open but shutting fast. Be the pied piper, not a rat.

Get Alternative Investment Ideas Here

http://www.LosPandosOpportunities.com

There are various investment strategies that are utilized with different hedge funds. These are lightly-regulated investment funds that are open to only a limited range of investors. These investors are required to pay a performance fee in order to fund the investment manager. The name comes from the fact that hedge funds will try to “hedge” some of the risks that inherently exist in investments by using short sales and derivatives. To hedge means to offset price changes in order to minimize unwanted risk. In order to qualify for investing in these funds, you must meet certain criteria put together by those who regulate it. These funds often total billions of dollars in new asset value, obviously giving you the chance to see high-yield returns.

You do not have to be a financial wizard to invest in hedge funds if you qualify, but it will take a great deal of your time and knowledgeable advice from your fund consultant. When you get started investing in these funds, you must be sure you are an accredit investor. Before investing in anything, learn as much as you can with regard to these funds. Read articles and evaluate fund managers’ commentaries. If you have any acquaintances that are currently working with these funds, or have experience investing previously, speak with them about your various options.

After you have gone through a good amount of research, utilize what you have gleaned to choose a licensed hedge fund consultant or broker. You will only want to associate with someone who has integrity and is willing to suggest various kinds of funds for you to think about investing in. Since there are various strategies, never bank on only one for every opportunity for investing in these funds that comes you way. Consult your financial advisers for help determining which strategy will work best depending on the situation.

The final note is to keep yourself informed. Ask for monthly or at least quarterly reports from your fund manager to stay involved in your own investments at a vigorous level. Learn about which market movements will affect your decision to invest in these funds the most. Keep an eye on trends and how they may affect your hedge fund investments. With multiple strategies out there for investing in hedge funds, it is obvious that there is more than one way to make your investment. By teaming with a knowledgeable and trustworthy consultant or broker, you will benefit from their knowledge as they get you started in the investment process.

Sean Johnson is an Investment Advisor for http://www.inquest.biz an Investment Referral Service for investors requesting information on specific investments.

Hedge funds are investment funds that are managed by an investment manager or broker. Private money is pooled together and invested according to a specialized strategy that takes the group members goals and preferences into consideration. For example, if the group prefers to be aggressive about making money, then the investment manager may invest in companies or assets that come with higher risks but offer higher payouts. These funds are generally limited to a small group of people and have a minimum investment amount of at least $10,000. This begs the question of whether investing in hedge funds is right for you.

The first thing you should know is that to even take part in most of these funds, you must be an accredited investor. This means you have to have over $1 million dollars in assets or at least $200,000 in annual income. Since the minimum investment is so high, this is likely to ensure that you won’t be spending money you don’t have. Hedge funds are high risk investments and it is very possible that you will lose every penny that you put into the fund. Therefore you should never be investing in these funds with money you can’t stand to lose.

But with that high risk come the possibility of high returns. Some funds return as much as 20% a year depending on the strategy of the fund manager. If you are looking to make money fast then investing in these funds is certainly one way you can do it. However, you must be certain that you are working with a fund manager who is knowledgeable and experienced in the market. All it takes is one bad deal to send your money down the drain. Take the time to thoroughly investigate the person handling the fund until you are certain they know what they are doing.

Investing in hedge funds is also very costly. In addition to your initial investment, you will also be paying the fund manager a fee for every year they manage the fund. That fee can be anywhere from 1.5% to 20% of the gains made in the fund. On top of that, you must agree to be a part of the fund for a contracted length of time, typically one year. This is to avoid any losses that may result from members pulling their money out and forcing the fund manager to sell assets at a loss. Learn all you can about hedge funds to determine if it is the best investment option for you.

Sean Johnson is an Investment Advisor for http://www.inquest.biz an Investment Referral Service for investors requesting information on specific investments.

The Trustee Act 2000 makes it clear that trustees are required to obtain and consider investment advice from a person they consider qualified to give it. This makes a great deal of sense but how does it work in practice?

The first job of the Investment Adviser is to help the trustees to prepare an Investment Policy Statement. This statement is intended to clearly identify what the proposed investment is required to achieve, over what time period, and how performance will be assessed in the future. A typical Investment Policy Statement will include the following:-

The overall level of return expected and minimum yield required
The income or capital requirements
The nature of timing of any liabilities
The liquidity requirement, including dates of planned expenditure
The marketability of the investments – important if income needs to be raised quickly
The time horizon of the trust – less than five years or long term
The time horizon over which performance will be assessed
The residence and tax status of the trust and the beneficiaries
Any socially responsible investment constraints
Other tax and legal constraints

Once agreed with the trustees, the statement will help the adviser in devising a strategy to generate a sufficient return to fulfill these objectives over the short, medium and long term.

Investment Risk

In an ideal world, trustees would expect a competitive and rising income with no risk to capital. In the real world however, interest from deposit accounts will not even match inflation. This means that the assets of very many trusts are guaranteed to go down in real terms. To protect trust assets against inflation and/or to generate a reasonable income in the current climate, some investment risk has to be accepted. Whilst cash that will be needed in the next year or two will have to be kept on deposit, money not earmarked for short term expenditure should be invested in a professionally designed portfolio of assets such as equities, gilts, corporate bonds and commercial property. The investment adviser will be able to suggest a portfolio to fulfill the objectives within the Investment Policy Statement and to explain the risks involved. It is for the trustees to decide if that level of risk is acceptable or whether the stated growth or income requirements were over optimistic. A degree of compromise is often required before an investment portfolio is finally agreed upon.

Investment Management

The size of the required investment largely dictates how the portfolio will be managed. This is because a major factor in reducing investment risk is diversification. As an example, investing in a portfolio of 40 or 50 shares carries much less risk than investing in just one or two. This means that smaller amounts might be directed towards collective investment such as unit trusts or investment trusts which can provide the required spread. There is often a combination of the two approaches with UK investments being directly held and foreign investments being in collectives. This is because the UK portion of a portfolio is invariable larger than the amount invested in (say) the USA or Europe.

Designing a suitable portfolio is only the start of the process. As different assets grow at different rates, the risk profile will move away from where it was originally set. For example, a typical portfolio might be invested 40% in equities with the balance in cash and fixed interest securities. If stock markets have a good year, the equity content might grow to 50% or more and the risk profile will have increased. A process needs to be established to regularly monitor and adjust the risk profile of the portfolio. The day to day management of larger portfolios, including rebalancing to maintain the original risk profile, is often passed to a discretionary fund management company. The role of the nominated Investment Adviser then becomes one of helping the trustees to evaluate the performance of the Investment Manager against the benchmarks agreed in the Investment Policy Statement as required by the Trustee Act 2000.

Independent Advice

To obtain impartial advice on the entire investment market, trustees should deal with an Independent Financial Adviser. There will than be no concerns about their recommendations being tainted because of access to a limited range of products or funds. Similarly, an Independent Financial Adviser will have no compunction about replacing an under-performing fund manager in the future – whereas an adviser working for the same company might not be in a position to do so.

Mike Wilson is a director of Scottsdale Consulting Ltd, having entered Financial Services in 1985 he specialises in pensions and investments, as well as expat services. He has a wealth of experience advising clients and in training other financial advisers.

There are many people out there looking to scam people. Therefore it is always important to keep an eye out to make sure it doesn’t happen to you, whether it is protecting against a computer virus or making sure you aren’t the victim to an investment scam.

Everyone wants to make a quick buck if they can, and some use this opportunity to offer investments to people offering quick or easy money. It is therefore very important to be sure of an investment scheme’s credentials before investing your hard earned money.

There are certain signs you should look out for. Any scheme that guarantees a big return is one to be suspicious of. A guaranteed return just isn’t possible as no investment is a certain success.

It is important to fully understand any investment product you are entering into. If you don’t understand then ask. A genuine investment manager will be happy to answer any questions, no matter how silly they may seem to experienced investors; don’t be worried about sounding like you don’t know what you are talking about. If they seem to get agitated or lose confidence in their own answers when questioned, it is probably a bad sign. Some will try to make things seem confusing so you don’t question them. A lack of information is a sign of a scam. Anything you are unsure of, ask.

Some scammers employ high pressure tactics to rush you into a decision. Avoid this at all costs. If you are unsure take your time, and say you will get back to them if you must. If they say it has to be now or never then tell them you are not interested.

It is crucial that you know what you are investing in. If an investment scheme claims to have a positive track record then make sure there is evidence to support this. It is a good idea to contact other investors who have used it in the past. Do some other research as well, for example look online. If they have been successful and people have benefited you may well find information about this. Similarly, if they have scammed people they are likely to have commented about it on blogs or forums. It is also wise to research schemes of a similar nature. For one thing, if it is a scam they may have changed the name or changed certain aspects to try to avoid detection. Most schemes will have something similar through another investment company, whether genuine or not. If you are using an investment company or partaking in investment trusts then make sure the company is registered.

Always urge on the side of caution. If in any doubt at all don’t risk your money. You should never rush into a decision. And if the investment company is trying to force you into rushing then they probably can’t be trusted.

It may sound obvious, but use common sense. If your gut feeling says this may not be trustworthy, walk away, and don’t deal with someone who does not seem professional.

Andrew Marshall (c)

Witan Investment Trusts offer private investors a portfolio of global equities managed by experienced investment managers.