In our last Money Matters, Rory McPherson, Chief Investment Officer of Magnus, explained the market turbulence we were experiencing in late 2022. In this article, Rory puts a bit more detail onto what Magnus does for clients of Wren Sterling.
In my last contribution to the newsletter, I introduced myself. It now gives me great pleasure to introduce Magnus; a DFM business that was acquired last year which runs MPS models.
“DFM” stands for “Discretionary Fund Manager” and “MPS” stands for “Model Portfolio Solutions”. Apologies for hitting you with 2 TLAs (three-letter acronyms) in the opening two lines, but they help introduce who we are and what we do.
Who are we?
We (Magnus) are a discretionary fund manager (“DFM” from now on) that the Wren Sterling Group purchased in November of last year. We are a separate company from the advisory business that manages money on behalf of clients of Wren Sterling.
We are on a panel of DFMs that Wren Sterling advisers can recommend to their clients, alongside other names such as Brewin Dolphin and Brooks Macdonald that you may have encountered previously. As Wren Sterling is an independent financial advisory business, each client recommendation is made according to their individual financial objectives, so while we are part of the same group as Wren Sterling, we are subject to the same rules as the other firms on the panel.
What does a DFM do?
The clue is very much in the name when it comes to explaining what a DFM does and what the benefits are.
Discretion over the investments we choose to buy on behalf of our investors allows us to move swiftly and nimbly. This means we are well placed to take advantage when markets misbehave without the administrative handbrake of needing switch letters and approval from busy clients. This is particularly pertinent in the markets we find ourselves in today. Our investment portfolios have benefited from changes we’ve implemented, ensuring we’ve got the best players on the pitch at all times to thrive in this market environment.
Strong investment performance is clearly a key benefit, but it’s not the only one. I want to highlight price and communication as being central to what we offer. Our goal is to generate strong investment returns for investors by blending together the best investment managers in the world. The fact that we’re doing this on a large scale means we can get great investments at great prices. With our sole focus on the investments, we’re able to provide lots of communications and updates to ensure our clients are kept constantly informed.
Model Portfolio Solutions (“MPS” from now on) are the investment portfolios that we run. We have six of these in total. Each MPS comprises different investments and these are all risk-mapped with the financial adviser. This ensures each investor is getting the right investment for them and the best “bang for buck” when it comes to getting the best possible return for the least amount of risk.
Our investment strategy in 2023
The last six months have been very busy! We’ve shifted away from investments that have benefitted portfolios by achieving full value into ones that we believe are better suited to the higher inflationary environment we’re living in today.
This means owning more short-dated bonds (with yields of over 7% for top-rated bonds) and more of equity markets such as Japan, which we believe provide outstanding future returns.
Higher mortgage rates, higher interest rates and high inflation are very popular buzzwords not only on the newswires but also from our discerning clients. They all make for an undeniable pinch on the UK consumer. However, investment markets are forward-looking, and our investment universe is much broader than just the UK. To that end, we’d note that UK equity markets are actually in positive territory this year and global equity markets are also in strong positive territory. Investment markets look 12 to 18 months ahead and so much of the bad news we’re reading today was priced in and reflected by markets last year.
Investment markets today are sniffing out signs of inflation falling (it’s close to 3% now in the US having been over 9% last June) and interest rates being cut (rates are close to their expected peak in the US with rate cuts expected next year). This has helped push equity markets higher and companies are starting to reap the rewards of tightening their belts in the 2nd half of last year. Although government bond markets remain challenged in the UK, we’ve been delighted to include investments in US bonds in our clients’ portfolios that have responded positively to the more stable inflationary environment being enjoyed on the other side of the pond.
I hope this introduction to Magnus, and its world of acronyms proved useful and please get in touch through your adviser if we can provide any more information. I provide weekly market updates to Wren Sterling advisers and quarterly market reviews, including videos.
I’ll finish by saying TFR (thanks for reading) and BFN (bye for now)! Have a fantastic summer and I promise, no more acronyms next time!
IMPORTANT: The value of investments and any income from them may go down as we as up and you could get back less than you invested.