It has been a while since the last newsletter. This is partly due to my spending time in the US and UK in September and early October. Part of the UK trip involved meetings with clients, product providers and an annual conference of leading fund managers which I will describe briefly below.

MOMENTUM THINK TANK

Momentum is the new name of the company (formerly RMBI) that manages among other funds the Harmony portfolios which form part of the core of many portfolio bonds. These funds are multi-asset, multi-manager funds. Every year some of the individual managers are invited to share their thoughts and predictions on the world's financial markets. This year's conference focused on the debt crisis in Europe and the effect it could have on global markets. The general view was that there was no 'silver bullet' and the only way out would involve some hard times ahead for the countries mired in debt as well as those countries that had lent the money. To what extent this would affect global markets was yet to be seen but there was still some good news in that many companies were still very profitable and were sitting on large amounts of cash. They were however reluctant to spend it due to weak consumer sentiment.

If you would like to read all the various viewpoints let me know and I will send you a full report on the Think Tank.

LATEST MARKET DEVELOPMENTS

The past few days have seen a welcome recovery in global stock markets following a depressing run since July. The latest agreement to write off part of Greece's bond debt will do a lot to calm markets in the short term although the burden of the losses is going to be borne by many parties. Global growth will be slow and it is not certain yet that another recession will be avoided in developing companies.

THE IMPACT ON INVESTMENTS

The debt crisis to date has made a big dent in investors' portfolios and savings plans. Not just equities were hit, but also commodities which have made such a valuable contribution to portfolios for a number of years. Once again we have returned to a situation where many people's investments have achieved little or nothing over ten years. Savings plans have fallen very short of projections which were standard in better times. Invariably a few clients have asked if they should stop contributions to savings plans as they felt their money was going into a black hole. This is always a real fear when markets are down but it is actually the very time when contributions should be maintained. Volatility is the key to the success of regular savings plans. When markets fall you are buying more units than when they are high. Over time this 'cost averaging' becomes more important than the actual growth in individual funds. This assumes that the plan is encashed only when markets are relatively higher than they were during the course of the plan, which may require holding on to a plan beyond the maturity date until value returns. Now is also a good time to start a long term plan, particularly if you expect a shortfall in your pension needs.

VISIT TO ARGENTUM

One bright light in all the gloom has been our ability to access the still little-known asset class of litigation funding. The credit crunch has actually worked in our favour since traditional lenders like banks and hedge funds are constrained in providing funds that could be tied up for two years or more.

Since close to a third of our clients have now taken a bold plunge into this venture we consider it of vital importance to keep close tabs on the company and to work closely with them to ensure clients' interests are protected. Consequently, together with Eric Jordan, our group's Managing Director, I paid a second visit to Argentum's offices in London. They have now moved from a serviced office to a permanent office in the heart of the City of London. We spent several hours with their senior staff and lawyers who briefed us on latest developments. One of the most significant was the listing of the company on the Jersey Stock Exchange. A first step on the road to becoming a major player in the industry. To be listed in Jersey is in itself an endorsement of the company's standing. We were also told about some major changes in the structure of future issues which should reduce costs and allow more money to be released to law firms to fund selected cases.

LATEST ISSUE, CENTAUR II, CLOSE TO FULL SUBSCRIPTION AGAIN

The latest series of Argentum was effectively released on October 10. No closing date was announced since the previous three issues were fully subscribed before the closing date. This issue is seeking GBP5,000,000 or USD 8,000,000 in either currency towards the funding of eleven cases that have already passed due diligence and are ready to roll. At the time of writing the amount raised is already approaching GBP4,000,000 so the issue is likely to close again within days. Anyone wishing to invest in this issue should scan an application form without delay but await transferring funds until we can confirm it can be accepted. Briefly the terms of this issue are:

• Capital guaranteed. A separate fund has been established which will accumulate all income until original client capital is recouped, either from case winnings or insurance should a case lose.
• 9% per annum payable half-yearly in years 1 and 2. Cases that continue into the third year will receive the same interest pro-rata. In addition a terminal bonus of 3% per annum is payable, again prorata in the third year.
• Win bonuses equivalent to 20% of money invested in each winning case. This is paid at the end of the quarter in which the case winnings are received. Money will be reinvested if cases settle early.
• Minimum investment (for PPI clients): one Note: GBP10,000 or USD15,000.

STANDARD BANK STRUCTURED NOTE

For those looking for a modest return with total capital protection Standard Bank have issued another series of their popular structured notes. While all major banks issue similar products this one is somewhat unique in that 50% of the investment is returned after 12 months with 4% interest in USD, GBP or EUR and 10% in AUD. The remaining 50% remains on deposit for another four years but is linked to the relevant stock market index. Capital is returned in full at the end of the term plus 60% of the growth in the index or a bonus of 5% should the index fall or fail to make at least 5%. Minimum investment USD or AUD20,000, EUR15,000 or GBP10,000.

The Note can be purchased directly (very simple transfer if you already have an account with Standard Bank) or via any of the major life companies if you hold a portfolio bond. This would require just a simple dealing instruction.

MORTGAGES FOR INVESTMENT PROPERTIES

We now have Terms of Business with Lloyds TSB International who can provide very low cost mortgages on properties in a number of countries. The loans can be up to 70% of the property value. If you have an existing loan you may wish to look into the possibility of remortgaging.

LOOKING FOR AN INVESTMENT PROPERTY?

For many years we have had an association with a very successful international property company, IP Global. The company does not operate as an estate agent but purchases blocks of units at a discount which can then be passed on to individual buyers. Their projects tend to sell very quickly. Their latest development is close to Central London at prices from GBP290,000 to 370,000. Estimated gross rental yield around 5.5%pa.

OTHER OPPORTUNITIES

Global financial markets may be in the doldrums but there are plenty of opportunities for investors who have adequate cash reserves and wish to diversify into areas not affected by all the bad news. Here is a small selection:

• ClubEasy Student Accommodation Fund - A secure income-earner with current returns in the region of 10% pa. Just approved by Skandia so it can be purchased within their bonds.
• FMG Iraq Fund - Certainly a fund for a bold contrarian investor. Actually has considerable potential (due to the improving political situation and likely increases in oil production). Is approved by life companies for portfolio bonds.
• Virgen Plantations - Possibility of direct investment or via funds into three forestry products: Agarwood, Stevia (a zero calorie sugar substitute) and Bamboo. The first two are 3-year term investments (buying semi-mature trees in the case of Agarwood) while Bamboo is income producing after just one year.

Happy to provide more information on all of the above products and services as well as advice on existing holdings, particularly if you feel concerned about them or feel a change of direction may be appropriate.

Colin Bloodworth