The profile of Irish investment preferences discovered by Barclays Bank in preparing their latest issue of Wealth Insights is depressing.  According to press reports, their research shows that Irish high-net-worth individuals (HNWIs) hold an amazing 55 per cent of their wealth in property, despite the collapse in property values in the past 5 years.  This is a higher proportion than any other nationality.  Irish HNWIs also hold 18 per cent in cash, 16 per cent in financial investments and 7 per cent in assets such as collectables.  And just how much private wealth do you think is invested in enterprise or business, the sector which is arguably the most vital to our economic future?  A pitiful 2 per cent.

A long legacy of under-taxation of property assets and transactions, only partly being addressed now, is an important factor in this mis-allocation of investment funds.  We all continue to pay a price for past policy failings in this area.

Historic factors are often also quoted as an explanation for our obsession with property. There is a pithy phrase in the famous Vanity Fair article by Michael Lewis (“When Irish Eyes Are Crying”) about how we crashed our economy:

Irish people will tell you that, because of their sad history of dispossession, owning a home is not just a way to avoid paying rent but a mark of freedom. In their rush to freedom, the Irish built their own prisons.

That sums it up nicely.

I had a drink recently with a friend who regards himself (not without reason) as an astute investor, and naturally I asked him for a view on which way stock markets were going to move.  I expected the normal analysis about markets going sideways, or being slightly overbought, or about to rebound and so on.  But what he hit me with was something altogether more surprising, and (if he’s right) alarming.  Read the rest of this entry »

Why do I think that investors in hedge funds should think twice?  Well, one of the key issues is that hedge fund managers typically take a large profit share (say 20%) in the good years, but don’t take a share of the lossses that arise in other years.  So they tend to like big swings in annual returns.  The effects of this lack of symmetry on investor return can be remarkable over the long run (just as the lack of symmetry in bonus systems for bank executives has had a predictably disastrous effect on the wealth of bank shareholders in recent years).  

By way of illustration of the sweet deal that hedge fund managers arrange for themselves, in the FT “Money” section on 20th June 2009, one of my favourite economic writers, John Kay, has this nugget:      Read the rest of this entry »