About 9 months ago one of our clients was discussing adding another £20,000 to his account. The obvious answer was YES, however the account manager had a long discussion with him about safety and diversification and eggs in one basket and the like. It was an important chat because we are not about taking any investment only that part that our clients are willing to risk in return for our rather impressive returns but it is far more important to us that our clients are truly sophisticated investors who understand the risks as well as the rewards.
Anyway fast forward six months and the same client is visiting our office and coming for lunch when we discover that he had lost £20,000 in the London and Capital insolvency. Fully regulated, controlled by the FCA so you can relax your investment is safe. Not so much.
London and Capital lost £237 Million that is 237,000,000 or what the average salary would earn in 9,480 years in mini-bonds, whatever a mini-bond is.
Yesterday Neil Woodford’s fund was shut to withdrawals. There is over £3.7Bn in there or to keep the analogy going or 148,000 years of average earnings. Now the money isn’t lost he has a liquidity problem and I am sure that most investors will get most of their money back (eventually) but it does make me wonder………..
My company, Apex Algorithms, is not in the regulated arena, our clients have now invested nearly £2M and we make bets on football and horse racing. Simple. Our clients have been enjoying tax-free returns of around 30% per annum for the last 5 years (unfortunately for me long before I had heard of them). But we are not regulated and we could lose everything and we are very clear with anyone that considers investing. However, in 2019 we have made roughly 0.5% every week for our clients, week in week out.
So what protection is there in being regulated? You fill in the blank space because I am not sure. It seems to me that you are at just as much risk as investing in stocks except that the variables that their funds are dealing with are infinitely more difficult to predict than the outcome of a football match and if all you are doing is looking to make 1%-2% profit per week then the risks are even smaller.
So some food for thought, gambling, even if it is done by a computer predictive model and has the risks constrained is still gambling and for that reason is not for everyone but trust me when I tell you that I have never met an unhappy client, who have paid for cruises, weddings or even weekends away with the boys from what was a fairly small investment. So regulation? Does it really protect the investor?