NCB Wealth Management has about €1.6 billion worth of assets under management. These assets are managed either through an advisory service, where clients ultimately make the investment decisions, or a discretionary service, where NCB’s portfolio management team makes investment decisions. The minimum investment levels are €250,000 for either service.
“A large proportion of the growth in our funds under management over the past few years has been in the area of discretionary portfolio management, which reflects increased demand from individuals, pension funds, ARFs (approved retirement funds) and charities for individually tailored investment portfolios,” said Poynton.
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Philosophy
“NCB believes professional advisers should be primarily ‘client-led’ rather than ‘product-led’, a philosophy that has resulted in us becoming a more all-encompassing investment boutique over the years, with a concentration on the upper end of the private client market,” said Poynton.
When it comes to equities, the focus is primarily on large-cap, well-established, blue-chip companies, with proven track records of delivering consistent shareholder returns. “Dividend yield and cash generation are important factors in the decision-making process,” he said. NCB concentrates mainly on firms in Ireland, Britain, Europe and America. It uses specialist asset managers outside these regions.
NCB provides primary research on European equity markets through membership of the European Securities Network (ESN), an association of 11 brokers across the continent.
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Performance
Equity-oriented NCB-managed portfolios achieved an average return of 22%-23% last year, compared with the average Irish-managed pension fund return of 21%, according to Poynton.
“The average return of similar portfolios to the end of June this year is between 2% and 3%, against 0.9% by the managed pension fund benchmark and a 1.7% decline by the FTSE World Index,” he said. ()
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Buying and selling
“Geographical considerations remain important and our equity investments continue to remain unequivocally overweight in Ireland, Europe and Britain and underweight in America,” said Poynton. “We remain wary of higher-risk emerging markets in the short term, until the factors that have created recent volatility and risk aversion have receded.”
NCB is a fan of the European financial sector, which is trading on an attractive ratio of just above 10 times next year’s earnings forecasts. The average dividend is above 4%.
“Merger and acquisition activity should also provide support to valuation levels. We have recently increased exposure towards retail banks and away from wholesale banks which a greater reliance on short-term financial trading profits,” he said. For this reason, he prefers the likes of France’s BNP Paribas to Germany’s Commerzbank.
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NCB has been topping up its clients’ exposure to CRH, the building materials group. Poynton says the group’s robust interim figures released a few weeks ago and 20% dividend hike are a signal of management’s confidence.
“In our view, sentiment towards the stock has been negatively affected by American housing concerns, however, new US residential building accounts for less than 10% of the group’s earnings,” he said. “We believe this is more than offset by the combination of strong organic profit growth, solid prospects and a consistent management track record.”
CRH is set to deliver double-digit earnings growth both this year and next, according to Poynton. “We view the current valuation of 10 times 2007 profit forecasts as offering significant scope for an upward re-rating of the stock.”
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Outlook
“We believe that the recent sell-off in equity markets is a healthy correction that has produced selective medium-term buying opportunities,” said Poynton. “However, with higher energy prices and rising geopolitical tensions it is hard to get overly excited in the near term. It is plausible that stocks could see more short-term downside on some unpredictable developments.”
European equity valuations will be supported by improving macroeconomic conditions, earnings growth and merger and acquisition activity, he says.
“Our positive outlook for global macroeconomic conditions coupled with favourable relative and absolute valuations means we continue to retain our preference for equity markets over bonds on a medium-term view,” he said.
Joe Brennan