Coutts Bank, the royal family's favorite bank, has sparked controversy by diverting nearly £2 billion of client money from the London stock market to invest in overseas projects.
The move by the private bank, which serves tens of thousands of wealthy clients, involves reducing allocations to UK stocks in six major client funds from 40 per cent to a range of 1.9 per cent to 3.5 per cent, depending on the size of the investment. finance.
The decision raised eyebrows, especially in light of the UK government's ownership of 28 per cent of Coates' parent bank, NatWest. The Treasury has actively called for increased investment in UK stocks, making Coates' move inappropriate.
In a letter to clients posted on its website, Coutts described its current portfolio balance as outdated and expressed its intention to adopt a more global approach. The bank highlighted benefits such as enhanced diversification, increased investment opportunities and reduced transaction costs for customers.
Charles Hall, head of research at Peel Hunt, commented that the Coutts shift represents a significant £1.96bn move away from the UK market, significantly impacting the direction of outflow of UK funds. Last year alone, outflows amounted to £8 billion, according to Calaston.
“It's not surprising to see Coutts going global, but it's not a great message for the UK, and it continues the theme of outflows, which is the fundamental problem for UK markets and IPOs,” Hall noted. “This will inevitably put more selling pressure on the market.” The UK is at a time when ratings are already low.
This development coincides with Jeremy Hunt's efforts to stimulate productive investment in the United Kingdom. The proposed changes include amendments to pension scheme rules and the introduction of a “UK tax code” that is expected to provide exclusive tax relief for London-listed stocks. In addition, a retail offer of shares in NatWest is currently in the works to enhance the attractiveness of share ownership in the UK.
The adjustments Coutts has made across its funds are significant. For example, a managed equity fund will reduce its UK allocation from 40 percent to 3.5 percent, while a balanced fund will decrease from 22 percent to 1.9 percent, and a cautious fund will decrease from 16 percent to 1.4 percent. . .
Fahad Kamal, chief investment officer at Coutts, explained: “At the moment, about 20 per cent of the standard balanced portfolio here is UK stocks, which is anachronistic. It would be closer to 3 or 4 per cent if it was more proportional to “The proportion of British stocks in global stock markets, so this is a process of recalibration.”
Coates faced scrutiny last year after the account of Nigel Farage, the former leader of the UK Independence Party, was closed. An internal Coutts document cited reasons such as Farage's views being inconsistent with the bank's overall position. The incident sparked a political controversy, leading to the resignation of Dame Alison Rose, the chief executive, who lost out on £7.6 million in potential bonuses.
Founded in 1692, Coutts specializes in serving clients with over £1m of liquid assets, managing £43.1bn of client assets. However, its operating profits fell from £436m to £291m last year.
Many portfolio managers have shown a home country bias, preferring UK-listed stocks, but this has hampered returns due to the poor performance of UK stocks in recent years. The portfolio's 'neutral' weighting indicates a UK allocation of just about 3.8 per cent, according to the MSCI World Index, reflecting the performance of large caps in 23 developed markets.
A Coutts spokesperson emphasized the bank's continued significant investment in the UK and its commitment to achieving optimal returns for clients. However, concerns remain in London about its diminishing influence on equity markets, as evidenced by some UK-listed companies choosing to list in other jurisdictions. Last year, ARM Holdings, the famous chip design group based in Cambridge, chose Wall Street over London for its flotation, which was seen as a setback for the UK market.