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The Irish investment market is pathetic

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By Michael O’Connor, theislandinvestor.com   

I lived abroad for years, so all the investment strategies I created were typically outside of Irish tax considerations.

But over the last few weeks I have been putting together several investment strategies for Irish-domiciled clients. It has been eye-opening, to say the least.

In short, most of the Irish market appears to be dominated by a handful of life insurance companies that offer 'wrapped' Multi Asset Funds. This means they offer a basket of stocks, bonds, property etc., all within one investment.

Irish Life's MAPs 4 multi-asset fund states a standard annual management charge of 1.15%. A bit on the higher side for my liking, but this is still manageable.

But when you dig a little deeper, the KID documents (where all fees have to be fully disclosed as part of UCITS regulations) show the fee as 2.2%.

Double the quoted price

As an added bonus, they lock your money up for seven years, where an early encashment charge is waiting for those who wish to withdraw their money early. That's right, they charge YOU for making your money inaccessible.

This lock-up period is a shrewd business tactic. An exit charge is an excellent way to ensure customers don't leave when they realise how poor the performance is.

Too late, you're trapped.

Performance

Fees become more digestible provided the performance is strong, but unfortunately, the misery continues.

The Irish Life MAPS 4 Portfolio has an annual return of 1.63% a year over the last five years. Granted, this was a challenging market climate to navigate, but falling below even the lowest expectations of inflation means that this fund has returned negative real returns after inflation over the last five years.

A similar 60/40 portfolio made up of passive index funds (S&P 500 and US T bonds) would have returned roughly 6.5% a year over the same period for a fee of roughly 0.1%.

We can go round and round in circles regarding the 'risk adjusted' approach and the added 'diversification' of the multi-asset fund versus the 60/40 portfolio I have shown. But the reality is much of this so-called diversification is over-engineering for an extra cost for many long term investors.

So, how can such pathetic offerings still exist in a system where low-cost operators such as De Giro are providing endless ETF options and commission-free trades that provide access to market returns at a fraction of the price?

Two reasons spring to mind

Firstly, the Irish retail investment scene is built on a financial broker commission system where unsuspecting customers are shoved into these products by 'financial planners' who receive kickbacks and commissions from these investment companies. You think you're getting free investment advice; believe me, you're not.

Second, the tax treatment of ETF structures is comical in Ireland, and US ETFs aren't even an investment option. A 41% exit tax and an eight-year deemed disposal rule leaves investors stuck between a rock and a hard place.

Choose an overpriced, underperforming product that locks your money away for multiple years or choose the cheaper, better-performing product and suffer the tax consequences.

Bizarrely, investors are forced to make decisions based on preferential tax treatment rather than on the underlying investment's merits.

I have gone into much more detail on the tax treatment and investment options in Ireland on my website. Just scan the QR code.

If you would like me to independently review your investment portfolio, just send me an email at mike@theislandinvestor.com.

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Book of Condolences for Pope Francis at Cathedral

  A Book of Condolences has been opened at St Mary’s Cathedral for those wishing to pay their respects following the death of Pope Francis. The Pope, who led the […]

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A Book of Condolences has been opened at St Mary’s Cathedral for those wishing to pay their respects following the death of Pope Francis.

The Pope, who led the Catholic Church for twelve years, died on Monday at the age of 88.

He had been suffering from double pneumonia in recent weeks, but his death still came as a shock to many. Just hours before his passing, he had been seen greeting crowds in St Peter’s Square during Easter Sunday celebrations.

Locally, Bishop Ray Browne has led the tributes. He described Pope Francis as “a gentle shepherd” who brought humility and compassion to his role.

“It was with great sadness that I learned of the death of our Holy Father Pope Francis,” Bishop Browne said. “From the moment he chose the name Francis, rooted in humility, he signalled a papacy of building peace, care for the poor, and love for all of God’s creation.”

The bishop also highlighted the Pope’s focus on protecting the planet and caring for the marginalised, calling him “a voice for the voiceless” and “a witness to the Gospel in word and deed.”

A special Mass in memory of Pope Francis was held at St Mary’s Cathedral on Wednesday.

The Pope’s funeral Mass will take place on Saturday at 10.00am in St Peter’s Square. It will be led by Cardinal Giovanni Battista Re, Dean of the College of Cardinals, and concelebrated by church leaders from around the world.

Due to the Pope’s passing, the special Mass for the canonisation of Blessed Carlo Acutis, which was due to take place this Sunday has been cancelled.

Mass will still take place at the usual time of 11.30am. A new date for the celebration will be announced in due course.

Blessed Carlo Acutis was due to be officially declared a saint in Rome on Sunda but that has been postponed.

Carlo Acutis had a deep devotion to St Francis of Assisi, and his final resting place is in Assisi, near the tombs of St Francis and St Clare.

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Con O’Leary: Killarney loses a vibrant and popular personality

Killarney Chamber of Tourism and Commerce has led the tributes to the late Con O’Leary, an extremely popular and very successful businessman in the town, who passed away in the […]

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Killarney Chamber of Tourism and Commerce has led the tributes to the late Con O’Leary, an extremely popular and very successful businessman in the town, who passed away in the early hours of Sunday.

Con was a vibrant and popular personality in Killarney where he operated The Laurels on Main Street, a thriving bar and restaurant, which he inherited following the passing of his father, Thado.
The business organisation said from a social perspective, The Laurels became the beating heart of the town and it was a landmark at the Market Cross in the same way as Clery’s clock was in the capital city.
Chamber said Con’s passing really marks the end of an era as he was one of a golden age of inspirational local business people who developed and built Killarney, through hard work, bravery and great commercial flair, and helped create the wonderful tourist attraction and holiday destination it is today.
“Con was very proud of Killarney and he played a very active part in progressing the town at many levels.
“He was a man that was never short of great ideas and his contribution to the business life of the town and as a director of Killarney Race Company was immense,” Chamber said.
“He was ahead of his time in many respects with the introduction by what became known as “the singing lounge” many years ago and The Laurels always led by example through its successes in the annual Killarney Looking Good competition”.
The business representative organisation noted that the O’Leary family has always been very supporting of the town and Con’s daughter, Kate, was a very dynamic Chamber President and is still a very valued member of the executive.
Chamber expressed deep sympathy to Con’s wife, Anne, children Kate, Niall, Tara and Lorna, sons-in-law, grandchildren, sisters, relatives and friends as well as the dedicated staff in The Laurels, past and present, who Con always had great time for and a great rapport with.

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