November 2007

Welcome to the 11th edition of our Corporate Connection e-bulletin.

We hope that you enjoy these e-bulletins. If you have any queries, or would like to discuss any of the issues raised with one of our consultants, please call us on 0845 050 0112 and quote EM-4488.

Towry Law continues expansion with a move to a larger London office

As part of our further expansion, we are delighted to announce that we will be moving our London operations to new, larger premises. This move follows our continued growth over the past year and the recent acquisitions of Baker Tilly Financial Services and MLP.

We will be moving from our current offices in Queen Victoria Street and Bedford Square to a new 18,500 sq/ft office space in the prestigious New Street Square development in EC4. The premises are currently being fitted out for our 80 London staff and should be ready for occupation by the end of the year. These premises will provide a high quality environment, with some stunning views, for clients and professional contacts who visit. They will also give us enough space to accommodate our future growth plans.

We will occupy the top two floors of Number 6 New Street Square which is a key part of the 500,000 sq/ft development which includes 30,000 ft of retail and leisure space.

Please click here for a photograph of the office.

Dave Percy
Head of Ops & IT

The Changing Healthcare Market

At a time when many companies are becoming alerted to the importance employees place on their employee benefit package, the healthcare market is making significant strides to show that innovation in terms of product design is the way forward.

The move towards greater flexibility is something that must be both welcomed and encouraged. Gone are the days where employers are prepared to continue to meet rising healthcare costs with 10% - 15% medical inflation increases being the norm.

The opportunity to discuss specific healthcare needs with clients and design bespoke arrangements for them, allows advisers to offer proper consultancy services rather than selling a contract that is a best fit arrangement. This move from product sellers to employee benefits strategists and consultants creates a far greater level of professionalism within our industry.

With employers attempting to find an edge over their competitors the introduction of a top quality benefits package is becoming critical in the fight to attract and retain the high calibre individuals required by employers to drive their business forward. These individuals are now demanding contracts that do not just react to given situations but prevent, thus creating a higher demand for associated wellbeing solutions such as employee assistance programmes, health screening, dental & optical etc...

The healthcare market will continue to evolve and it is essential that employers benefit from these changes rather than being stuck with old fashioned and 'out of date' arrangements. The approach of advisers should be on providing holistic financial planning and investing the time with clients to assess their key objectives before making tailored recommendations rather than simply attempting to sell a best fit product.

Mark McLeod
Risk Benefit Manager

Market Commentary

Equity markets have been the main drivers of returns over the past year, despite set backs in February, and, more importantly, July and August. Asia and Emerging Markets have been outperforming for five years now, and this superiority was particularly marked over the past year. For example, the average pension fund investing in Asia was up 57%, whereas the average UK fund gained a more sedate 12%. The Emerging Market story remains intact, but some individual countries, such as China and India (and maybe even Brazil) look to be valued at bubble levels and the risk/reward trade-off does not appear to be in their favour. Nevertheless, investors, if history is any guide, rarely seem able to stop buying high and selling low, let alone rebalance their portfolios, and so further momentum purchases do seem inevitable. September was the record month for Emerging Market mutual fund inflows, and the last couple of months have seen more invested than in the whole of 2005 or 2006 - and this, of course, after five years of out performance (you can't buy historic returns!).

The returns from bond markets were rarely better than flat over the year. However, high quality bonds were seen as a safe haven during the uncertainty of July and August and rallied strongly. This emphasised their qualities and importance in portfolio construction terms, and was an important fillip, coming on the back of 18 months of unusually poor returns.

Commercial Property, another asset class to have been flat over the last year, or at least in terms of bricks and mortar, is held in Towry Law client portfolios. Many pension funds and private investors, however, will have invested in listed property company shares, where returns have been negative. Property transactions have been ebullient to say the least, in part due to the presence of leveraged speculators. These have now been priced out of the market by higher borrowing costs, and the froth is getting blown off valuations. This consolidation is a welcome event, as prices had run ahead of themselves and the long term growth rate of this asset class.

Future prospects

Whilst it is usually impossible to predict the future, make sense of all the variables, or assimilate all the information available to today's investors; it is nevertheless rare for the investment outlook to be quite as uncertain as it is now. Much of this is because no one knows how long it will be before the sub prime debacle fully plays out, and what impact this will have. Will the US enter recession (a sporting chance) and will this cause a contagion effect elsewhere in the Western world or indeed across the globe in entirety? Or can the emerging world finally decouple from Wall Street?

The last couple of months have seen stock markets worrying about whether the glass is half full or half empty, and with little real conviction as to how to price a dollar of earnings, especially when that dollar of earnings is now so uncertain.

One also has no idea how much worse the US housing market may get - 6% of sub prime mortgages sold in 2007 defaulted in their first 3 months - or whether there might be any similar action to play out in the UK. In the US, house prices were actually being propped up by sub prime borrowers (those that could least afford it and were the last to arrive at the party), and structured debt markets were being propped up by investors essentially in the same boat and both were overly reliant on borrowed money, which dried up quickly. Banks were quick to pass on the debt, but then found that those that bought it, such as hedge funds, often had credit lines to the self same banks, so like a bout of malaria, it repeated the visit and the problem.

One of the key benefits of multi asset class investing is the lower volatility of returns, and reduced downside risk. This can be helpful from a "sleep at night" perspective, but also comes into its own, from a mathematical angle, during more volatile periods. So, diversified multi asset class portfolios remain an intelligent investment choice for a future where few sensible analysts are prepared to forecast beyond the end of their own noses.

Andrew Wilson
Head of Investment

This Global Markets Commentary is solely for information purposes and is not intended to be, and should not be construed as investment advice.

Whilst considerable care has been taken to ensure the information contained within this commentary is accurate and up-to-date, no warranty is given as to the accuracy or completeness of any information and no liability is accepted for any errors or omissions in such information or any action taken on the basis of this information.

The opinions expressed are those of Towry Law Investment Management Limited on behalf of Towry Law Financial Services Limited and are made in good faith, but are subject to change without notice.

IMPORTANT NOTICE: Towry Law Financial Services Limited. Registered in England No. 607039. Towry Law Investment Management Limited. Registered in England No.793636. Towry Law Trustee Company Limited. Registered in England No. 1151146. Towry Law Pension Trustees Limited. Registered in England No.781047. All of the above firms are authorised and regulated by the Financial Services Authority. Towry Law Holdings Limited. Registered in England No.4773122. Towry Law Nominees Limited. Registered in England No.2988101. Towry Law Services Limited. Registered in England No. 5169111. The Registered Office of all these companies is Towry Law House, Western Road, Bracknell, Berkshire, RG12 1TL. Telephone 01344 828000.

We may record telephone calls to protect both of us and for training purposes. We may also monitor the content of email communications and by sending an email to us or responding to an email from us you acknowledge and accept that any such email communications may be monitored. The information contained in this e-mail is intended only for the individual or entity to whom it is addressed. It may contain privileged and confidential information and if you are not an intended recipient you must not print, copy, distribute or take any action in reliance on it. If you have received this e-mail in error, please notify the sender by using the reply function, and then delete the message from your computer. Although this message and any attachments are believed to be free of any virus or other defect that might affect your computer system into which it is received and opened, it is the responsibility of the recipient to ensure that it is virus free, and no responsibility is accepted by Towry Law for any loss or damage in any way arising from its use.