This is unfair to the poorest teenagers in our country

Axing the Education Maintenance Allowance will prevent thousands of young people from deprived backg

Last week the debate around tuition fees focused on whether it would put people from low-income backgrounds off going to university. Yesterday that choice was taken away from them as the Education Maintenance Allowance (EMA) was axed. When I say axed, that is what was done, in effect: because when you turn to page 42 of the Comprehensive Spending Review green book you see that the saving from "replacing" the EMA is £0.5bn, which also happens to be the entire budget for the scheme.

If you don't know what the EMA was, it was basically a means-tested allowance of between £10 and £30, paid to 16-to-19-year-olds who stayed on in education and who were from deprived backgrounds where household income was below £30,810 per year.

Those receiving the £30 payment made up 80 per cent of all recipients; to able to receive this payment, household income had to be below £20,817 per year. This sum may seem insignificant to some, but in a survey carried out by the National Union of Students in 2008, 65 per cent of participants who were on the highest EMA rate of £30 said that they could not continue to study without the EMA.

But if this still does not convince you to their importance, at least the weight of evidence supporting the EMA far outweighs the arguments of any naysayers. For example, research by the Institute for Fiscal Studies shows attainment at GCSE and A-level by recipients of the EMA has risen by 5 to 7 percentage points since its introduction, and by even more for those living in the most deprived neighbourhoods. In addition, RCU Market Research Services carried out an investigation on the national scheme and published a report called Evaluation of the EMA National Roll-out 2007, which concluded:

The EMA is reducing Neet (those Not in Employment, Education or Training) and also motivating learners to work harder.

Ipsos MORI published a report in 2008 called Evaluation of Extension of Education Maintenance Allowance to Entry-to-Employment and Programme-Led Apprenticeships. This report reached similar conclusions to the RCU research:

The EMA is reducing Neet and also motivating learners to work harder.

But, if one wants to look for an example of why the axe should not fall on the EMA system, one has only to look to Scotland. The SNP administration in Holyrood which administers the EMA for Scotland, has cut the budget for the allowance by 20 per cent and made regressive changes to the scheme's eligibility criteria. These changes lowered the threshold for the £30 payment and axed the £10 and £20 payments in Scotland.

The action has unfortunately led to fears in Scotland that progress made so far will be undone by the SNP administration's policy. At the time of the cut, the NUS claimed that it would lead to 8,000 students dropping out. As youth unemployment in Scotland has risen by 7,000, it is hard to dispute their early prediction.

The £20 and £10 payments may seem a small sum to some, but this maintenance allowance removes some of the barriers to participation in education, and the £10 and £20 brackets are useful in this case, particularly in covering transportation costs.

Figures on the EMA released by the Scottish government just last year showed that the old system developed under the Labour administration was successful. The figures showed that 39,110 college students and school pupils from low-income families were taking up the allowance in 2007-2008, up on levels for 2006-2007.

The figures also showed that the allowance helped school pupils from low-income families stay on in education: 77 per cent of school pupils on the EMA scheme for the full year achieved the attendance rates and learning expectations set out for them, compared with 70 per cent in 2006-2007. The percentage of those on the EMA for a full year and receiving £10 or £20 payments who completed the scheme increased to 82 per cent (the figures for 2006-2007 were 74 per cent for those on £10 payments and 73 per cent for those on £20 payments).

These figures may seem just a list of endless statistics to some, but they represent something quite different to me. Since I started the Save EMA campaign, I have had hundreds of emails and messages from teenagers on the Save EMA website who are very worried about their future.

Take this one from Alex:

Without the EMA I wouldn't be able to go to college and become what I have always dreamed of being.

This is something I can relate to, as I was on the allowance, and I know that attending sixth form depended on those payments. When they were delayed, it meant that I missed college. Luckily that didn't happen too often, and unlike my older sisters and all the generations in my family before me, I was able to straight on to university.

My old sixth form now has half the students on the EMA. It pains me greatly to think that there are many people like myself at my old school who will not have the same opportunity to stay on in education and get the qualifications they need to live a better life. But I will leave you with the words of Alex, another of the many people who have emailed me and written on our website.

For me, his comment sums up what the Comprehensive Spending Review means to people like us:

I need EMA otherwise I will have no education. In other words . . . no future.

James Mills is part of the Save EMA Campaign.

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Artemis Monthly Distribution Fund: opportunities in volatile markets...

The Artemis Monthly Distribution Fund is a straightforward portfolio that combines bonds and global equities with the aim to deliver a regular income. It is run by James Foster and Jacob de Tusch-Lec. James also manages the Artemis Strategic Bond Fund whilst Jacob also manages the Artemis Global Income Fund. Whilst past performance is not a guide to the future, the Monthly Distribution Fund has returned 76.7%* since launch in 2012. Its current yield is 3.9%. It is also the top performing fund in its sector.*

Political uncertainty and the actions of central banks continue to create market volatility. In this article, James Foster talks about the opportunities this has provided and which areas of the market he considers most attractive.


The approach of the European Central Bank (ECB) has been both broad and radical. The increase to its quantitative easing (QE) programme has helped to push the yields on an even wider range of government bonds into negative territory. The cheap financing it offered to banks was less expected. To date, however, it has done little to ease fears that European banks are in trouble. The performance of bank shares across Europe (including the UK) has been abominable. Returns from their bonds, however, have been more mixed.

Bonds issued by banks and insurers are an important part of the portfolio. We increased our positions here in February but reduced them subsequently, particularly after the UK’s referendum on the EU in June. Our insurance positions have increased in importance. New Europe-wide solvency rules were introduced at the beginning of the year. They make comparisons easier and give us more comfort about the creditworthiness of these companies.

As part of its QE programme, the ECB announced that it would start buying corporate bonds with the aim of reducing borrowing costs for investment-grade companies. After months of preparation, the purchases began in June. The mere prospect of the ECB buying corporate bonds proved as significant as the reality. The implications, however, could be even more profound than they initially appear. Bonds of any investment-grade issuer with a European subsidiary are eligible.

Moreover, the ECB has changed the entire investment background for bonds. Companies are more likely to do their utmost to retain their investment-grade ratings. The financial benefits are so great that they will cut their dividends, issue equity and sell assets to reduce their borrowings. We have already seen RWE in Germany and Centrica in the UK undertaking precisely these policies.

High-yield companies, meanwhile, will do their utmost to obtain investment-grade ratings and could also lower their dividends or raise equity to do so. This creates a very supportive backdrop to the fund’s bonds in the BBB to BB range, which comprise around 28% of the portfolio.

The backdrop for higher-yielding bonds – those with a credit rating of BB and below – has also been volatile. Sentiment in the first quarter of 2016 was weak and deteriorated as the risk of recession in Europe increased. These types of bonds react very poorly to any threat of rising default rates. With sentiment weak in February and March, they struggled. However, the generosity of the ECB and stronger economic growth readings helped to improve sentiment. Default rates are higher than they were, but only in the energy sector and areas related to it.

We felt the doom was overdone and used the opportunity to increase our energy related bonds. Admittedly, our focus was on better quality companies such as Total, the French oil company. But we also increased positions in electricity producers such as EDF, RWE and Centrica. In a related move, we further increased the fund’s exposure to commodity companies. All of these moves proved beneficial.

One important area for the fund is the hybrid market. These bonds are perpetual but come with call options, dates at which the issuer has the option to repay at par. They have technical quirks so they do not become a default instrument. In other words, if they don’t pay a coupon it rolls over to the following year without triggering a default. In practice, if the situation is that dire, we have made a serious mistake in buying them. These hybrids have been good investments for us. Their technical idiosyncrasies mean some investors remain wary of these bonds. We believe this concern is misplaced. For as long as the underlying company is generating solid cashflows then its bonds will perform and, most importantly, provide a healthy income, which is our priority.


In equities, our response to the volatility – and to the political and economic uncertainties facing the markets– has been measured. We have been appraising our holdings and the wider market as rationally as possible. And in some cases, the sell off prompted by the Brexit vote appeared to be more about sentiment than fundamentals. We will not run away from assets that are too cheap and whose prospects remain good. We retain, for example, our Italian TV and telecoms ‘tower’ companies – EI Towers and Rai Way. Their revenues are predictable and their dividends attractive. And we have been adding to some of our European holdings, albeit selectively. We have, for example, been adding to infrastructure group Ferrovial. Its shares have been treated harshly; investors seem to be ignoring the significant proportion of its revenues derived from toll roads in Canada. It also owns a stake in Heathrow Airport, which will remain a premium asset whose revenues will be derived from fees set by the regulator whether the UK is part of the EU or not.

In equities, some European financials may now be almost un-investable and we have lowered our risk profile in this area. Yet there are a handful of exceptions. Moneta Money Bank, for example, which we bought at the initial public offering (IPO). This used to be GE’s Czech consumer lending business. The Czech Republic is a beneficiary of the ongoing economic success of Germany, its neighbour, and unemployment is low. The yield is likely to be around 8%. And beyond financials, prospects for many other European stocks look fine. Interest rates that are ‘lower for longer’ should be seen as an opportunity for many of our holdings – notably real estate companies such as TLG Immobilien  and infrastructure stocks such as Ferrovial – rather than a threat.


For high-yield bonds the outlook is positive. For as long as the ECB continues to print money under the guise of QE it will compel investors to buy high-yield bonds in search for income. The US economy is also performing reasonably well, keeping defaults low. Despite the uncertainty created by Brexit, that oil prices have risen means we can expect default rates to fall.

At the same time, there are a number of legitimate concerns. The greatest, perhaps, is in the Italian banking system. A solution to the problem of non-performing loans needs to be found without wiping out the savings of Italian households (many of whom are direct holders of Italian bank bonds). Finding a solution to this problem that is acceptable both to the EU and to Italian voters will be hard. Other risks are familiar: levels of debt across Europe are too high and growth is still too slow.

* Data from 21 May 2012. Source: Lipper Limited, class I distribution units, bid to bid in sterling to 30 September 2016. All figures show total returns with dividends reinvested. Sector is IA Mixed Investment 20-60% Shares NR, universe of funds is those reporting net of UK taxes.

† Source: Artemis. Yield quoted is the historic class I distribution yield as at 30 September 2016.



Source: Lipper Limited, class I distribution units, bid to bid in sterling. All figures show total returns with net interest reinvested. As the fund was launched on 21 May 2012, complete five year performance data is not yet available.


To ensure you understand whether this fund is suitable for you, please read the Key Investor Information Document, which is available, along with the fund’s Prospectus, from

The value of any investment, and any income from it, can rise and fall with movements in stockmarkets, currencies and interest rates. These can move irrationally and can be affected unpredictably by diverse factors, including political and economic events. This could mean that you won’t get back the amount you originally invested.

The fund’s past performance should not be considered a guide to future returns.

The payment of income is not guaranteed.

Because one of the key objectives of the fund is to provide income, the annual management charge is taken from capital rather than income. This can reduce the potential for capital growth.

The fund may use derivatives (financial instruments whose value is linked to the expected price movements of an underlying asset) for investment purposes, including taking long and short positions, and may use borrowing from time to time. It may also invest in derivatives to protect the value of the fund, reduce costs and/or generate additional income. Investing in derivatives also carries risks, however. In the case of a ‘short’ position, for example, if the price of the underlying asset rises in value, the fund will lose money.

The fund may invest in emerging markets, which can involve greater risk than investing in developed markets. In particular, more volatility (sharper rises and falls in unit prices) can be expected.

The fund may invest in fixed-interest securities. These are issued by governments, companies and other entities and pay a fixed level of income or interest. These payments (including repayment of capital) are subject to credit risks. Meanwhile, the market value of these assets will be particularly influenced by movements in interest rates and by changes in interest-rate expectations.

The fund may invest in higher yielding bonds, which may increase the risk to your capital. Investing in these types of assets (which are also known as sub-investment grade bonds) can produce a higher yield but also brings an increased risk of default, which would affect the capital value of your investment.

The fund holds bonds which could prove difficult to sell. As a result, the fund may have to lower the selling price, sell other investments or forego more appealing investment opportunities.

The historic yield reflects distribution payments declared by the fund over the previous year as a percentage of its mid-market unit price. It does not include any preliminary charge. Investors may be subject to tax on the distribution payments that they receive.

The additional expenses of the fund are currently capped at 0.14%. This has the effect of capping the ongoing charge for the class I units issued by the fund at 0.89% and for class R units at 1.64%. Artemis reserves the right to remove the cap without notice.

Any research and analysis in this communication has been obtained by Artemis for its own use. Although this communication is based on sources of information that Artemis believes to be reliable, no guarantee is given as to its accuracy or completeness.

Any forward-looking statements are based on Artemis’ current expectations and projections and are subject to change without notice.

Issued by Artemis Fund Managers Ltd which is authorised and regulated by the Financial Conduct Authority.