Investment Objective Review & Objective Setting
Before we even open an account for a client, we must first undertake a rigorous review of their objectives. This can include why they have investments, their size, their time horizon, their tolerance to loss, any income requirements, currency related issues and many others. We aggregate this information to determine the clients Risk Profile which will be used to formulate a suitable Investment Strategy.Investment Strategy Formulation
Only once we have a thorough and complete understanding of the client’s requirements, will we begin to construct an investment strategy that, we believe, will fulfill those requirements and objectives. Once a strategy has been agreed with a client, we will progress to the asset allocation and fund security and security Selection. As each investor’s objective and risk profile may change according to circumstances, these should be re-evaluated continually.Asset Allocation
Asset allocation is a medium to long-term process designed to capture more macro-economic determined events through investing in asset classes that we expect to appreciate and withdrawing from those we expect to decline. For example, investing in equities in 2007 (and not bonds) would have been beneficial, as opposed to 2008 when an emphasis on bond investment (and not equities) would have proved a more successful strategy. We attempt to ensure that the asset allocation of the portfolio between the various asset classes (shares, bonds and cash, etc.) is continually managed according to the changing economic cycles and financial markets. However, this process is always managed in accordance with the investment mandate and corresponding risk profile.During certain phases of the economic cycle asset allocation is the most effective method of maintaining portfolios performance. The saying “a falling tide effects all ships” can certainly be true in this respect.
Fund and Security Selection
It has been proved that no single investment company or portfolio manager can be a top performer in respect of every geographic region or different types of asset classes. We, therefore, implement a evolution of the multi-manager approach to an investment portfolio, using specialist managers for the various investment disciplines, alongside discrete investments in individual securities, where applicableThe advantage of this approach is the fact that investment funds will be exposed to the investment styles, strategies and views of different top investment specialists. This considerably reduces the risk profile of an investment portfolio because, should one portfolio manager read the market incorrectly, it would not have a negative effect on the entire portfolio.
Such diversification served our clients extremely well during the credit crisis of 2008 and 2009 when even the most seasoned managers potentially faced exogenous risks. Not “having all your eggs in one basket” reduces overall portfolios risk.
We begin by avoiding a key mistake many firms make when evaluating managers: a dependency upon quantitative metrics. They do this because such metrics are objective, cheap, and easy to obtain; and they do not require much in the way of judgment. We, therefore, combine quantitative techniques with a focus on qualitative analysis. To achieve this we ensure that all our employees (from the top down) are integrally involved in screening, evaluating and ultimately the selection of managers for our clients’ portfolios.