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Style and philosophy of investment management

We have built our discretionary investment management services around three fundamental investment principles:

  1. Asset allocation is the key driver of investment performance.
  2. Multi-asset class investing diversifies risk and maximises the opportunities to deliver attractive risk-adjusted returns.
  3. Passive or index tracking funds will commonly outperform actively managed funds in developed markets.

In addition to these principles, we understand that your overriding expectation is the delivery of investment performance.

Investment return is achieved by taking risk. We will review and agree your tolerance to risk ahead of building an investment solution and we will regularly monitor this ‘risk tolerance’ to ensure it is maintained in accordance with your changing circumstances and objectives.

Asset allocation

A series of academic papers published over the last two decades have concluded that asset allocation is the major determinant of investment performance*. We use this evidence as the cornerstone of our wealth management approach: building portfolios that ensure you have access to a wide range of asset classes. We define five major asset classes: cash, bonds, property, equities and alternative investments. The latter asset class includes hedge funds, structured investments, private equity and commodities.

The choice of asset classes will vary according to your needs and the prevailing investment environment. The selection of the most appropriate allocation to each asset class, a process known as tactical asset allocation, also adds value to investment performance** and we adopt this investment style to optimise returns. Exposure to each asset class is ordinarily achieved through the use of collective investment vehicles.

* Brinson, Beebower and Singer Financial Analyst Journal June 1991; Ibbotson & Kaplan AIMR 2000

**Hoernemann, Junkans and Zararte Journal of Wealth Management 2005

Diversifying risk and achieving return

Clients invest to achieve a financial goal, which can vary from securing a source of income to building a substantial lump sum over a long investment term to finance set objectives, such as retirement. Investors face a variety of risks in attempting to achieve their objectives and these risks must be managed effectively to prevent a disappointing outcome. We work closely with you to ensure portfolios are structured to meet a target level of return within your defined level of risk.

Asset class diversification diffuses investment risk and wealth managers have successfully employed this process for a number of years. However, the increasingly complex array of financial vehicles and strategies available means considerable skill and expertise is needed in order to deliver attractive ‘risk-adjusted’ returns. We will regularly review the risks created, for example, by volatility, liquidity, inflation, interest rate movements and geopolitical events, to ensure the designated risk and reward balance is achieved.

Risks of the discretionary investment management service

  • The value of investments and the income from them can fall as well as rise and you may not get back the original amount invested.
  • Exchange rate changes may affect the value of investments.
  • In view of possible exchange rate and market price movements that may take place between receiving your instruction to invest new monies, determining the asset weighting and placing the deals in the market, the actual amount invested may be more or less than the expected initial cash investment.