Strategies

Portfolio Construction and Investment Strategies

We design and manage investment portfolios for our clients depending upon their needs and requirements

These include portfolios structured to provide capital growth, or strategies for generating income investing or a combination of both. If appropriate, we can also offer ethical or socially responsible investing.

Each portfolio is designed to provide a return in keeping with an investor’s chosen risk profile. After careful consultation with our clients we agree a strategy which is appropriate for them and that they are happy with.
Whilst some clients are willing and able to potentially expose their investments to a higher level of risk in order to make potentially higher returns, others wish to proceed more cautiously and do not want to incur much risk at all to their capital.
Many clients fall somewhere in between and are happy to take on some risk, but not too much.
The important factor here is that we will tailor a strategy to suit the needs of our investors rather than them having to adapt to a strategy that may not suit them.

Growth based portfolios are designed to focus on increasing the capital value over time and aims to increase the real worth of the money by beating inflation.
Income based portfolios also seek to increase capital over time, but their primary aim is to generate regular income for clients and 4% per annum is possible at present.
Importantly, there is no right and wrong when it comes to deciding how much investment risk and which strategy is right for you, but it is important to choose a portfolio which meets your objectives and that you are comfortable with.
The asset mix for a sample portfolio of ours is shown below, together with that of a typical benchmark.

Typical Portfolio

Global Emerging Markets Equity
Far East EXC Japan Equity
UK Equity
UK Fixed Interest
Global Equity Income
North America Equity
Specialist (Commodity)
Global Growth
Global Fixed Interest
European Equity
Specialist Infastrucure
Cash

Typical Benchmark

UK Equity
International Equity
Others
North America Equity
Fixed Interest
UK Fixed Interest
European Equity
Money market
Global Fixed Interest
Asia Pacific Equities

We measure all the portfolios we manage against benchmarks and in order for the comparison to be meaningful it is important to compare apples with apples and pears with pears. We therefore use standard industry models provided by the IMA (Investment Management Association) where the average volatility within the benchmark matches that within a portfolio.

By investing across a range of asset classes and sectors, it is possible to diversify both the risk and return achievable for investors.

So for example, if the FTSE 100 rose or fell by 5%, you wouldn’t expect to see the above portfolio or the benchmark portfolio rise or fall by exactly 5% as well. This is because they only own between 13% and 34.1% respectively in UK Equities, the rest of the portfolios are dependent upon the performance of other indices.

The key to portfolio diversification is to understand that headline equity markets are often quoted in the press and while they have an undoubted affect on portfolio performance, they are not wholly reflective of how a portfolio may perform on any given day. It is both possible and desirable to spread the risk across a range of assets in order to meet an investor’s objectives.

Another key element of portfolio construction is to consider an investor’s capacity for loss versus their desire for capital growth. Unfortunately investment markets do not go up in a straight line, with peaks and troughs encountered along the way. In an effort to make investment more realistic for investors, we publish maximum gain and loss figures over discrete 12 month periods to highlight the potential to both make and also to lose money.

When we construct a portfolio, we aim to invest across the main asset classes as detailed below:
Cash deposits
Gilts, Corporate Bonds & Other Fixed Interest Investments
Commercial Property
UK & International Equities
Commodities (ie Gold, Minerals, Foodstuffs etc)

We constantly review the performance and composition of our portfolios in line with current market and economic conditions.

Not only do markets change over time, but personal circumstances change as well, so it is important to keep our investor’s portfolios and attitude to risk under review. Such reviews form a key part of our relationships with clients.

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