Investment Philosophy

We’re detail fanatics and that really is at the heart of everything we do. We stick to the fundamentals at every level, using tried and tested methods.

Our portfolio design and management approach is based on Modern Portfolio Theory. The main thing about Modern Portfolio Theory is that it states the vast majority of the behaviour of a portfolio is due to asset allocation. Our portfolios have been designed each with a specific risk profile and therefore a specific level of volatility, and our aim is to maximise the potential investment return for each portfolio relative to its risk profile. We do this in four stages:

We combine different types of investment with varying risk/return characteristics, to create a range of efficient portfolios with the highest potential return expectation for each specific risk profile. The aim is to capture most of the upside (the good bit) from long term investing, whilst limiting exposure to downside (the bad bit).
We live in the real world, so we apply a short term ‘bias’ to the asset allocation of each of our portfolios to reflect our views of economic and market outlooks. We’re trying to improve returns, or reduce losses, by making measured adjustments to asset allocations over shorter timescales. We do this without fundamentally altering the long term strategic risk/return profile of the portfolios.
We identify and use fund managers in our portfolios with the potential for outperformance. We’ll use actively managed investment funds in our portfolios where we believe it is worth paying a higher annual management charge for a fund manager who has the potential for generating additional returns. If we can’t see value in active investment funds for a particular sector we will use passive funds that aim to track the market index for that sector.
We can make changes to our portfolios at our discretion. We believe this offers significant advantages to you, as we can change things quickly and efficiently, without the delay that would be incurred writing to all our clients and waiting for their approval to proceed (which is the other approved way of working). If we identify an opportunity to improve a portfolio tactically, either to add upside potential or downside protection, we can do so quickly and efficiently for all clients invested in our portfolios.