Eggs, baskets and a "team of teams".
By The PortfolioMetrix Team
No, this isn't another post about Woodford Investment Management. There's been enough in the news about Mr Woodford already and we're not about to join the slaughter, but if there's a parable to emerge from recent events, it's the importance of not relying on one factor, much less one person, for investment success.
There are multiple drivers of investment outcomes and getting each step right and achieving incremental gains in every one is what is needed to deliver the sort of consistent and dependable long-term performance that clients rely on to achieve their investment goals.
Firstly, there is the choice of asset class: strategic asset allocation with the application of moderate tactical tilts when circumstances dictate.
Then there is how the portfolio is optimised, diversified and re-balanced to get as close as possible to upper quartile performance, while at the same time maintaining consistency of risk separation. This is not only a matter of compliance, but also of good client management.
Of course, seeking alpha through fund and manager selection is an important part of the picture. There is no substitute here for intensive qualitative research backed by a large dollop of judgement and experience.
At PortfolioMetrix, we go through a meticulous five-step process when selecting funds that takes us from generating the fund universe for each asset class, through quantitative and qualitative screening of performance and style, to due-diligence, which includes face-to-face meetings with the fund managers, evaluation of their investment processes and regular operational reviews. Only then, after rigorous debate, will our investment committee sign-off the final recommendations.
Looking at this from the client's perspective, when they choose an IFA, they choose you. You are the one who is going to help them plan, execute and optimise their investment strategy. You are their "star manager".
But it should be important and reassuring for them to know that behind you sits a "star team". One that is focused on all the drivers of investment outcomes and has the experience, systems and processes to make high quality assessments of market conditions and react with a laser-like focus on long-term performance rather than volatile short-term returns.
Here at PortfolioMetrix, we firmly believe that this "team of teams" approach is the most dependable way of delivering for your clients. You're at the front managing the client relationships, we're managing the portfolios and giving you the technology and information you need, and behind us all, is a hand-picked team of fund managers making decisions on individual investments.
Others might take a different view, but our results over the past 10 years suggest that we could be onto something!