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Portfolio Management and Communication

Wealth Manager believes that to build enduring portfolios, you need to focus on your long term strategic asset allocation, specific portfolio requirements and appropriate manager selection. A clear mandate and appropriate asset allocation decisions means investors have peace of mind and confidence moving forward, all consistently communicated by Wealth Manager.

Glacier Research’s analyst’s high convictions of choices are completely objective and unconstrained. Managers across all asset classes are sought to fulfil specific roles in a portfolio context. They need to demonstrate skill, performance consistency and an ability to protect capital and / or deliver capital growth, depending on the objective and mandate of the fund. The goal is to find fund managers with disciplined, comprehensive, sustainable strategies who produce returns in line with the funds‟ investment style, objective and benchmark, understand what they are buying and are able to better manage their expectations.

Effective portfolio diversification – This will offer some downside protection in a falling market. Diversification ensures that capital is exposed to asset classes, market sectors, manager styles and philosophies which are not highly correlated. This strategy will offer protection to a portfolio, but may come at the expense of potential upside.

Wealth Manager’s uses research produced by the investment analysts to build consistently diversified portfolios, exposed to a broad range of investment opportunities. The goal of the portfolios will be to produce the maximum returns for a given level of risk. We will make active recommendations to you to achieve this goal over time.

Fees matter – In fact they matter such a great deal that you should refuse to pay them if they are exorbitant. Fund fees and taxation impact directly on the performance you receive. Performance fees can also be asymmetrical and you should take note of how they are structured. Their impact is not always obvious. Given that the asset allocation decision is the most important over the longer term, more often than not, it is possible to substitute one fund for another if the fee structure is not appropriate.

Investment risk is a complex term – It covers a plethora of definitions such as active risk, downside risk, short term volatility etc. All portfolios are built with an investment goal in mind and not meeting this objective is the biggest risk of all. Therefore a decision needs to be taken as to how much short term volatility (i.e. market risk) a portfolio can tolerate versus the risk of not meeting the long term goal. An example of this is the wide use of standard deviation as a risk measure. We believe that standard deviation is not the most appropriate measure of risk as it includes the “good” volatility accompanying a bull market and penalizes funds that participate in the upside. Looking at drawdowns (the maximum loss a portfolio suffers) is more appropriate as that is the maximum potential loss a client would suffer. This example illustrates Wealth Manager’s client-centric approach to risk management where potential monetary losses are more important than deviations from the mean.

Understand what you are buying – Being unfamiliar with the investment dynamics and risk-return characteristics of funds in your portfolio leaves you vulnerable to unpleasant surprises and undue risk. Each fund is chosen to fulfil a specific purpose. The way in which these funds are blended takes correlation, asset class exposure, risk and diversification into account.

Once your goals are outlined and your portfolio thoughtfully constructed, all that is left to do is stick to the plan or “stay the course “– through bull- and bear markets. Your portfolio must be constantly monitored and periodically rebalanced, but it is imperative not to be swayed by volatility, investment bubbles, market commentators or fear and greed. Investment success requires tenacity and discipline.

And finally, realistically manage your return expectations. The best you can ever expect is a combination of long-term asset class returns which are largely a function of the average level of interest rates and inflation and in the case of equities, the equity risk premium. Ignoring these long term returns means you run a large risk of your portfolio not meeting your investment goals.

Historically equities have outperformed bonds, which in turn have outperformed cash. This therefore presupposes that portfolios positioned for inflation-beating returns require a tilt towards equities in order to achieve long term goals.

Once the portfolios are active, Wealth Manager will monitor your portfolios and through consistent communication will suggest changes / rebalancing as market- and compliance conditions warrant. At all times, Wealth Manager  will provide appropriate investment consulting services in line with each of your portfolios objectives with the view to avoid market pitfalls and investment mistakes which could undermine your portfolio’s long-term-success.

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