Wealth Manager believes that research needs to be carried out in a holistic manner, with a focus on both quantitative and qualitative information. Quantitative analysis provides us with an idea of how the fund manager has performed in different market conditions, whereas qualitative analysis (of a fund manager’s strengths and weaknesses) provides us with knowledge of how a fund manager is expected to behave.
Consistent communication pertaining to the clients portfolio management and performance, and strict adherence to the Global Fiduciary Standards is also of critical importance to Wealth Manager.
An understanding of these factors is important when deciding between funds / managers.
Wealth Manager retains the services of Glacier Research -a dedicated and highly skilled team of investment analysts who evaluate more than 500 single manager collective investment schemes and identify the most suitable funds using both qualitative (face-to-face) and quantitative research methods.
Qualitative analysis looks at the asset management house, the investment team and the philosophy and process behind the management of the fund.
The following factors are evaluated in terms of the asset management / investment house:
Investment Philosophy Investment Process Decision Making Process Research Process Performance and Risk Monitoring House-view Implementation The following factors are evaluated in terms of the investment team:
– Education and qualifications
– Length and nature of experience
– Financial Motivation
– Alternate responsibilities
– Quality and depth of team
– Succession Planning
Quantitative analysis looks at the performance, risk and correlation of the funds using the following methods of:
Performance – Although past performance is no indicator of future performance, Probability Distributions and Value-at-Risk models are useful in determining how funds should perform relative to an appropriate benchmark. Static and rolling returns are scrutinized and special attention is paid to performance in negative markets. The effect of tax is considered where applicable.
Risk – To determine the overall risk of a fund we look at volatility (Standard Deviation, Downside Deviation) and other well-known risk ratios (Sharpe, Treynor, Information Ratio), where applicable. These measurements are analyzed on a static and rolling basis (Snail-Trail analysis) to determine if there have been significant changes in the funds‟ risk characteristics, e.g. a new fund manager may change portfolio risk as a result of a different management style.
Drawdown Analysis – A fund’s drawdown – the maximum cumulative loss over any period – is analyzed to determine the effectiveness of a fund in protecting capital when the market loses value. This is particularly useful in the Absolute Return and Equity categories where defensiveness is an important consideration.
Correlation – A correlation matrix is used to determine the behavior of funds relative to other funds in the same sector and to various indices. Knowing how funds perform relative to each other helps to determine which funds should be combined to build a well-diversified portfolio. Qualitative analysis looks at the asset management house; the investment team and the philosophy and process behind the management of the fund.
Attribution Analysis – Attribution analysis is useful in determining the funds source of alpha. We determine whether the relative performance over time is due to sector rotation, asset allocation or stock selection.
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.
Global Fiduciary Standards and the importance thereof for investors, trustees and portfolio managers and benefits of an Accredited Investment Fiduciary (AIF™) overseeing the investment process.
Modern medicine has major findings which have been documented such as DNA and gene mapping. Coupled with advances in technology, medical research is benefiting people at large with these quantum leaps in knowledge – saving millions of lives, and a better life experience for many that have had hitherto suffered various health complications. Correspondingly, in the Science of Modern Finance* the world’s leading economists and finance professors have made significant findings regards understanding the risk and return of all well known asset classes.
In recent years their attention has focused on the management of costs (including taxation liabilities). These findings, along with advances in technology, mean investors taking advantage of this knowledge can gain levels of confidence and superior returns at a lower risk than has previously been possible in past years. This will mean a new standard of lifestyle planning for families, family trusts and the Retirement Fund industry.
This knowledge and technology can now be linked with new Global Fiduciary Standards and processes which enable investors to make any investment service provider fully accountable in respect of the results they achieve or don’t achieve in the interests of their clients. This knowledge will also challenge historical thoughts and services within the wealth management industry. Another challenge that will become apparent to professional trustees is the necessity for them to demonstrate that they have a defined governance process in place capable of meeting legislative and new international ethical standards.
Investment fiduciaries are looking for universally accepted standards of practice to aid them in the performance of their fiduciary duties. Adherence to a standard can be the foundation for the trust placed in Advisors by their clients.
The vast majority of the world’s liquid investable wealth is in the hands of investment fiduciaries, and the success or failure of investment fiduciaries can have a material impact on the fiscal health of any country. As critical as their role is, most fiduciaries are unaware or uncertain of the full extent of the details of a prudent investment process.
The Prudent Practices for investment fiduciaries guide investment fiduciaries as they strive to fulfill their fiduciary obligations. By following a structured process based on the Practices, the fiduciary can be confident that critical components of an investment strategy are properly implemented and followed.
The Practices provide the foundation and framework for a disciplined investment process and generally represent the minimum process prescribed by US law and legal precedent. The Practices are further supported by Criteria, which represent the details of the Global Fiduciary Standard of Excellence.
Glacier Research, Investment Fiduciary approach All three of the Wrap Funds managed by Wealth Manager are structured to comply with Regulation 28 of the Pension Fund Act as this is deemed prudent investment management even for “Discretionary Funds” (funds outside of the Pension , Provident Funds, Retirement annuities and Living annuities-commonly referred to as “Compulsory Funds “ ).
Through the use of proprietary tools, Morningstar Direct and other information systems, Wealth Manager will recommend an appropriate asset allocation strategy based on the portfolio’s return objectives, risk limits, time horizon, tax considerations and your other unique requirements. We then assist in the implementation of this strategy via a carefully selected portfolio of collective investment schemes combined to provide diversified exposure to the market’s many opportunities.
