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Pan Asset was founded in 2007 by John Redwood, Robert Brown and Christopher Aldous with the aim of providing a new and different approach to investment management.
We spent the first few months carrying out detailed research on the use of asset allocation techniques to manage portfolios.
When we launched Pan Asset it had long been accepted that the general mix of assets in a portfolio would change its characteristics – such as the level of risk. However, the use of a dynamic approach which sought to optimise the detailed composition of assets in a portfolio was rare. Our research unearthed a wide range of academic studies showing that asset allocation is likely to make the greatest difference to investment returns over time (detailed elsewhere on this site). Although our ‘new’ approach was greeted with scepticism at first, our dynamic asset allocation approach is now widely accepted and has been adopted by many of our competitors.
At the same time we set out to establish the best way to implement asset allocation decisions. We researched the universe of ‘active’ (stock-picking) fund managers with the aim of selecting the best performers in each asset class. Our criterion was that a manager should have outperformed their index by 2% on average over five years, without falling into the bottom quartile of performers for any twelve month period. We soon realised that this was not a realistic quest as very few managers beat the index by that margin over time and the few that did tended to experience high levels of volatility leading to erratic performance year by year.
Our solution to this problem was to turn to passive, index-tracking funds. Our research showed that we were more likely to achieve all or most of the return available from an asset class by using a passive fund than by using the average active fund. The increasing availability of Exchange Traded Funds (ETFs) meant we could access an expanding range of asset classes and made it far easier to implement our asset allocation approach.
Our process worked well in 2008 as it guided us to holding high levels of cash and has helped us to weather difficult and volatile conditions ever since. We now have a wide range of clients and our assets under management are growing.
After launching as an independent company, Pan Asset secured development funding from Evercore Partners Inc, a US listed corporate advisory firm. Evercore was a reliable and secure partner who saw us through our main development and growth phase. Its management decided on a new corporate strategy in 2013 and divested their investments in asset management companies, including their shareholding in Pan Asset.