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How we Invest

Philosophy

How we Invest

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Getting the big decisions right


We take asset allocation decisions to choose whether to be in cash or property, equities or government bonds, or in a mixture of these. We concentrate on the big picture and take long-term views about the likely performance of an asset. We move more into cash if there is substantial economic and market disruption. If an asset class becomes unattractive we will sell it and if we cannot find enough attractive assets to buy because markets are difficult we will temporarily hold cash to avoid losses and preserve capital. Our investment universe covers over 30 asset classes across all geographic regions. The asset allocation team constantly monitors each asset class to find the best investment opportunities around the world.

We believe:

  • Successful asset allocation is the key to good investment performance.

  • We usually implement agreed strategies using low cost tracker funds to keep down the overall costs of management

  • Investment should be approached on a global basis. We are moving from an Atlantic-centric world to a more Pacific-centric world.

  • Asian equity investment is likely to produce better long-term returns, given the underlying growth of Asian economics.

  • Real assets like equities and property represent a stake in economic progress providing a rising income stream. They should produce significantly higher returns over time than monetary assets, such as bonds and cash, which are at the mercy of inflation.

  • Alternative investments have an important role to play.

  • Cash is an important and underrated asset class.

Simple Truths:

  • 2% return on a government bond is unlikely to pay future wages or pensions.
     
  • If something looks too good to be true, it probably is.
     
  • There is a huge surge of wealth, income and output in Asia. Does your portfolio reflect this?
     
  • Emerging markets do sometimes emerge.
     
  • You cannot avoid having an asset allocation. Are you controlling and managing it?

We kept discretionary clients in cash for most of 2008 before investing in 2009 as we were very pessimistic about the world outlook in 2008. We do not feel we have to invest clients in any particular asset class because others are doing so or because it is traditional to do so. We do so if we think there is a reasonable prospect of a decent return compared to cash.

We think equity investment is helped if the underlying economies are growing quickly. That’s why we like Asia and emerging markets. If you can buy property with a higher initial income than on bonds, and then rents rise, you should do well.

You cannot avoid having an asset allocation. Every day that markets trade you have to decide whether to hold shares or property or bonds or some combination of them. The future of your portfolio is largely decided by how much of each type of asset you hold.

That’s why we concentrate on the Big Picture decisions. They are the decisions that make a big difference.

 

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