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The PanDynamic Model Portfolios

Investment services

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seven Model Portfolios

PanDynamic Model Portfolios offer a versatile range of low-cost investments to Advisers and their clients. A range of seven Model Portfolios employ Pan Asset’s dynamic asset allocation process coupled with low-cost investment in carefully selected index-tracking funds. This gives Advisers’ clients day-by-day management of their money by investment professionals concentrating on the big picture. The wrap platform (Ascentric, Aviva, Novia, Nucleus, Transact or Standard Life) provides the custodian and dealing service. The adviser retains full control of the client account and responsibility for the relationship.

Our Investment Approach

Getting the big decisions right determines how much investors’ clients make on their money. We take asset allocation decisions to choose whether to be in cash or property, equities or government bonds, or in a mixture. So many asset managers charge investors for trying to choose the right shares but on average stock-picking managers do less well than just buying all the shares in the Index.

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 instead 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.

The Portfolios are managed with clear risk and return benchmarks designed to cater for most standard client risk profiles.

Depending on the flexibility of the wrap platform, the Model Portfolios can normally be used for all or part of an investment portfolio. The Model Portfolios aim to exploit the continually changing opportunities offered by different asset classes around the world. The dynamic asset allocation process combines long-term investment in assets most likely to meet a particular client’s needs, with shorter-term tactical decisions which can protect their assets in times of stress.

We believe that index-tracking funds are the best way to access most asset classes. This is a good way to reduce investment management costs and improve returns to the investor. It removes individual stock risk and avoids underperforming active investment managers.

The Seven Model Portfolios

The seven Model Portfolios offer a choice of risk and return options ranging from ‘Defensive’ to ‘Aggressive’ and include an ‘Income’ option. They allow an adviser to meet the needs of most types of investors. The risk/return ratings aim to match the range of risk profiles generated by standard risk-profiling solutions. Risk appetite is measured in terms of maximum tolerance of loss while return benchmarks are linked to multiples of cash returns. The Income Model is also managed to meet a risk profile which lies close to ‘Balanced’ but also aims to produce a reasonable income.

The portfolios are carefully constructed using appropriate asset classes for each Model Portfolio’s stated risk benchmark. Detailed back-testing and performance simulations are used to verify that the model is likely to meet the risk and return benchmarks. The full range of asset classes and sub-classes (available here) includes bonds, equities, listed property, funds of hedge funds, private equity and commodities and, of course, cash.

A summary of the characteristics of each Model Portfolio is shown in the table below together with the core weightings in each asset class. The table also states the indicated level of risk during normal market conditions as well as the performance benchmarks.

We will seek to mitigate risk in difficult markets by holding more cash and avoiding risk assets, like shares. The Model Portfolios target real rates of return over the longer term, coupled with a lower risk of loss than comes from remaining fully invested at all times. Therefore their performance will not necessarily track the rise (or fall) of any specific index.

The seven model portfolios as at 31st January 2015

  Defensive Cautious Balanced Balanced Moderate Growth Growth Aggressive Income
Distribution technology (DT) profile 3 4 5 6 7 8 5
Typical Growth/ Defensive Split 10:90  30:70 50:50 65:35 80:20 99:01 50:50
Current Growth/ Defensive Split 15:85 35:65 55:45 70:30 86:14 94:06 55:45
Cash 2 10 100 1 5 100 2 5 100 1 0 100 0 0 100 0 0 100 0 5 100
Bonds 83 80 100 64 65 80 43 45 70 29 35 50 14 20 30 6 0 20 45 45 70
Equities 15 10 20 27 25 50 45 40 70 61 50 80 76 55 90 84 65 100 44 40 70
Property 0 0 0 8 5 20 10 5 25 9 10 30 10 15 35 10 20 40 11 5 25
Other Assets 0 0 0 0 0 20 0 5 25 0 5 30 0 10 35 0 15 40 0 5 25
Sensitivity to volatility 5% Fall 10% Fall 15% Fall 20% Fall 25% Fall 30% Fall 15% Fall
Performance Benchmark 1 Month £ Libor 1.25 x £ Libor 1.5 x £ Libor 1.75 x £ Libor 2 x £ Libor 2.5 x £ Libor 1.5 x £ Libor


* CW- Current Weight, TW- Typical Weight, MW- Maximum Weight.

Source: Charles Stanley Pan Asset/ Thomson Reuters, as at 31st January 2015

Two Portfolio Approaches

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