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Investments
Investment Strategy
When building an investment portfolio there are two important considerations. The first is asset allocation, which is concerned with how you spread your investment between different asset types and regions. The second is fund selection, which is concerned with the decision of which fund managers and funds to use for each of the different asset sectors chosen. Both of these considerations are important although studies have consistently shown that in the medium to long term the asset allocation usually has a much larger impact on the overall portfolio risk and return than the individual funds selected.
The asset allocation of your portfolio will mainly be driven by the amount of risk that you wish to tolerate.
In order to build an asset allocation for the portfolio, we will use a sophisticated financial model. The model attempts to determine an optimal combination of different asset classes to predict the maximum mathematically expected return for your chosen level of risk. Such an advanced approach to building portfolios is not normally possible for retail investors and would typically only be done by institutional investors and pension fund managers.
The financial model is dependent on a set of economic assumptions, on which advice has been received from Watson Wyatt LLP, a highly respected international firm of Actuaries and Investment Consultants. The assumptions are built using a combination of past experience and forecasts of future economic conditions. Whilst no guarantees can be attached to these, we believe that they represent as good a forecast of future economic assumptions as there is available.
Once an asset allocation strategy has been built, we use a set of robust techniques to select only the very best investment managers for the portfolio. We believe that selecting an efficient asset allocation and the very best fund managers for the portfolio can minimise risk and maximise the overall returns.
Guide to Investments
Online Services
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Visit our online services section for more details.