Our objective is to meet each client’s unique spending needs and investment goals which are represented by each Portfolio’s stated investment objective. This is an Absolute Return objective, independent of the fluctuations of global asset classes.
The assets we use to achieve these objectives are however subject to market fluctuations. Our dynamic hedging strategy does not eliminate risk, rather it is designed to ensure any drop in value is readily recoverable within the Portfolios’ investment horizon – we call this Management of Risk.
Portfolio objectives – are determined by clients’ spending needs and investment goals and are the starting point from which Portfolios are designed. In designing our Portfolios we think for ourselves from first principles.
Asset class screen – identifies a range of asset classes which have the potential to meet the Portfolio’s objectives.
Historical performance review – once an asset class has been identified its historical performance is studied. Assets rarely deliver returns in a linear manner, studying the past helps determine where an asset class sits in the return cycle.
Return versus risk – all return comes with risk, but there is more than one way to define risk. Risk for us is defined by the potential for a permanent loss of capital which we assess through drawdown (i.e. peak to trough).
Correlation analysis – assets do not exist in a vacuum, instead they interact, influencing each other throughout the investment cycle. Understanding when assets tend to move in the same direction (and when they do not) is an essential step toward constructing a diversified portfolio.
Dynamic hedging strategy – diversification alone is an insufficient shock absorber for managing risk and asset classes can take longer than investors’ timeframes to return to their long term return path. Therefore a separate hedging strategy is designed for each asset class (and sub-sector) we invest in.
Dynamic asset allocation – as asset classes transition through their return cycle their weight in the Portfolios is varied using our dynamic asset allocation model.
Withstanding the vicissitudes of markets – we stress test the Portfolios by “implementing” the Portfolios during different historical periods and in different regional markets. Forecasts and expectations are no substitute for the rigours of the real world.
Further information on the GIS Portfolios is contained in the current Investment Statement, which is available upon request.
