We had our Investment Policy Committee meeting last week when we spent a great deal of time reviewing our investment approach, the robustness of our processes and the current portfolios we run.
We favour a passive approach and work with Dimensional Fund Advisers to create our portfolios but need to constantly review our process to ensure this is still the way we want to offer investment solutions.
Malcolm Stewart has responsibility for maintaining our investment strategy and as part of our approach he looks at other investment asset classes that we could use but currently don’t.
We will look at the entire investment universe and apply a set of rules and guidelines to see if any alternative asset classes should be ruled in or out for recommendations to our clients.
For example, we don’t currently recommend Hedge Funds and on applying our screening process, we have questions over the level of fees potentially charged, the transparency of the investment strategies and some of the details of performance reporting.
So in this instance, we will not use hedge funds in our portfolios but will review this again to see if there should be any changes in the future.
Applying these processes to commodities funds, gold, property and other asset classes helps to try and avoid risks we don’t want to expose our clients to.
Unless we can quantify that the level of risk a client is exposed to is justified by the level of return, we will generally avoid this.
It takes time and effort but ultimately a sound investment policy that we understand and have confidence in is what we are trying to achieve.
We feel very strongly about our investment approach and as clients, you should be asking detailed questions of your current adviser about his or her approach and how they have arrived at their decisions about how and where to invest.
Interestingly, it’s not so long ago that I was advised to copy fund performance figures from a well known industry magazine as justification for my investment choices.
I didn’t think it was a good idea or process then and I certainly don’t think it is now!
Roland Oliver