Discretionary Management Solutions
Since we launched our market analysis services we have received consistent feedback about a great deal of its value lying with portfolio decision makers and particularly discretionary management.
While our analysis is specifically designed to capture weekly trends which form a better picture for quarterly and semi-annual advisory reviews, a key component of our methodology is the layering of trend information.
This means that we can drill down in to shorter time frames and support more active decision making roles such as the Discertionary Fund Manager (DFM).
We are rapidly approaching the RDR deadline with all aspects of the industry making significant changes to how they do business and more importantly how they are compensated for the business that they do. No area is unaffected, from advisers to investment managers and all forms of service providers.
With all of these changes your company, along with many others has probably elected in the past, or may be considering a move from the advisory arena to making discretionary management decisions for client portfolios. If this is the case the key drivers to your business will be:
- Achieving investment performance;
- Managing portfolio risk exposure; and
- Achieving superior investment performance.
It is increasingly evident that many investment managers are struggling to achieve effective performance in today’s markets without the tailwind of a benign economy. This is most evident with the overall increase in Dog Fund managers in the last 12 months. Dog Funds.
Accordingly, it is vital to be able to make the most of your investment “edge” to create Alpha for your clients.
Is Discretionary Management Your ALPHA?
Many of you will be familiar with the Capital Asset Pricing Model (CAPM) which has underpinned investment activity for a long time. The CAPM is a compelling theory and provides a sound framework for general investment activity given its range of basic assumptions.
The value of diversification along with a buy and hold strategy can remove investor anxiety, reduce transaction costs and deliver long term results consistent with market performance.
However, as experienced money managers we have issues with CAPM:
- No-one has un-limited Capital available over an infinite timeframe that will ensure the ultimate success of a diversified portfolio allocation
- In the real world additional CAPM assumptions are unrealistic.
We are facing the very real prospect of limited growth and fragmented market performance over an extended time period as the world economy adjusts and evolves after the credit crunch of 2008.
We do not think that you can afford to be too passive in your investment strategy for the next generation of investors in the belief that value will accrue to a portfolio on the timescale specific to each of your clients.
What we believe is constant, for any successful investment process is the need for:
- Evidenced based decision making processes;
- Identification of superior risk adjusted opportunities
- Consistency of application over time irrespective of whether the market is persistently trending or not; and
- Good money management principles.
Without these fundamental attributes any investment strategy will struggle to achieve superior results in the long term.
We All Know Market Timing is Important
In the past, have you done all the research, identified your investment objective, sourced the best security or instrument and still failed to make the most of the opportunity?
There are studies to prove that you can’t significantly improve long term results by trying to time the markets. Equally, there are also studies that demonstrate the single biggest contributor to success is market timing.
What appears to be conflicting evidence (although we should always be careful with interpreting research) points to the fact that you need to develop the means to participate effectively in any market.
- Enter/Exit too early and you suffer the pain of underemployed assets and opportunity costs waiting for your research to be validated;
- Enter/Exit too late and you will either miss the growth opportunity or need to risk greater capital to achieve superior performance.
The key is to make the decisions that suit your portfolio rather than succumb to subjective analysis, a herd mentality or worst of all be drawn in to positions by an emotional desire for a favourable outcome.
Ignore Prices in Favour of Risk Adjusted Transactions
The financial services industry is overflowing with opinion and methodologies and we are no different except for the fact that we have no opinion. However, what we lack in opinion we make up for in method to complement and augment your own research.
We do not worry about the eternal search for the best price but focus on finding suitable prices. A “suitable” price will best serve the purpose of your clients’ portfolio. Whether you are investing in liquid markets, small cap securities, ETF’s, commodities or fixed interest the mandate from your clients is to do so on their terms.
It is vital that your investment decisions, transaction costs and ultimately management fees are tailored to the risk profile of your investor base. Whatever these factors are for you, good investment practice involves staying with your winners as long as possible and taking your losses as quickly as possible.
Again there are many studies to indicate that this is not a natural part of human nature. So how do we compensate for our human failings in investment terms?
By combining state of the art investment modelling, cutting edge data analysis and our own proprietary knowledge we are able to identify risk adjusted transaction opportunities across asset classes, markets and industry sectors.
We are able to package and deliver our unique analysis in real time as research, modelled portfolios or by performing the function of a portfolio adviser dependent upon your requirements (and regulatory status).
Whether you are a discretionary investment manager or a fund manager, as long as you are faced with decisions on price and risk management we can provide market insight when it is most needed.
What Do We Mean By Complimentary Research and Analysis?
You will have your own views and sources of research information to develop the insight to investment opportunities that is the basis for your client relationships. This evolves with risk profiling, tax planning and generally understanding what your clients’ need and want from their savings and investments.
Our value to your process lies in our ability to improve your market participation. This can be described in many ways but hinges on our ability to:
- Identify and exploit persistent price trends as they occur; and
- Evaluate the changing nature of risk associated with any given price.
The effect of our analysis is to augment your decision to include a security or instrument in your portfolio with:
- Improved efficiency in the form of better money management; and
- Greater capital preservation by creating a bias towards growth and away from under performing stocks.
We Know Our ALPHA
Our market analysis has a fundamental cornerstone of Capital Preservation where the focus is firstly on “knowing What Not to Do” and then only deploying capital where a statistical edge over a risk free instrument has been identified.
Based on an investment philosophy that concentrates on reducing realised and un-realised drawdowns we seek a high standard deviation of returns for both realised and un-realised gains and losses, measured in the form of a Sharpe Ratio.
Sinergi Management use ground breaking technology in the form of Qlikview Dashboards and CQGinvestment software combined with proprietary knowledge to achieve this.
Our ability to scan millions of separate data sets quickly and demonstrate our back-tested evidence in real time without any forward looking bias is what sets us apart from other market analysis and portfolio advisers.