Improve Your Investment Strategy and decision making process.
Most Advisers or Investment Professionals will be familiar with the recurring feeling that there are normally 3-5 major decision points per year that will have the most significant influence on their Clients investment Performance. These decisions have the ability to maximise investment performance either through compounding of growth, or just as importantly, preservation of capital over time for your Client.
However, very often there is a confidence gap in the ability to assess the Market environment and making the most of these opportunities by correctly applying this insight and the appropriate choice of action on behalf of your clients.
Imagine being able to drive your decision making process confidently from a position of strength as opposed to the time consuming defensive “re-acting to market events” that, unfortunately, many Advisers find themselves in.
1.0 Use Sinergi Reports to Ensure Continuing Client “Suitability” criteria
Sinergi appreciate the onerous burden of “Time” that Advisers are obliged to monitor and report investment performance for their clients, ensuring that the nature of the chosen vehicle does not change substantially over time. It is important that the risk alignment of a fund or the strategic focus of its manager do not change without the adviser being aware.
2.0 Use Sinergi Reports to Monitor Price Volatility (remember 2008)
All Asset classes have a “normal acceptable” and desirable range of price volatility eg Fixed Interest (4-9%), Equities ( 15-25%),Commodities ( 10-25%) and Foreign Exchange ( 4-8%). However, it is important to spot when volatility becomes unacceptably high. We all remember 2008 when the non-correlation of Asset Classes broke down completely and many portfolios were destroyed when forced to crystalise losses when Volatility in some cases was fives times the norm. This is called “Fat-Tail” Risk and rendered many Managers’ Value at Risk (VAR) models ineffective.
Unwanted price volatility can affect the “risk alignment” of a fund in relation to your clients original risk profile. It is important to understand that increased price volatility can undermine what was previously regarded as an “appropriate risk” investment opportunity. Sinergi Reports will give you the chance to spot this early and take corrective action.
3.0 Use Sinergi Reports to identify Unwanted “Manager Style Drift”
The risk exposure of a fund will change over time as the manager seeks new growth opportunities or there is a change in personnel at the management company. Therefore it is important that the adviser considers the sector and market focus of each fund on a regular basis ensuring correct “risk alignment” and acceptable “Portfolio drift”.
4.0 Using Sinergi Reports for Effective Benchmarking and Review Cycles
It is important that any methodology includes a well-defined and consistent decision support framework, which allows the adviser to independently understand the Markets with a degree of confidence sufficient to execute appropriate decisions on behalf of their client.
Increasingly this will require the Adviser to REVIEW markets consistently and the performance of the chosen Fund Manager. The Adviser must use their respective Review Cycles for both his Client and chosen Fund Manager to ensure that overall client suitability remains in place and that the original advice remains appropriate for the needs and appetite of the client.
5.0 Using Sinergi Reports compliments Portfolio Risk Monitoring
A key factor for identifying persistent price trends is the understanding of the effect of price volatility. Increased price volatility is associated with, but not exclusive to, falls in price and periods of market uncertainty.
These periods are very often the most destructive points in time for long term portfolio growth as managers are forced to take steps, realising losses and incurring costs as price fluctuations force them in and out of the market.
The ability to apply more discipline in periods of price volatility either by staying in or out of the market can reduce instances, of realised losses, or the increased costs of re-entering at higher prices.
The Sinergi Heatmap and TACT reports are provided on a weekly basis. However, as we progress the adviser can begin to build up a picture of the persistent trends in markets and how they will influence short to medium term investment performance.
The following table outlines how the Weekly Sinergi TACT Reports would have built up this year to assist you in this process:
Sinergi TACT Reports combined (Weeks 6, 8, 10, 12, 14, 16 and 18)
Fig 1 a Asset Class Overview
Fig 1 b Equity Sector Overview
Fig 1 c Markets Overview
As the adviser, through your risk profiling process, you have agreed the appropriate type and mix of portfolio for each of your clients. At the key points of setting up and re-balancing a portfolio you need to consider factors such as:
- Are equities performing well and should the portfolio be overweight versus its long term benchmark?
- What is the outlook for commodities at the moment?
- Is there a decision to be made between the alternatives of fixed interest and cash investments?
It is not necessarily a case of getting it absolutely right but simply improving the quality of the decisions that you make at these stages, can accumulate additional growth or more importantly preserve capital that has, in turn, a higher chance of compounding towards maturity.
Our aim is to provide the insight that increases your confidence in making the three to five key decisions on behalf of your clients each year.
Over time it is these tactical adjustments within your long term strategy that will augment investment performance and support your client relationship.
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