INVESTMENT STRATEGY 20 17
Balamory Investments is an authorised financial services provider FSP: 41688
www.balamory.co.za
CONTENTS 1 Our Competitive Advantage (4 points)
2 Why these points are a Competitive Advantage 3
Our Portfolio building Methodology: ETFs 4 Why only US exchanges for global exposure 5 Our current Service offering (Portfolios)
6 Summary & Closure Balamory Investments FSP: 41688
Strategic Asset Allocation
Rule Based
Competitive Advantage
Complete Risk Management
Portfolio Regime changes Balamory Investments FSP: 41688
Competitive Advantage #1 Strategic Asset Allocation
Specific weightings
Style/Category exposure
Geographic exposure
Core & satellite approach
Equities Cash
Bonds
Alternatives
Properties Strategic Asset Allocation
Asset Classes Balamory Investments FSP: 41688
Competitive Advantage #2 Rule-Based System, no manual intervention
Secondary Inputs
Main Indicators
• Momentum of the S&P500
• Geographic view
• Company earnings & estimates (S&P500)
• Currency view
• Developed Markets Inflation rate trends • Developed Markets Interest rate trends
• Style view
• • • •
Asset Class Triggers
Regime Portfolios
• Focused Growth Portfolio • Global Neutral Portfolio • (Risk off Portfolio)
Fund Flows; Relative Strength; Correlations; Beta (Asset Classes)
Balamory Investments FSP: 41688
Competitive Advantage #3 Complete Risk Management Portfolio management can address this risk
Investment Goals
Investment Horizon
Risk (variance)
Cash flow needs
Portfolio management cannot address this risk
Risk Profile of Investor
non-Systemic
Systemic
Diversification
More Stable Assets & Less Risky Assets
Balanced between Risky & Stable Assets
More Risky Assets & Less Stable Assets
Global Portfolios on Risk Continuum Balamory Investments FSP: 41688
Competitive Advantage #4 Portfolio Regime Changes More Stable Assets & Less Risky Assets
Balanced between Risky & Stable Assets
More Risky Assets & Less Stable Assets
Return of Portfolio
Global Portfolios on Risk Continuum
Pie in the sky portfolios
Efficient Frontier line
Our portfolios
Regime A: Focused Growth
Not optimum portfolios
Cash
Regime B: Global Neutral Regime C: Risk Off
Volatility of Portfolio Regimes for each Portfolio and each of the FOUR asset classes Balamory Investments FSP: 41688
CONTENTS 1 Our Competitive Advantage (4 points)
2 Why these points are a Competitive Advantage 3
Our Portfolio building Methodology: ETFs 4 Why only US exchanges for global exposure 5 Our current Service offering (Portfolios)
6 Summary & Closure Balamory Investments FSP: 41688
Why these points are a Competitive Advantage Less Volatility Keep the Investor PROTECTED (Optimum Sharpe Ratio)
Minimize Portfolio RISK
Reduce Maximum Drawdowns
Minimise Downside Risk
Maximise Diversification
Maximise Sortino ratio
Beta, R-Squared, Alpha
Maximize Portfolio RETURNS
Portfolio Regime Switching The RESULT is better Portfolio Returns
No predictions of the future or biases
Structured ReBalance Policy
Best Portfolio Return Balamory Investments FSP: 41688
Why Investors care about Volatility! It creates market inefficiencies!
Position sizing
Required cash flows are influenced & could result in a shortfall
The wider the swings in a portfolio, the more emotional worry
When withdrawals are taking place, high volatility have a permanent impact
Retirement shortfall possibility
Balamory Investments FSP: 41688
CONTENTS 1 Our Competitive Advantage (4 points)
2 Why these points are a Competitive Advantage 3
Our Portfolio building Methodology: ETFs 4 Why only US exchanges for global exposure 5 Our current Service offering (Portfolios)
6 Summary & Closure Balamory Investments FSP: 41688
Our Portfolio building Methodology: ETFs
Fit
Liquidity
Risk
Structure Balamory Investments FSP: 41688
Our Methodology in short to build Portfolios
Fit Index followed & Benchmarking
Concentration Risks & Type
Diversification success & contribution
Tracking error & NAV
Liquidity Exposure: Currencies; Geographic; Style
Baskets vs Holdings
AUM
Bid-Ask spread costs
Fund flows vs packets vs % of AUM
Issuer
Weighting
Volumes & tradability
Structure Turnover frequencies
Tax exposure
Script lending & Associated risks & benefits
TER & other expenses
Hidden costs
The Risk (volatility) of using one of the 2,096 ETFs listed on the 4 exchanges in the US, has a separate set of due diligence points to adhere to. Balamory Investments FSP: 41688
CONTENTS 1 Our Competitive Advantage (4 points)
2 Why these points are a Competitive Advantage 3
Our Portfolio building Methodology: ETFs 4 Why only US exchanges for global exposure 5 Our current Service offering (Portfolios)
6 Summary & Closure Balamory Investments FSP: 41688
Why do we only use the US exchanges for Global exposure? +70% of all ETF AUM in US exchanges
Low liquidity cost
Balamory Investments FSP: 41688
CONTENTS 1 Our Competitive Advantage (4 points)
2 Why these points are a Competitive Advantage 3
Our Portfolio building Methodology: ETFs 4 Why only US exchanges for global exposure 5 Our current Service offering (Portfolios)
6 Summary & Closure Balamory Investments FSP: 41688
Our current Service offering (Portfolios)
5 1 1 5 3
Global Multi-Asset
Risk continuum
Global Money
Active Strategy
Strategic Growth
All Equity
Reg 28 Multi-Asset
Risk continuum
Onshore non-Reg 28 Multi-Asset
Risk continuum Balamory Investments FSP: 41688
CONTENTS 1 Our Competitive Advantage (4 points)
2 Why these points are a Competitive Advantage 3
Our Portfolio building Methodology: ETFs 4 Why only US exchanges for global exposure 5 Our current Service offering (Portfolios)
6 Summary & Closure Balamory Investments FSP: 41688
Summary & Closure Global Portfolios on Risk Continuum More Stable Assets & Less Risky Assets
5 Yr Return in USD
9.6%
Balanced between Risky & Stable Assets
10.8% 12.7%
More Risky Assets & Less Stable Assets
13.5%
14.7%
Balamory Investments FSP: 41688