Our Strategic Portfolio Management Process

The financial goals and values you shared with us at our Discovery Meeting have become the basis for your investment plan, as well as our Strategic Portfolio Management Process. This is not a one-time event, however. The Strategic Portfolio Management Process that we use is constantly ongoing to ensure that we are on track to achieve those goals and values. It is vital in managing the investment component of your overall investment plan. The process has four distinct parts, as illustrated below.

Gap Analysis

Current Situation

Financial Values and Goals

Asset Allocation

Investment Objectives

Risk Tolerance

Asset Class Selection

Rebalancing and Reporting Progress

Fine-Tuning of Portfolio Performance Report

Portfolio Activity

Gap Analysis

Manager Selection

Cost Effectiveness

Tax Efficiency

This is an ongoing evaluation of your current situation. We reassess where you are now, where you want to go, and consider any actions or changes that may be necessary to maximize the probability of achieving all that is important to you.

Asset Allocation

As we have discussed, we use Modern Portfolio Theory (Appendix 5) to determine that your account has the proper asset class selection to meet your financial goals. Change is one thing of which we are certain, and because proper asset allocation is so important, we periodically review each asset class to determine if it is still appropriate to your overall plan.

Attempting to chart a way through this complexity is difficult enough even for seasoned Professionals and ensuring that we can devote sufficient time to working with you to achieve all that is important to you is always our primary objective.

However, managing investment portfolios in Ireland is challenging for several reasons including the relative complexity of the tax rules, the lack of the “plumbing” necessary to facilitate our investment approach, and the time taken to manually trade investment portfolios with a client signature required for even the most mundane administrative matter. For further details of tax considerations see

Appendix 3 Tax Considerations.

Where suitable, we therefore delegate some of the investment portfolio management work to our investment partners Conexim supported by PortfolioMetrix Asset Management. Conexim provides a discretionary investment management service, but we are also able to provide an advisory service for those clients looking for a bespoke investment solution subject to minimum investment amounts

Manager Selection

The decision to retain or terminate an investment manager cannot be made by a formula. Also, extraordinary events do occur that may interfere with the investment manager's ability to prudently manage investment assets.

We generally recommend funds instead of individual securities due to their inherent diversification benefits. We usually advocate passively managed (e.g., "index") funds rather than actively managed funds.

Principally due to their lower fees, passively managed funds' long-term performance must exceed that of most actively managed funds investing in similar securities before tax For more information, see Nobel-prize winner William Sharpe's excellent brief article on the subject, "The Arithmetic of Active Management"

Note that past performance isn't one of our criteria. That is because, contrary to conventional wisdom, there is very little correlation between past performance and future performance. This has been proven statistically with a high degree of confidence in several academic studies.

In general, picking investment funds on the basis of their past performance is likely to be little better (or, more likely, a little worse) than picking funds at random. There is a better way. That's why we use the above criteria: they have been shown to have a correlation with future performance (i.e., they have been shown to be good predictors of long-term performance).

“All the time and effort that people devote to picking the right fund, the hot hand, the great manager, haveinmostcases led to no advantage.” - Peter Lynch, Magellan Fund and Fidelity Investments (1977 to 1990).

Reporting Progress

During our Regular Progress updates, we will ask you about any specific events in your life that may call for a change in your portfolio. These events might include, for example, the birth of a child or grandchild, the death of a parent or a change in your marital status. When changes in your situation indicate that changes and rebalancing in your portfolio are warranted, we make these as needed.

We will also report on how your portfolio has performed and if it needs to be adjusted or rebalanced to align with your required asset allocation

Rebalancing

The benefits of portfolio re-balancing derive from controlling risk and not from an increase in the expected returns. The proposition that rebalancing can increase the expected return of a portfolio is dubious. One thing is certain: rebalancing entails costs and possibly taxes and costs reduce expected rates of return.

For rebalancing to increase expected returns over time, asset prices would have to be consistently mean reverting and clients would need to be able to accurately time their rebalancing decisions. We do not recommend a market timing strategy or attempts to drive a “tactical” asset allocation strategy through a rebalancing strategy.

As we have seen, a portfolio’s asset allocation determines the portfolio’s risk and return characteristics.

Over time, as different asset classes produce different returns, the portfolio’s asset allocation changes.

To recapture the portfolio’s original risk and return characteristics, the portfolio must be rebalanced to its original asset allocation.

Our Investment Solutions

We povide a wide range of investment solutions which are designed to accommodate your values, your risk appetite and your tax status. Our solutions are summarised in the tables below: