the
I veagh C ore P ortfolios a tradition of innovation
product brochure october 2013
WE LCOM E In 1886, Edward Guinness, my great, great, great grandfather, the first Earl of Iveagh, floated the Guinness brewing business on the London and Dublin stock exchanges. The listing created an overnight fortune so Edward established one of the first family offices, Iveagh Trustees, with two objectives in mind: to preserve the wealth that had been created, and to grow this wealth for future generations. More than 125 years later and my family is still guided by these same principles. Our family wealth has survived and grown through global depressions, property booms and crashes, credit crunches, dot com busts and World Wars. Combining the Guinness tradition of wealth preservation and modern institutional investment techniques, the Iveagh of today now helps all individuals and their families who also seek to preserve and grow their financial assets. We look forward to welcoming you to the family. Edward Guinness 4th Earl of Iveagh Chairman of Iveagh Ltd
Please invest responsibly
A T R A D I T I O N O F I N V E S T M E N T I N N O VAT I O N
Finding a safe and steady home for your investments is one of the most important financial decisions you will make. Preserving and growing your wealth over the long term requires the skills of an investment team that is focused not only on achieving satisfactory returns, but also the management of risk.
Iveagh brings a unique fund range to the world of asset management, allowing all investors to benefit from the sorts of portfolio management techniques which have helped to protect and grow the wealth of members of the Guinness family.
WHAT MAKES IVEAGH DIFFERENT? Embracing our Guinness family heritage, we create family-office style portfolios using the latest institutional-quality investment management techniques.
Our investments embody Iveagh’s six principles of sound investing: 1.
A disciplined investment process for consistent decision-making.
2. Broad global diversification to capture opportunities and promote portfolio stability. 3. Focussed risk management, so we only take the risks appropriate for you. 4. A long term investment perspective, to help us look through short term market noise. 5. Independence, of ownership and thought, so that we can have the courage of our convictions. 6. Communication, so that our investors and their advisers know what we are doing and why we are doing it, just like our family office investors.
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T H E F I N A N C I A L P L A N N I N G P R O C E S S A N D YO U
The Iveagh Core Portfolios put your needs at the centre of the investment selection process. Once you and your financial adviser have determined your financial goals and risk profile, together you can select the most appropriate portfolio.
The investor and financial adviser relationship
The Iveagh Core Portfolio you select will capture broad exposure to financial markets using a range of investments blended according to prevailing market conditions and the amount of risk you are prepared to take.
The Iveagh Core Portfolio fund range
Your fund is invested in a broad and global diversification of assets UK Equities
Your adviser will help you determine your investment goals and time horizons. After assesing your risk profile together you will select the most suitable investment profile
US Equities Adventurous Portfolio
European Equities Japanese Equities Far East ex-Japan Equities
Income Portfolio
Smaller Company Equities Emerging Markets Equities Private Equity
Growth Portfolio
Government Bonds Corporate Bonds High Yield Bonds
Balanced Portfolio
Emerging Market Bonds Mortgage Backed Securities Cash
Moderate Portfolio
Property Gold Commodities
Cautious Portfolio
Absolute Return Infrastructure Volatility
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T H E F I N A N C I A L P L A N N I N G P R O C E S S A N D YO U
The Iveagh Core Portfolio funds capture our investment philosophy perfectly – wealth preservation plus sustainable growth of capital over the long term.
Each asset type plays an important role in a portfolio
We believe that the Iveagh Core Portfolios offer investors a long-term wealth management solution for today’s rapidly changing financial landscape.
Investor communication
Capital growth and real returns
Monthly Fund Factsheet
Capital preservation and income
Financial planning review
You and your adviser review your portfolio and circumstances to ensure your portfolio is on target to meet your financial goals
Quarterly Investment Strategy Report
Investor Conference Call Inflation protection
Alternative diversification
Investment Commentary
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H OW T H E IVE AGH CO R E P O RT FO LIOS WO R K
The Iveagh Core Portfolios share the same experienced team and asset allocation expertise used by the Guinness family to help protect their investment portfolios.
Each fund draws on Iveagh’s expertise as a family office to invest in a diverse spread of 20 or more global asset classes, some of which would be difficult for the average investor to access on their own. We seek out and use the most appropriate, cost-efficient products to achieve this including open-ended funds, exchange traded funds, corporate and government bonds and, where appropriate, listed securities.
Each portfolio, or fund, offers a particular “risk versus return” profile which is managed with the objective of meeting a particular type of investor’s requirements over the course of an investment cycle. Whether you are identified as a cautious investor, more adventurous or somewhere in between, Iveagh manages your investment capital to help you reach your financial goals.
The allocations of asset classes for each fund are carefully blended together to achieve the highest possible return for a given level of risk. Clearly defined risk targets mean that you can see exactly how much risk we are taking on your behalf.
Cautious Portfolio
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Moderate Portfolio
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Balanced Portfolio
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Growth Portfolio
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Income Portfolio
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Adventurous Portfolio
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lower risk
higher risk
IVEAGH CORE PORTFOLIOS RISK PROFILES Each fund in the Iveagh Core Portfolio range has a pre-defined level of risk. Iveagh’s team of investment professionals will take action to reduce the target volatility for each Core Portfolio if economic or market risk increases.
However, as always investors should remember the value of investments may fall as well as rise (especially during periods of increased volatility) and you may not get back your original investment.
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T H E I M P O R TA N C E O F B E I N G D I V E R S I F I E D A N D G LO BA L
The key to maximising investment returns for the risk you take lies in broad diversification. Finding the most appropriate balance of returns versus the risk you’re prepared to take is paramount when choosing an investment. It’s true that whilst diversification can reduce the risk of losing money, it can also reduce the potential for profit. However, when diversification is properly researched and implemented it can reduce risk by more than you could lose in returns - a remarkable quality often called “the only free lunch in the investment world”.
So, how much diversification do you need? We think it is important to have more strings to your bow than traditional asset classes like equities, bonds and property, and to look further afield than the UK in order to capture the drivers of global growth. Our fund portfolios are therefore highly diversified, with no bias to the UK or any other market. We consider ‘alternative’ investments like infrastructure, private equity, precious metals, absolute return and volatility, and we consistently monitor the environment for innovative ideas, carefully testing their viability before introducing them to the portfolios. With a wider range of opportunities we can create a broad
The nominal returns achieved by the portfolio
spread of risk and potentially more stable portfolios.
Diversified portfolio
The benefit of diversification
Concentrated portfolio
Target The level of risk targeted by the portfolio
The impact of different ranges of diversification across multiple asset classes on the same level of portfolio risk. Source: Iveagh.
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W H Y R I S K M AT T E R S
All investment involves risk to some degree because it is the risk that commands the interest, premium or return that we receive for placing our money in a particular investment. Although it is tempting to assume that the best portfolio is always the one with the best recent performance, the returns you earn should depend on the risk you are comfortable taking in the long term. Chasing short term performance can lead to taking unintended risks, leading to a nasty shock when financial markets take a downturn.
We believe strongly in applying risk management with the aim of meeting the investor’s risk target over the long term, controlling volatility so that the portfolio will have a greater chance of achieving compounding positive returns over time. It is crucial that an investment strategy is devised and assessed not only in terms of its potential returns but also the level of risk being taken. With this in mind, our highly experienced team uses their skill together with sophisticated statistical techniques to create the optimal portfolios. However, in our view, risk can only be properly assessed over a full investment cycle of seven to ten years, and our risk targets should be seen in this context. Targeting risk over shorter periods can leave investors vulnerable to sudden changes in the investment climate.
W H AT A R E T H E R I S K S ?
Price volatility – the amount by which an asset’s value may fluctuate - is arguably the most common definition of risk. There are many others, some of which are listed below, and we try to take all of them into consideration when managing your investment. Inflation risk: The impact of inflation on the returns we receive – a very real risk for cash savings at present Liquidity risk: Being able to sell investments quickly if needed Credit risk: For example, the possibility that a borrower may default
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Counterparty risk: The risk that a transacting party fails to keep their side of the bargain Currency/exchange rate risk: Overseas assets bring exchange rate risk which may need to be managed Valuation risk: Overpaying for assets can greatly increase the risk of permanent capital loss For more information about the risks of investing, ask your financial adviser for a copy of The Iveagh Guide To Risk
DY N A M I C R I S K M A N A G E M E N T — P R E S E R V I N G YO U R W E A LT H
The Iveagh Core Portfolios are invested by reference to a series of strategic asset allocation models, each one designed to meet a particular risk versus return outcome and quantified on a scale of 1 to 10. These models are regularly refreshed to take account of prevailing market conditions and are built to cope with the sort of gyrations which are typical of markets. However, what happens if markets enter a period of extreme stress? On these occasions, the usual relationships between different asset classes can break down, and even well diversified portfolios can surprise to the downside.
Therefore, in the rare circumstances that our investment process signals a high risk of a large, sustained fall in markets, our Dynamic Risk Management overlay is triggered, and each portfolio reduces its risk by temporarily re-balancing to a less risky asset allocation model, up to three steps below its normal asset allocation on the 1 to 10 scale. This is to cushion the effect of extreme market moves. The chart demonstrates the Dynamic Risk Management in action. Prior to the start of the credit crisis in 2008 we were able to reduce risk by using more defensive assets in the portfolio. As the market shock eased in 2009 we reduced the defensive components in order to increase risk and capture some of the market revival.
100% 90% 80%
Real Assets
Portfolio Allocation
70% Equities
60% 50%
Corporate Bonds
40% 30%
Defensive assets: Government Bonds, Absolute Return and Cash
20% 10% 0% Nov 2007
Jan 2008
Sept 2008
Jan 2009
Jul 2009
Source: Iveagh.
Investors should remember: Past performance should not be viewed as a guide to future performance, and the value of investments may fall as well as rise (especially during periods of increased volatility) and you may not get back your original investment.
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T H E IVE AGH INVE S TMEN T PRO CE SS
Iveagh’s investment process is a tried and tested service only available through Iveagh which our investment team uses to form investment portfolio decisions and to identify potentially extreme risks within financial markets. This analysis allows our investment team to sift through the mountain of available information in an objective and methodical way, promoting consistent and clear-sighted decision-making.
Our process is designed to give clear signals of when decisive action needs to be taken by reducing risk within investment portfolios, with the objective of controlling volatility and preserving capital. Just as importantly, the process generates signals when the risks are receding (and/or fully discounted by markets), prompting a return to the normal asset allocation policy.
K E E P I N G YO U I N F O R M E D
To help keep you up to date on how our financial insight may impact your Iveagh Core Portfolio, our investment team produces a range of literature which is available to all investors:
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Monthly Fund Factsheet
Investor Conference Call
to show how the fund is invested
to provide a forum for investors to hear the investment team’s latest thoughts and ask questions
Quarterly Investment Strategy
Investment Commentary
to show how the fund is invested
to inform investors of current issues which may affect markets and investments
IVEAGH 21 Queen Anne’s Gate London SW1H 9BU United Kingdom TELEPHONE Investors: +44 (0)20 7808 1400 Sales Desk: +44 (0)845 570 1400 WEBSITE www.iveaghltd.com
THE VALUE OF INVESTMENTS MAY FALL AS WELL AS RISE AND YOU MAY NOT GET BACK YOUR ORIGINAL INVESTMENT. PAST PERFORMANCE SHOULD NOT BE VIEWED AS A GUIDE TO FUTURE PERFORMANCE. THIS DOCUMENT SHOULD NOT BE CONSTRUED AS INVESTMENT ADVICE OR AN OFFER TO INVEST IN THE FUND. PROSPECTIVE INVESTORS SHOULD CONSULT THEIR FINANCIAL ADVISER AS TO THE LEGAL, TAX, FINANCIAL OR OTHER MATTERS REVELANT TO THE SUITABILITY OF AN INVESTMENT IN THE FUND BEFORE MAKING AN INVESTMENT DECISION. THIS DOCUMENT IS ISSUED BY IVEAGH LTD (“IVEAGH”), A COMPANY AUTHORISED AND REGULATED BY THE FINANCIAL CONDUCT AUTHORITY TO UNDERTAKE INVESTMENT BUSINESS. THE IVEAGH WEALTH FUND AND CORE PORTFOLIOS (“THE FUNDS“) QUALIFY AS UNDERTAKINGS FOR COLLECTIVE INVESTMENT IN TRANSFERABLE SECURITIES (UCITS) AND HAVE OBTAINED RECOGNITION UNDER THE EUROPEAN COMMUNITIES DIRECTIVE FOR MARKETING IN CERTAIN MEMBER STATES IN THE EUROPEAN ECONOMIC AREA, INCLUDING THE UNITED KINGDOM. PLEASE INVEST RESPONSIBLY