As Financial Planners, we construct and manage investment portfolios which are designed to deliver on the long-term financial objectives of our clients.
We formulate and monitor these portfolios within a robust framework which ensures suitability.
Part of this governance framework is an in-house investment committee, meeting a handful of times each year, to consider the latest capital market assumptions and how these might influence our portfolio positions.
Our investment committee consists of Financial Planners and Paraplanners, who each get an equal say and bring together a wealth of experience.
As well as reviewing capital market assumptions, we agree on any adjustments to the asset models we use, discuss the outlook for global investment markets, and agree on any changes to our preferred investment funds.
We also use this investment committee meeting as an opportunity to discuss broader investment-related issues.
Adopting new models
At our latest investment committee meeting at the end of October, we agreed to adopt the newest asset models from our partners at Dynamic Planner.
These models reflect continuing Brexit and global growth uncertainty, which means relatively little change was made to the benchmark asset allocations at this time.
When comparing events to the previous annual review of the models, our partners felt that little had changed fundamentally within the macroeconomic background, with leading indicators presenting a clear trend of slowing global growth.
The ongoing trade war between the US and China, a slowdown in Chinese economic growth, and regional tensions in the Middle East, all remain in place.
The only significant change to the position a year earlier was the reversal of the previous years’ rate hikes by the US Federal Reserve, in response to slowing global growth concerns, and also the return of quantitative easing measures by the major central banks to provide further monetary stimulus.
Within the benchmark asset models we adopted, there is a continuing trend towards gradually increasing global diversification.
This trend is delivered in the latest updates by some minor reductions in UK equities, UK gilt and sterling corporate bond exposures while adding to US equities and global investment-grade bonds.
Changes were made across risk levels 3 to 6, with no changes on this occasion to risk levels 1, 2, 7, 8, 9 and 10.
Brexit uncertainty
As the events Brexit continue to develop, our partners at Dynamic Planner will continue to monitor things and review the allocations as appropriate, should a resolution be achieved. We will also, of course, keep a close eye on developments and make tactical changes as we see fit.
Our most recent investment committee meeting was also an opportunity to review our preferred funds, which populate these benchmark asset allocation models.
It was especially pleasing to see the research confirm that no fund changes were required for 2019/20, with the existing suite of funds continuing to demonstrate desirable attributes across our critical measures of consistent risk-adjusted returns and low cost.
Our committee discussed whether we needed to further diversify within some of our higher-risk models, from risk level 7 upwards.
We concluded that this diversification, especially in global emerging markets, was challenging to achieve through the addition of different sector funds, or through the introduction of specialist fund sectors, which could result in intolerable levels of risk in return for greater diversification.
As a result, we decided to introduce a UK smaller companies fund for these risk levels, broadly moving allocations from UK equity income to this new sector. But otherwise, those clients with a desire, tolerance and need for higher levels of investment risk will continue to be treated on a case-by-case basis to satisfy their requirements.
Our updated asset models are now live and will be reflected in recommendations made following client review meetings from the start of November.
As always, do speak to your Financial Planner if you have any questions.
