What research goes into your investment portfolios?

Investment Champion uses the expertise of the Investment Team at The Private Office to create simple to understand investment portfolios that offer an alternative and cost-effective way to make your money grow. The Investment Champion portfolios provide diversified investment exposure across a range of geographies and asset classes in order to produce attractive risk-adjusted returns for investors. These portfolios use passive funds which track the performance of a benchmark and are not actively managed by a fund manager. They therefore offer a cost-effective solution to building a portfolio.

There are two ranges of portfolios available, one set that take account of ESG (Environmental Social Governance) factors and the other uses broad market index exposures. There are four portfolios in each range which aim to generate long-term returns for different levels of risk. These portfolios are diversified across different geographic regions and asset classes. They are rebalanced twice-a-year, a process of buying and selling portfolio assets to ensure and maintain the balance of investment risk that is suitable for you, so that any changes in the fund weightings within the portfolio due to market movements are corrected. 

Investment Process

The investment process starts by using The Private Office’s expected long-term future returns and volatilities for each asset class. We use volatility as a measure of risk for portfolios and it is defined as the dispersion of returns for a given asset class i.e., the higher the volatility, the higher the range of returns an asset class could produce. The Investment Team at the Private Office will then use techniques to generate four risk-rated portfolios within the passive and ESG passive services aimed to maximise expected return within the volatility boundaries set out by our four risk profiles. 

We then analyse the asset allocation of a portfolio to ensure the drivers of expected returns at a portfolio level are in line with the Investment Team’s understanding of the market environment. This asset allocation starts with a discussion about the state of the world and what could influence markets including inflation, policy, valuation, economic growth, corporate fundamentals and geopolitics c events. A global view of the world is then constructed, and the Investment Team uses this information alongside estimated expected return and volatilities to construct appropriate asset allocations for each of the four risk-rated portfolio models. 

Once the asset allocation is generated for each of the four risk-rated portfolio models, the team screens the available universe which could be used to achieve the required asset allocation exposures for each of the model portfolios. For the Investment Champion ESG service, these funds are sub-divided based on ESG credentials. Passive funds use an investment strategy that tracks a market index or portfolio. For example, a passive fund could be used to track the FTSE 100. Given the nature of the passive fund investment universe, the Investment Champion portfolios will include a mix of equity and bond strategies but do not include alternative strategies, as these types of strategies are not available through the use of passive funds. 

Our Investment Team aims to keep portfolio costs as low as possible. In order to achieve this, we will look at a collection of passive funds for each asset class that fits the desired exposure and invest in the cheapest share class available. The team also ensures there is appropriate diversification among fund providers to prevent the portfolios from being overly concentrated to one single issuer. 

The portfolios are designed to be long-term allocations to asset classes and the only trading on positions is at regular six-month intervals. In May and November each year the portfolios will trade back to their original percentage holdings, therefore, correcting movement of the portfolio weightings caused by movements in the markets. This is an efficient process that means the portfolios stay in-line with the original assumptions without the need for intervention by the client.

Performance is monitored on an ongoing basis to ensure that the portfolios are still within their expected range of outcomes. If there is a need to change allocations in a portfolio then a new version will be issued, and the original portfolio will close. It is important that you review the website regularly to ensure that your original selection is in-line with your circumstances. If a fund used in a portfolio is no longer available, then that portfolio will be closed, and a new version will replace it. 

Investing vs Savings Accounts

Chasing the best savings rates is a great way to save over the short-term for future expenses such as holidays or large one-off purchases. However, investing is a better tool to increase wealth over a long period of time. This is because investing includes an element of risk which you are compensated for through higher returns over the medium to long-term. This is why stock markets tend to perform better than savings rates over the long-term. It should be noted that investments can go up as well as down, highlighting the importance of staying invested over extended time periods so that periods of negative short-term performance due to market falls can be recovered.

To see how Investment Champion portfolios have performed over time, click here.