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Asset Allocation Wealth Management
 

Asset Allocation Wealth Management

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Wealth Management Asset Allocation

Wealth Management Asset Allocation

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Asset Allocation Wealth Management Asset Allocation Wealth Management Presentation Transcript

  • Asset Allocation Strategy Your money, your way Gary Williams MBA (Durham) BSc (Hons) FPC MAQ CeRER CertPFS “ With over 19 years experience as an International Independent Financial Adviser; I provide specialist advice, together with extensive international experience. Providing my clients with the experience and expertise that they are looking for”   Mobile +852 5307 3732 Office   +852 2827 1199 (Ext: 123) Email [email_address] Gary Williams Personal Website: www.wealthmanagementhongkong.com Gary Williams LinkedIn Profile: www.linkedin.com/in/wealthmanagementhongkong Financial Partners Ltd 3708 The Center 99 Queen's Road Central Hong Kong
  • Introduction
    • Section A: History & theory of asset allocation
    • Section B: FP Group solutions
    • Section C: How is the service delivered?
  • Section A: History & Theory of Asset Allocation Date Influence Nature of the influence Area of impact 1952 Harry Markowitz Diversification; efficient frontiers and modern portfolio thinking Diversification and risk management 1991 Professor Brinson (and others) The factors influencing portfolio performance over time Asset allocation 2002 Daniel Kahneman The psychological influence on investment decisions Investor attitude to risk
  • Markowitz
    • Modern Portfolio Theory
    • Understanding Markowitz is about recognising that investors requirements revolve around obtaining reasonable investment returns without excessive volatility (Risk).
    • It’s not about getting high returns!
    • It’s all about blending different asset classes to produce average to good results at a lower risk (Volatility).
  • Brinson
    • Asset allocation constitutes the most important step in portfolio construction, accounting for more than 90% of the variability in portfolio performance over time 1
    • 1 G.P. Brinson, B.D.Singer, G.L. Bebower, “Determinants of Portfolio Performance II: An Update”, Financial Analyst Journal, May-June 1991.
  • Kahneman
    • The 2002 Nobel prize for Economics ¹ winner Daniel Kahneman states that individuals are more depressed with losses than they are satisfied with equivalent returns .
    • ¹The Sveriges Riksbank Prize in Economic Science
  • Efficiency and Asset Allocation Risk Govts, Index Linked Emerging Market Domestic Govt. Bonds Domestic Equities Core Equities, EM. Markets Small Cap Global Equities Cash Cash Cash Alternative Investments Alternative Investments Return Govts, Index Linked Emerging Market Alternative, Fixed Income
  • Asset Class Returns
        • Source: RMB Asset Management International, Lipper, Historic figures are %p.a. November 1999-October 2009. Indices used for historic returns: Credit Suisse Tremont Multi Strategy Hedge Fund, FTSE EPRA/NAREIT Global Property, JPMorgan Global Bonds, JPMorgan US Bonds, LIBOR USD 3m, MSCI World, S&P 500, Credit Suisse High Yield Bonds.
  • Section B: FP Group Solutions
    • Risk Profiles
      • Strategic vs Tactical
    • Accumulation vs Capital
      • Regular premium vs Lump Sum
    • Strategic Asset Allocation Models
      • Third Party
      • Current Strategic and Tactical Allocations
      • Client Communication
    • Core & Satellite
  • FP Group Risk Profiles Strategic Profiles Conservative Balanced Growth Alpha Tactical Profiles Aggressive Pre Retirement Post Retirement Income
  • Risk Profiles & Objectives Source: RMB Asset Management August 2007 Objectives : Long-term capital growth. Objectives : Capital growth from investments, low levels of income. High potential for growth. Objectives : Income and capital growth from investment. Medium potential for growth. Objectives : Steady income from investments and modest capital growth. Some growth potential. Investor suitability : Investors who wish to adopt an aggressive approach, with the sole aim of long-term capital growth. Medium-term losses should be expected. The allocation is almost entirely biased towards equities and other growth assets.   Investor suitability : Investors who have a long investment time horizon, are interested primarily in capital growth and are comfortable with modest short-term capital losses. The allocation is biased towards growth assets, but still invests in a broader range of assets than a typical growth fund.   Investor suitability : Investors with some time until retirement who wish to invest in a balanced portfolio. The allocation invests in a much broader range of assets than a typical balanced fund, which will result in lower potential for capital loss, while at the same time offering growth potential.   Investor suitability : Investors primarily interested in income and modest growth potential but who wish to remain invested in a diversified portfolio of assets. The allocation is relatively defensive but has a modest exposure to growth assets.   Alpha Growth Balanced Conservative STRATEGIC
  • Accumulation vs Capital GENERIC ASSET ALLOCATION Capital accumulation Lump sum matrices Capital accumulated Equity balanced Equity Core & satellite 1 1 When Harmony IC’s are available Link to matrices
  • RMB Asset Management
    • RMB Asset Management is a wholly owned subsidiary of South Africa's largest financial services group, FirstRand
    • Based in the City of London, FSA license
    • FirstRand has USD124 billion of assets under management (June 2008) with a market capitalisation of USD9.7 billion (December 2008)
    • RMB Asset Management is a boutique manager with USD2.1 billion assets under management as of 31 December 2008.
    • From its office in London, RMB Asset Management employs over 35 staff:
      • Equity Desk – Long only manager of manager funds
      • Fixed Income desk
      • Alternative Desk
      • Multi Asset Desk - Bespoke multi asset class portfolios
      • Advisory services for professional clients
    Source: RMB Asset Management, February 2009.
  • RMB Asset Management
    • Well resourced, experienced investment team
    • Genuine diversification to a broad range of ‘traditional’ and ‘non-traditional’ asset classes
      • reducing risk and widening the opportunity set
    • Consistent valued ad through all market conditions
    • Cost-effective portfolio management
    • Global best of breed: It is widely accepted that no one manager is the best in all asset classes. Our analysts carry out over 1000 research meetings a year to uncover the world’s best managers
    • Disciplined and repeatable process
  • The Manager Selection Process
    • Focus on alpha generation
    • Intelligent use of qualitative and quantitative research
    • Maximising efficiency through technology
    Asset class research Portfolio construction Portfolio monitoring Manager research analysis of universe blend managers quantitative analysis asset class research fundamental research asset allocation style analysis attribution / trading analysis
  • Where active management works Percentage of fund managers who underperform various performance hurdles Source: PSN, Lipper Hindsight, RMB MultiManagers, * Average of US, UK and Eurozone Asset Class Research Inefficient Index +1% +2% +4% Efficient Domestic Bonds* 84 Global Bonds EM Equity Japanese Equity Semi-Efficient UK Equities US Equities Global Equities European Equities Small Cap* 66 77 67 77 65 71 75 69 75 81 53 66 75 59 67 73 48 57 65 75 49 54 59 67 Efficient Inefficient
  • Manager Research and Selection
    • Assets under management
    • Investment style
    • High alpha
    • Returns based style analysis
    • Risk/attribution analysis
    • Check consistency through
    • time
    • Philosophy
    • Process
    • People
    • Evidence
    Re-evaluation of existing managers
    • Ongoing monitoring
    Asset class screening / initial research Quant analysis Due diligence Selection
  • Philosophy Process People Evidence Focus on skilful exponents of investment styles
    • Disciplined and repeatable process
    Is the philosophy implemented consistently? Skilful individuals leveraging the resources of a wider team rather than consensus based approaches Through risk and return attributions, confirm risks being taken are consistent with the stated philosophy Best of Breed
  • RMB Global Equity Fund: Incumbent Managers Tokyo: JP Morgan Shiozumi London: Jupiter New Star Cazenove New York: American Century ASB Pzena Evercore Chicago: Driehaus Timpani Paris: Comgest Wilmington: Marvin & Palmer Connecticut: Lapides Data: as at 17.10.2008
  • Current Strategic Asset Allocation 1 2010 Link to archive Source: RMB Asset Management 1 February 2010 Asset class Balanced Growth Alpha Domestic Equity 18% 32% 40% International Equity 12% 18% 23% Domestic Bonds 30% 21% 15% International Bonds 5% 4% 3% Alternative Fixed Income 10% 5% 4% Fund of Hedge Funds 5% 5% 4% Property 10% 10% 7% Cash 10% 5% 4% 100% 100% 100%
  • Strategic Asset Allocation 2 - with current tactical overlay Source: RMB Asset Management 2 February 2010 Link to archive 2010 Asset class Balanced Tactical Growth Tactical Alpha Tactical Domestic Equity 18% 17% 32% 29% 40% 39% International Equity 12% 13% 18% 21% 23% 26% Domestic Bonds 30% 31% 21% 21% 15% 15% International Bonds 5% 0% 4% 0% 3% 0% Alternative Fixed Income 10% 18% 5% 12% 4% 8% Fund of Hedge Funds 5% 9% 5% 6% 4% 4% Property 10% 8% 10% 8% 7% 6% Cash 10% 4% 5% 3% 4% 2% 100% 100% 100% 100% 100% 100%
  • Strategic Asset Allocation Expected % return, risk of loss, and actual returns June 2009 Source: RMB Asset Management Link to archive Link to other portfolios Link to SP fact sheet Link to Harmony fact sheet USD based investor Conservative Balanced Growth Alpha Expected annual return 2.8% 3.5% 4.8% 6.4% Expected annual volatility 4.1% 5.4% 7.7% 10.4% Expected worst case scenario over any 12 month period -6.8% -9.0% -13.1% -17.8% Probability of negative return 24.7% 25.6% 26.8% 27.1% 1 in X years 4.0 3.9 3.7 3.7 Conservative Balanced Growth Alpha Expected upper range (99%) 12.5% 16.0% 22.7% 30.5% Expected upper range (95%) 9.6% 12.3% 17.4% 23.4% Expected lower range (5%) -4.0% -5.3% -7.9% -10.7% Expected lower range (1%) -6.8% -9.0% -13.1% -17.8% Actual returns 2006 % 10.6 13.2 15.2 15.8 Actual returns 2007 % 6.3 6.6 7.7 7.5 Actual returns 2008 % -10.5 -27.2 -30.1 -33.3
  • Strategic Asset Allocation Expected % return, risk of loss, and actual returns 2010 Source: RMB Asset Management Link to archive Link to other portfolios Link to SP fact sheet Link to Harmony fact sheet USD based investor Conservative Balanced Growth Alpha Expected annual return 4.5% 4.9% 5.6% 6.4% Expected annual volatility 5.2% 7.4% 10.3% 12.9% Expected Range of annual returns % (with 90% probability) -4.0 to 9.6 -3.9 to 13.7 -7.1 to 18.3 -10.7 to 23.3 Expected worst case scenario over any 12 month period (with 99% probability) -6.8% -9.0% -13.1% -17.8% Probability of negative return % 24.7% 25.6% 26.8% 27.1% Conservative Balanced Growth Alpha Actual returns 2006 % 10.6 13.2 15.2 15.8 Actual returns 2007 % 6.1 6.7 6.5 7.3 Actual returns 2008 % -10.5 -27.2 -30.1 -33.3 Actual returns 2009 % 13.14 17.5 18.5 18.36
  • Strategic Asset Allocation Client Communication
  • Core & Satellite Strategy Satellite Satellite Satellite Satellite The Core “ Asset Allocation”
  • Delivery of Core & Satellite Strategy Property Commodities Alternatives Land Banking
  • Introduction to Harmony Source: RMB Asset Management, February 2009. The range of Harmony Funds has been designed to provide a core investment solution to your clients. The investment objective is achieved through a diversified portfolio that invests across a broad range of asset classes and currencies in varying proportions over time. These asset classes include international equities, fixed income, commodities, alternative strategies, property, money market instruments and asset allocation portfolios.
  • Harmony Portfolios Funds - Incorporated cells of RMBIS Mutual Fund ICC Structure Regulator Guernsey Financial Services Commission Fund Manager RMB Investment Services Limited Harmony Portfolios Fund Range Asian Balanced Fund Asian Growth Fund Euro Balanced Fund GBP Balanced Fund GBP Growth Fund USD Balanced Fund USD Growth Fund AUD Growth Fund
    • Designated Manager
    • RMB Investment Services Limited
    • Investment Manager
    • RMB Asset Management International Limited (London)
    • Distribution Partner
    • Financial Partners
    • Custodian
    • Close International Custody Services
    • Auditors
    • Price Waterhouse Coopers
    Harmony Structure
  • Harmony Funds Detail
    • The funds are available in USD, EUR, GBP and AUD
    • Daily dealing
    • Initial Fee - 3% Ongoing Fee – 1%
    • Minimum Investment - US$25,000 (or currency equivalent)
    • Minimum Subsequent Investment - US$7,500 (or currency equivalent)
    • Minimum Redemption - not less than US$2,500 (or currency equivalent)
    • Dividend Policy - no dividends will be paid. All income received will be reinvested
    Source: RMB Asset Management, February 2009.
  • Section C: How is the service delivered?
    • Platform
      • Nominee Accounts – RMBIS
      • Master Trust – Aviva (Australia)
      • Investment Bonds – FP Group approved list
      • Direct Investment – Stand alone holdings
    • Product – Core
      • Harmony Portfolios
    • Product - Satellite
      • Symphony
      • Concerto
      • FP GIC approved list in some form
  •