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LWM Investment Philosophy and Process April 2020


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Investment Philosophy and Process for LWM Consultants Ltd

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LWM Investment Philosophy and Process April 2020

  3. 3. AGENDA 1. Objectives 2. Philosophy 3. Process 4. Benchmark 5. The team 6. Facts and figures 7. Summary
  5. 5. OBJECTIVES We are passionate about investing, and take a lot of our learning from the greats – Buffett, Lynch, Grantham et al. Our key client objectives are:  To maximise returns whilst minimising the risk of loss  To focus on long term value driven goals rather than short term opportunistic thinking  To adopt a robust and consisted selection process to identify first rate funds and asset managers
  7. 7. INVESTMENT PHILOSOPHY Our philosophy is to:  Deliver an impartial, rigorous and unbiased selection process  Deliver consistent risk and return traits  Identify the most suitable funds and managers and blend them in the most appropriate manner  Continually monitor existing assets as well as identifying new opportunities as they arise
  8. 8. PROCESS
  9. 9. PROCESS The main principles behind our process are to:  Avoid making outsized bets on sectors or markets as we believe over time and annual rebalancing (selling back risen investments to buy the fallen) this will systematically achieve the desired results  Gather analytical data and meet fund managers before making decisions. Only by meeting and listening can you really get an understanding for the investment opportunity  Search out good managers, demonstrating rigorous logic and reason, with a strong mandate and support system  Implement a strategy that delivers long term returns through patience, skill and persistence
  10. 10. PROCESS – PRE-SELECTION OF ASSETS The main process for pre-selection includes:  Asset Allocation tools – we use strategic asset allocation as a starting point and then overlay this with our own tactical allocation; meaning we may go overweight / underweight in particular sectors or regions  Underlying assets - we use UK, Dublin and Luxembourg domiciled funds, and investment trusts. We may consider ETFs and / or Passive Funds if appropriate  Analytical tools - we use tools such as Morningstar and Trustnet to identify the best funds in terms of performance over a number of timeframe periods. We normally look to bring forward a maximum of five to ten funds from each sector
  11. 11. PROCESS – SELECTION OF ASSETS We use a combination of desk based research, questionnaires and meetings to arrive at our selection list:  Using Morningstar and Trustnet we analysis all aspects of the funds including volatility, holdings, correlation  We look to understand process and philosophy as well portfolio turnover and exit strategy  We look to break (how it can go wrong) a fund before it makes it to the final list
  12. 12. PROCESS – SELECTION OF ASSETS  Our aim is to meet as many fund houses and fund managers as possible whether this is face to face, telephone conference calls or other routes to gain deeper insight to their investment strategy.  How investment ideas are generated  How the ideas are processed for inclusion in a fund  What makes a company more attractive than another to the fund  How the fund manager interacts with other teams in their company  How risk is measured and controlled  Rational behind the current fund structure, and whether this is consistent with their stated philosophy and process
  13. 13. PROCESS – SELECTION OF ASSETS “Ultimately through our selection process we are looking identify funds which will deliver sustainable long term performance.”
  14. 14. CONSTRUCTION Our investment committee will discuss portfolio construction and opportunities. The committee will look to construct portfolios around funds they have a strong conviction in, effectively the portfolio consists of the “best ideas” filtered through a series of analytical tests. Key elements of portfolio construction are:  To review the asset allocation model and agree on any tactical allocation changes  To select between 25 – 30 funds per portfolio (although the committee have the authority to go above or below this limit)  To adopt a long term hold approach  To ensure the funds when combined complement each other  To ensure the portfolios provide the best balance between risk and reward
  15. 15. ON-GOING MONITORING We continually monitor and evaluate the portfolios:  We analysis the volatility of portfolios on a quarterly basis and returns on a monthly basis  We constantly track the performance of funds, meet fund management groups and discuss issues at our quarterly investment committee meeting (or earlier where required)  We monitor funds to identify any potential warning signs  We believe in long-term holdings and we won’t sell out unless:  There has been a material change to the investment philosophy or process  There has been significant changes to the team of investment professionals  Performance is inconsistent with its stated aims  A superior fund has been identified in the same investment area
  16. 16. ON-GOING MONITORING We believe communication is key – we provide clients with:  Quarterly newsletters including a macro view of the markets and performance data  Regular email updates, including access to notes from fund management meetings as well as our blog  Regular feeds via twitter and Facebook  Half yearly performance updates, as well as the offer to rebalance portfolios on an annual basis
  18. 18. BENCHMARKS  Each of the portfolios has a percentage weighting to sectors depending on the risk / reward profile. The benchmark is taken from the performance of the following sectors: Sector Benchmark Diversifying Assets (Fixed Interest, REITS, Infrastructure, Structured Products, Multi Asset) Vanguard Global Bond Index UK Vanguard FTSE All Share Index Europe iShares MSCI Europe Ex UK US iShares MSCI North America Japan DB X-Trackers MSCI Japan ETF Asia iShares MSCI AC Far East Ex Japan Emerging Markets iShares MSCI Emerging Markets (Acc) iShares MSCI Frontier 100 Global iShares MSCI World Dist
  19. 19. CURRENT TACTICAL ASSET ALLOCATION Cautious Balanced Mod Adventurous Adventurous DIVERSIFYING ASSETS Bonds 12.00% 9.00% 4.20% 0.00% Overseas Property 6.00% 4.50% 4.20% 2.50% UK/Europe Property 6.00% 4.50% 4.20% 2.50% Infrastructure 12.00% 9.00% 4.20% 3.00% Structured Products 6.00% 4.50% 4.20% 5.00% Multi Asset 12.00% 4.50% 0.00% 0.00% 54.00% 36.00% 21.00% 13.00% EQUITY EXPOSURE UK 10.00% 15.00% 12.00% 12.00% Europe 7.00% 8.00% 9.00% 10.00% US 7.00% 10.00% 13.00% 14.00% Japan 4.00% 5.00% 5.00% 5.00% Global 10.00% 12.00% 21.00% 23.00% Asia/Frontier/Emerging 8.00% 14.00% 19.00% 23.00% 46.00% 64.00% 79.00% 87.00%
  20. 20. THE TEAM
  21. 21. THE TEAM  The portfolios are managed by Paul Berry and George Ladds  Final decisions on both the tactical asset allocation and investment choice are made through the investment committee  The investment committee also act as a risk management oversight function ensuring that the portfolios keep within the risk return parameters  All decisions, and meetings are documented and passed through to our network to act as a final safety check  The process is built such that should one member leave the team there would be no material impact of the process behind the portfolios
  22. 22. THE TEAM  Mini Biography – Paul Berry  Managing Director (and owner) of LWM Consultants Ltd, and Co-Portfolio Manager  Over 20 years experience in financial planning and portfolio construction  Fully qualified financial planner  Investment Blogger  Mini Biography – George Ladds  Director, Compliance Officer, and Co-Portfolio Manager  Over 20 years experience in marketing, product development, fund research and portfolio construction  Diploma from Chartered Insurance Institute and BTEC in Business and Finance  Investment and Financial Planning Blogger
  23. 23. INVESTMENT COMMITTEE  The Investment Committee is made up of:  Paul Berry, Managing Director  George Ladds, Director  Nicola McKissick, Director
  24. 24. REMUNERATION  All members of the team are remunerated via a basic salary  Company performance bonuses are paid (profit share) but portfolio performance bonuses are not paid  The company encourages members of the team to invest in either the portfolios or some of the underlying investments so that the performance is aligned with investors
  26. 26. FACTS AND FIGURES  Assets managed in portfolios, £88 million (as at 31 December 2019) – total assets under management over £127 million  Costs of Portfolios (including product charges, ongoing fund charges (including investment trusts) and adviser charging) – this doesn’t reflect platform discounts based on fund size and family members Ethical Cautious Balanced Moderately Adventurous Adventurous ISA / Personal 1.98% 1.86% 1.93% 2.06% 2.09% Pension 2.27% 2.15% 2.22% 2.35% 2.38%
  27. 27. PERFORMANCE SINCE LAUNCH – 31 MARCH 2020 Performance from 1 January 2009 to 31 March 2020. Ethical from 1 August 2014. Source: Morningstar, on an bid to bid basis with net income reinvested. You should note that past performance is not a reliable indicator of future returns and the value of your investments can fall as well as rise. The total return reflects performance without sales charges or the effects of taxation, but is adjusted to reflect all on-going fund expenses and assumes reinvestment of dividends and capital gains. If adjusted for sales charges and the effects of taxation, the performance quoted would be reduced. Ethical Cautious Balanced Moderately Adventurous Adventurous Performance 47.08% 129.14% 154.87% 158.68% 166.98% Benchmark 2.80% 85.20% 89.61% 100.02% 105.48% Outperformance 1,581% 52% 73% 59% +58%
  28. 28. SUMMARY
  29. 29. SUMMARY  LWM are driven by a passion and desire to deliver a service proposition where the client is central to the business  We believe in long term, life time financial planning where we can help the client and their family  We are passionate about identifying goals first and then building the solutions to deliver the goals  We see investments as a central part of this proposition, and believe in long term investments and not being distracted by the noise around us
  30. 30. You should note that past performance is not a reliable indicator of future returns and the value of your investments can fall as well as rise. PLEASE NOTE YOUR CAPITAL AND / OR RETURNS ARE NOT PROTECTED OR GUARANTEED LWM Consultants Ltd is authorised and regulated by the Financial Conduct Authority. FCA Number 728107. Registered in England and Wales under Company Number 07408315. Registered Office: The Garden Suite, 23 Westfield Park, Redland, Bristol, BS6 6LT