Approach to Investment

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Approach to Investment

  1. 1. IntroducingOUR APPROACH TOINVESTMENTMANAGEMENT AND THEINVESTMENTCOMMITTEE
  2. 2. Contents3 Foreword by Chris Ralph4 The St. James’s Place Approach to Investment Management7 The Investment Committee8 Members of the Investment Committee11 Stamford Associates Limited12 The benefit to clients of investing with St. James’s Place13 Our record
  3. 3. Foreword by Chris RalphChief Investment Officer of St. James’s Place Successful investment is critical to your future financial wellbeing, but it is a field which presents a unique problem: future performance is unpredictable. A widely used method of assessing the quality of an investment manager is to look at their previous performance; however this can only give you part of the picture. Some of the best managers will occasionally underperform the market over a short period and equally the worst managers can sometimes achieve impressive performance. This happened during the dot-com bubble when some managers looked good for a while. Clearly past performance can provide no guarantee of future performance. Also consider that the manager who performed successfully in the past may no longer manage the fund, having moved onto another fund or left the company. It may also be that a management style which had historically worked so well may not be right for current or future market conditions. As a result, when you choose someone to manage your money, no matter how successful they have been in the past, how can you be sure that you have made the right choice and that it will continue to be the right choice in future years? Crucially, what can you do to monitor the manager you have chosen and to ensure that they are continuing to do a good job for you? St. James’s Place adopts a radical and effective solution to this problem. Recognising that no single investment house has a monopoly of investment expertise, we do not employ any in-house managers. Instead, we carefully select a number of external managers of outstanding ability to manage our range of funds. This document explains how you can benefit from this approach, as well as the role of the St. James’s Place Investment Committee and Stamford Associates – key elements which are at the heart of the St. James’s Place Approach to Investment Management. 3
  4. 4. The St. James’s Place Approach toInvestment ManagementWhen it was formed in 1992 the St. James’s Place The work of the InvestmentWealth Management Group decided to take a radical Committeeand effective approach to investment management.Our approach recognises that no single investment The St. James’s Place Investment Committeehouse has a monopoly on investment expertise so focuses on:we carefully select a number of external managersof outstanding ability to manage our funds. 1. Selecting the best investment managers – which includes careful examination of the people andThis has a number of advantages: procedures within a large number of investment• It gives us the freedom to select first-class companies. managers from the global investment market to 2. Continually monitoring those managers to ensure manage our funds on behalf of our clients. they maintain the standards for which they were• It enables us to change any of these managers selected – this process includes monitoring of both at short notice if we have lost confidence their portfolios and their processes. in them, without any charges, or tax, or 3. Changing managers if necessary – where inconvenience to our clients. St. James’s Place becomes unhappy with a• It offers our clients a real opportunity to manager, it will remove that manager and appoint diversify their investments by spreading their another to manage the fund. This is a seamless money across funds managed by different transition to the new manager. There is no charge managers with different styles. to investors and, as you still hold the same fund,The St. James’s Place Investment Committee no tax consequences either.‘manage the fund managers’ on your behalf. In order 4. Ensuring clients have an appropriate spread ofto achieve the objective of consistently generating investments by providing a comprehensive rangesuperior investment results, having selected the of Managed and Specialist funds – the managers ofbest individuals within the appropriate investment these funds are carefully selected not only for theircompany, the key is to monitor both the individuals quality but also to ensure that they have differentand the company they work for to ensure they remain styles of investment management.appropriate for the fund that they are managing. If theCommittee loses confidence in a manager, they willbe replaced, quickly and efficiently. In carrying outthis task, the Committee is assisted by independentinvestment consultants Stamford Associates. 4
  5. 5. A distinctive approach to The funds available include Managed fundsinvestment management invested in a balanced portfolio of UK and international equities as well as a range of moreWhilst many companies now offer a ‘multi-manager’ Specialist funds, including a range of income andapproach, the St. James’s Place approach remains growth options.distinctive: 4. St. James’s Place chooses the managers for1. Unlike most other companies, St. James’s Place only portfolios based on their skills in active uses external investment managers for its funds. management rather than following a benchmark. Whilst other companies will have an interest As pointed out by the Myners Report1 in directing as much business as possible to the commissioned by the Treasury, institutional investment funds managed by the ‘in-house’ fund investment managers tend to invest the huge managers they employ, in order to maximise their amounts of money they handle largely in line with own profitability, St. James’s Place has no such market indices or industry benchmarks and many conflict of interest or investment bias. other companies are content to follow this line. St. James’s Place insists that its managers are truly2. The Investment Committee of St. James’s Place active rather than passive. appoints and replaces managers on behalf of all of its clients, ensuring no client is ‘left behind’. We 5. Clients of St. James’s Place have the peace of mind do not wait to act if we have lost confidence in of knowing that investment manager changes are a manager. implemented promptly and seamlessly. This contrasts with the approach of many other There are no explicit charges for changing a fund companies who simply try to provide access to manager since it is simply that the responsibility for as many existing funds in the market as possible. managing the underlying assets has been handed This leaves the individual investor with the over to a new investment professional who will difficult challenge of having to decide which of then make their own adjustments to the portfolio. the investment companies and funds they believe is likely to produce the best results. Another important advantage is that there are no capital gains or income tax implications involved3. St. James’s Place offers a range of investment for investors in the change – this means that styles that together provide a truly diversified longer-term wealth strategies are not disturbed by portfolio for clients. unwanted taxable events. 1 Institutional Investment in the UK: A Review, Paul Myners, 2001 5
  6. 6. Investment management companies are asked by us If you, as an investor, are unhappy with a particularto change the individual handling funds for the group manager, you can move money from that manager to anyor we may replace the manager and company when other within the St. James’s Place range of managers.we no longer have confidence in the structure and This transfer will involve little or no charges for youapproach of the managers. and where you are invested in one of our life, pension or overseas life funds, will have no tax consequences. 6
  7. 7. The Investment CommitteeThe cornerstone of the St. James’s Place approach Monitoring includes direct presentations by theto investment management is the St. James’s Place particular individuals who manage the funds at theInvestment Committee. The Committee’s role is to regular meetings of the St. James’s Place Investment‘manage the fund managers’ on behalf of St. James’s Committee, giving members the opportunity toPlace clients. question the managers closely, as well as ongoing monitoring of each portfolio. To enable theTheir overriding objective is to generate consistently Committee to fulfil its objectives it meets a minimumsuperior investment results over the medium term by of six times a year, although this can increaseselecting the best individuals within the appropriate depending on market conditions.investment company; monitoring both the individualsand the company to ensure the Committee remain At each meeting the Committee will make crucialhappy with the choice, and changing them where decisions about the best way forward. It has fournecessary. The Committee does not seek to influence options:the investment policy of the managers. Its aim is to • Leave the portfolio of managers unchanged ensure success by selecting superior managers and because the Committee retains confidence in holding them accountable for their performance. the way clients’ funds are being managed In general, exceptional investors are able to perform • Retain the investment company but change better than their peers over a wide range of market the manager – the departure of an individual conditions by exhibiting skills in stock selection. manager may cause this to happen The Investment Committee uses a range of tools to • Change the investment company and manager analyse and assess these skills. The aim is to avoid because the Committee no longer has confidence managers who periodically add value by betting on in their ability to manage our clients’ funds the direction of the market. The managers selectedby the Investment Committee typically take a • Introduce a new investment fund or strategy ‘bottom-up’ approach, looking at the fundamentals to give our investors greater opportunity or to of individual stocks, rather than sectors or regions, improve performance prospects.to identify quality investments. By identifying quality Based on our investment management approachinvestments at a stock level, investment growth is and the work of the Investment Committee,more likely to be repeatable as returns are less reliant St. James’s Place is able to offer our clients aon the manager ‘winning’ their bet on the market or a diversified investment proposition where overallparticular area outperforming. risk control is achieved by the careful selectionThe St. James’s Place Investment Committee closely and combination of managers pursuing differentmonitors the management of each of the funds. investment disciplines across their respectiveWhilst the Committee’s members possess a great deal asset classes. This strategy creates our investmentof expertise and knowledge, the breadth of available proposition that offers realistic scope to producemanagers from around the world necessitates a added value over time, belying the notion that lowdedicated research resource. The Committee is risk must result in low returns.aided in this by the independent investment researchconsultancy Stamford Associates. 7
  8. 8. Members of the Investment CommitteeThe Committee’s responsibilities require a broad range of knowledge, skills and experience. As with any governingbody the Committee includes representatives who will bring independent expertise as well as experience inrepresenting the views of those who will ultimately be impacted upon by our fund performance - our investors.The members of the Committee have been carefully selected to ensure all these requirements are met. Sir Mark Weinberg Chairman Sir Mark Weinberg is President of St. James’s Place plc. He is also Chairman of the Investment Committee of the London School of Economics. He has previously held many key roles within the financial services industry. In 1961 he founded Abbey Life Assurance and in 1970 Hambro Life Assurance. He has also held senior positions within the industry’s regulatory framework, including Chairman of the Stock Exchange Committee on Private Share Ownership and Deputy Chairman of the Securities and Investment Board. Sarah Bates Sarah has had a wide range of experience in the investment industry over 30 years and has held a number of high profile positions including joint chief investment officer and head of investment trusts at Invesco Perpetual. She is a non-executive director of Witan Pacific Investment Trust, Invesco English and International Trust, New India Investment Trust and JP Morgan American Investment Trust. As well as being a strategic investment adviser to the Merseyside and East Riding Pension Funds Sarah is also chairman of the Cancer Research campaign pension fund investment committee and an adviser to The Royal College of Surgeons’ charitable fund. In 2011 Sarah will become chairman of the Association of Investment Companies (AIC) having been on the AIC board since December 2006 and deputy chairman since January 2008. Sarah was appointed to the Investment Committee and Board of St. James’s Place plc in September 2004. 8
  9. 9. Vivian BazalgetteVivian was appointed to the St. James’s Place Investment Committeein 2009. Vivian is currently an adviser to BAE Systems Pension Fundand sits on the board of a number of investment trusts, includingPerpetual Income & Growth. He is also Vice Chairman of Governorsto Dulwich College.Vivian’s investment career started in 1979 with James Capel beforemoving on to Mercury Asset Management and then Gartmorebefore becoming M&G’s Chief Investment Officer; and subsequentlyPrudential’s following their takeover in 1999. He continued to holdthe post until 2002, stepping down to pursue other interests.Peter DunscombePeter was also appointed to the St. James’s Place Investment Committeein 2009. Peter is the Head of Pensions Investments at the BBC where headvises the trustees on investment strategies, portfolio development andappointing new investment managers.Educated at Oxford, Peter began his investment career with Simon &Coates in 1971. In 1975 he joined Imperial Investments progressing tobecome Joint Managing Director of the pension fund. His responsibilitiescovered investment strategy, manager selection, monitoring, portfoliomanagement and compliance.Michael SorkinMichael was appointed to the St. James’s Place Board as an independentnon-executive director in January 2002. He was appointed SeniorIndependent Director in May 2005 and is Chairman of the RemunerationCommittee and a member of the Nomination and Audit Committees.Michael joined the Investment Committee in 2007.He joined Hambros Bank in 1968, was a director of Hambros PLCbetween 1986 and 1998 and a managing director of S G Hambros from1998 to 2001. He is Vice Chairman of Investment Banking at N MRothschild Corporate Finance Limited and a non-executive directorof J Z Equity Partners PLC. 9
  10. 10. Members of the Investment Committee continuedSenior members of the St. James’s Place Wealth Management Group also sit on the Committee, bringing a wealthof investment experience from extensive careers in the financial services and fund management arenas:David Lamb Andrew CroftBusiness Development Director Finance DirectorDavid joined St. James’s Place in 1992. He is Andrew joined St. James’s Place in 1993 and wasresponsible for developing the Group’s Wealth appointed Finance Director in 2004. He qualified asManagement proposition and fund range. He was a Chartered Accountant in 1988 and has a degree inappointed to the Board in December 2007. David is Accounting and Economics from The University ofa graduate of City University, London and a Fellow Southampton. He is a trustee of the St. James’s Placeof the Institute of Actuaries. Foundation.Chris Ralph Andrew HumphriesChief Investment Officer Executive Director, Asset ManagementChris joined St. James’s Place in 2009. After joining Andrew joined St. James’s Place in 2003 and hasCazenove & Co in 1984, specialising in convertible responsibility for the distinctive multi-managerbonds, Chris subsequently worked with S.G. Warburg investment approach. Andrew graduated from Theand NatWest Markets becoming recognised as a University of York with an economics degree. Priormarket leader in analysis in the income fund sector. to joining St. James’s Place, Andrew spent 20 yearsHe joined Fidelity to undertake peer group fund in the City of London working in a variety ofmanager analysis leading to building a specialist team investment and business development roles withinresponsible for the manager selection process. Most the financial services sector including various rolesrecently he was involved in the launch of a new at Prudential and GE Capital.multi-manager boutique.Report of the Investment CommitteeThis is an annual report detailing the decisions made by the Investment Committee during the previous year. Italso highlights the goals and objectives which our Investment Committee has for the future and reiterates the roleswhich they and the independent investment research consultants, Stamford Associates, play in achieving those goals.A copy of the latest Report of the Investment Committee can be obtained from your St. James’s Place Partner. 10
  11. 11. Stamford Associates LimitedStamford Associates is a leading international “Identification of likely future performance investment research consultancy. It was established requires highly sophisticated and time-intensive in 1984 in London and is authorised and regulated analysis of performance data and fund managers’ by the Financial Services Authority. Its aim is styles. Only a tiny minority of consumers have to provide superior-quality services to deliver access to this sort of analysis. Yet without doing intelligent investment solutions for its clients. so, simply looking at past performance is of Stamford Associates has been closed to new business minimal value.”for six years and it concentrates its entire resource As an independent consultancy, Stamford Associatesto servicing a small number of institutional clients is able, in fulfilling its research and monitoringamongst which St. James’s Place is unique, being role for the Investment Committee, to analyse andthe only provider of wealth management solutions compare the portfolio activities of managers as wellto private individuals. It has a dedicated team that as other pertinent data with complete objectivity.has a wealth of experience encompassing asset This is something which is not easy to do where themanagement, portfolio analysis, performance portfolios being monitored include funds managedmeasurement, behavioural finance and investment by a company’s own investment department – or, asconsultancy. is sometimes the case, where that department is itselfStamford Associates is totally independent of responsible for the monitoring.St. James’s Place and, like our external fund Stamford Associates’ philosophy is that superiormanagers, is under contract to us to provide a investment decisions are made by individuals ratherrange of investment consultancy services. Stamford than the companies they work for and it alwaysAssociates’ assessment of managers is based on its looks to the individual rather than the company inclose day-to-day involvement in the investment recommending a manager. Even where St. James’sindustry rather than on investment performance Place makes use of a large fund managementtables which can be of limited value. Their task is company, it insists that its portfolio is handled by theto work with the Investment Committee to particular individual in whom Stamford Associateshelp achieve its objective of generating superior and the Investment Committee have confidence.investment results over time.Stamford Associates’ forward-looking philosophyaims to achieve superior investment results byapplying a fundamentally driven investment disciplineand through identifying exceptional investmentprofessionals. They provide highly specialised skillsthat would not normally be available to privateclients or trustees but which are essential if investorswant to aim to achieve superior performance – apoint highlighted in a report commissioned by theGovernment to investigate the UK savings andinvestment market1.1 Sandler Review: Medium and Long-Term Retail Savings in the UK 11
  12. 12. The benefit to clients of investing withSt. James’s PlaceEvery client who invests with St. James’s Place will Since the start of the relationship with St. James’sautomatically benefit from the highly specialist skills Place in 1999, Stamford Associates has advised thethat Stamford Associates provides, which ordinarily Investment Committee on 29 fund manager andprivate individuals or advisers would not be able to investment mandate changes. Whilst this clearlyaccess. If this level of monitoring were not available demonstrates a robust approach to the monitoringhow would you know when a particular manager of our independent fund managers and the need forwithin an investment company has been taken off change, it is not change for change’s sake.their fund in order to start a new fund, or has perhaps Our approach to investment therefore means that allleft the company altogether? How would you know if of our clients benefit from the sophisticated analysisthe key analysts in the organisation who supplied the provided continuously by Stamford Associates throughmanager with the good ideas have left the company? the services it offers to St. James’s Place.Whenever Stamford Associates recommends a This has significant strategic benefits for investors andmanager there is conscious risk control through brings peace of mind to our clients, as the individualsconsideration of how the manager will combine responsible for managing our funds are beingwith our other managers. By using individuals with continuously monitored by full-time professionals.different investment approaches you benefit fromdiversification of management style. 12
  13. 13. Our recordOutlined below are recent examples of decisions made by the Investment Committee. Sometimes the decisionis not to replace a manager, even if there has been deterioration in performance in the short term. In a situationlike this, the Committee takes the view that the manager’s strategy over the longer term remained valid. Inthe Committee’s view, good investment managers formulate a strategy in advance of something happening asopposed to following fashionable trends. In turn, this can lead to considerably better long-term performance. Date Change Notes January 2007 Cautious Managed Funds The Committee felt strengthening the lower risk part of the Jupiter Asset Management fund range was important. A Managed fund combining appointed to manage the new equities and fixed income provided a lower risk investment funds with Ian McVeigh as opportunity. lead manager. January 2007 Worldwide Managed Funds The Committee identified the opportunity to strengthen the Bernard Horn of Polaris Capital global equity offering. Bernard Horn represented a seasoned Management appointed to US investment professional with a contrarian style based on manage the new funds. extensive fundamental research. January 2007 UK Growth Funds To complement the value style of some of our UK equity John Innes of RWC Partners managers the Investment Committee appointed John Innes appointed to manage the new with his highly growth-orientated approach to UK equity funds. investing. October 2007 Continental European Fund Following a number of senior-level departures from BIAM BIAM is replaced by Stuart the Committee decided to appoint Stuart Mitchell to succeed Mitchell of S.W. Mitchell the incumbent managers. Stuarts’s concentrated all-cap Capital. approach and consistent performance has served investors well over the medium term. October 2007 Diversified Income Funds In deciding to strengthen the UK equity income part of our George Luckraft of AXA fund range the Committee appointed George Luckraft of Framlington appointed to AXA Framlington, an established and renowned equity manage the new funds. income manager. In discussions with George, the Committee decided to focus on a small/mid/large cap mandate different to other mandates he manages for other UK investors. April 2008/ Corporate Bond Funds Following a fundamental review of the investment objectives April 2009 Appointed Paul Causer and and parameters of SJP fixed income funds, Invesco Perpetual Paul Read at Invesco Perpetual were appointed to manage the Corporate Bond funds for to replace Wellington. St. James’s Place. This was followed a year later with the launch of an Investment Grade Corporate Bond fund also managed by Paul Causer and Paul Read. 13
  14. 14. Date Change NotesApril 2008 High Octane Funds Client requests led the Committee to investigate the Jointly appointed Richard opportunities for a concentrated aggressive portfolio to take Oldfield of Oldfield Partners advantage of global equity opportunities resulting in the High and Vin Walden of Thornburg Octane mandate. The managers’ experience of concentrated Investment Management to portfolios and differing approaches led to a joint appointment. manage the new funds.August 2008 Alternative Assets Funds In response to the developing investment landscape and Appointed BGI (now investors’ search for investments not correlated to traditional BlackRock) to manage the equity markets, the Committee appointed BGI (now new funds. BlackRock) to manage a portfolio of diversified alternative asset classes.September 2009 Greater European Funds Following a detailed review, the Investment Committee Appointed Burgundy Asset concluded that THS Partners’ investment process and Management and S.W. Mitchell philosophy was best suited to diversified global equity Capital to replace THS Partners. investing, rather than the narrower geographic mandates of the UK and European portfolios. The review reinforced theSeptember 2009 UK & General Committee’s comfort in THS’s ability to continue managing Progressive Fund the THSP Managed funds and International Unit Trust. Joint Appointed Liberty Square Asset managers on each fund provided for diversification of Management and J O Hambro investment styles. Capital Management to replace THS Partners.April 2010 Global Emerging The continued development of emerging economies presented Markets Funds the opportunity for a new fund which could achieve Appointed Jonathan Asante at diversification across a number of markets. First State to manage the new funds.April 2010 Absolute Return Funds Recognising our clients’ desire to achieve greater Mark Lyttleton and Nick diversification and less correlation to equity markets the Osborne at BlackRock Committee appointed Mark Lyttleton and Nick Osborne appointed managers of the as managers of the St.James’s Place UK Absolute new funds. Return Funds.April 2010 International Corporate As an alternative to the Absolute Return Fund and, to provide Bond Funds higher income returns, at a lower risk level, the Committee Appointed Jill Fields and Zak appointed Babson Capital to manage the International Summerscale of Babson Capital Corporate Bond Funds. to manage the new funds.October 2010 UK & International Recognising the need for further diversification through Income Funds overseas exposure within the income fund range, the Appointed Adrian Frost and Committee appointed Adrian Frost and Adrian Gosden of Adrian Gosden of Artemis Artemis Investment Management to manage the UK & Investment Management to International Income Funds. manage the new funds.October 2010 Global Managed Funds Following an intensive and comprehensive review of this Appointed Artisan Partners to mandate, the Investment Committee recommended a change replace Newton. of investment manager from Newton to Dan O’Keefe and David Samra of Artisan Partners. The name of the funds changed from ‘Newton Global Managed’ to ‘Global Managed’. 14
  15. 15. OUR APPROACH TO INVESTMENT MANAGEMENT AND THE INVESTMENT COMMITTEE Members of the St. James’s Place Wealth Management Group are authorised and regulated by the Financial Services Authority.The St. James’s Place Partnership and the title ‘Partner’ are the marketing terms used to describe St. James’s Place representatives. St. James’s Place Wealth Management Group plc. Registered Office: St. James’s Place House, 1 Tetbury Road, Cirencester, Gloucestershire, GL7 1FP, United Kingdom. Registered in England Number 2627518 www.sjp.co.uk SJP917-VR22 (10/10)

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