Investment Portfolio

Elle Murgartroyd
23021416 Word Count: 3176
THE LACE AND HOSIERY
WORKERS PROVIDENT
CHARITY (LHWPC)
AssumedControl:31st
March 2015

Principles of Investment Elle Murgatroyd 23021416
1
Contents
Introduction..............................................................................................................................2
Current valuation of Investments...........................................................................................2
Trustee’s responsibilities.........................................................................................................2
Trustee comments and concerns.............................................................................................3
Market/Economic background ...............................................................................................3
Risk Management ....................................................................................................................4
Investment Theories and core strategy ..................................................................................4
Portfolio changes......................................................................................................................5
The new suggested portfolio with likely income....................................................................6
Conclusion ................................................................................................................................6
Appendix 1 – Current Portfolio .................................................................................................7
Appendix 2 Re-valued Portfolio (Trustnet, 2015) (Lansdown, 2015).......................................8
Appendix 3 – Adapted Portfolio (Trustnet, 2015) (Lansdown, 2015).......................................9
Appendix 4 Trustee Act 2000 ..................................................................................................10
Appendix 5 Trustee comments ................................................................................................42
Appendix 6 The Big Five (EthicalConsumer, 2012) ...............................................................43
Appendix 7 Risk Management (SRA, 2014) ...........................................................................44
Appendix 8 – SWOT Analysis ................................................................................................44
Appendix 9 – Modern Portfolio Theory, Efficient Frontier and Risk (SMART401K, 2015) .45
Appendix 10 – The Efficient Market Hypothesis (Boundless, 2015)......................................45
Appendix 11 – CF Odey Opus Class I – Accumulation (GBP) (FundsLibrary, Hargreaves
Lansdown, 2015)......................................................................................................................46
Appendix 13 – Rathbone Ethical Bond (Rathbone, 2015) ......................................................47
Appendix 14 – Diageo – Ethics (Diageo, 2015) ......................................................................47
Appendix 15 – SABMiller – Ethical Practices (SABMiller, 2014).........................................48
Appendix 16 – New Portfolio 6 Month Previously (Trustnet, 2015) (Lansdown, 2015) ........49
Glossary ...................................................................................................................................50
Bibliography.............................................................................................................................51

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The Lace and Hosiery Workers Provident Charity (LHWPC)
Introduction
We have beenpresented withaportfoliosetupfora charitythat isclearlyinappropriate andwill be
needingchanges.We are givencommentsfromTrustee membersthathighlightthe keyissuesthat
theyfeel are significantandmusttherefore be addressed. Itisthereforeimportanttocreate a
portfoliothatproducescapital growthinadditiontoincome,howeveritmustnot be too risky.The
level of riskwasbroughtupmy multiple Trusteesandshouldbe addressedimmediately. Equally,we
needtolookintochangingthe current assetallocationasthiswill helptolowerthe level of riskbut
alsomake it more appropriate fortheirneeds. Thisportfolioisheavilyinvestedinindividually
quotedequities whichisone of the riskierformsof investing.We musttherefore lookintodifferent
investmentstrategiestocreate a newbroaderand lowerriskassetallocation.Indoingsowe can
alsoadd more diversification(anotherissue raisedbytrustees).Currently,the portfolioincludes
multiple investmentwithinthe same industry orsectorwhichcancause an increase in unsystematic
risk(see glossary).Thisisadiversifiable riskthatwe canlowerthroughincreaseddiversificationof
bothcompaniesandindustriesacrossvariousassetclasses.Iwill demonstrate how thiscanbe done
to achieve lowerriskgrowthof butwithreasonable growthprospectsanddividendincome bya
combinationof:
 Income – Equities,GiltsandBondsproducingdividends(referredtoasyieldinthe case of
Bonds)
 Growth – Equities.
Current valuationof Investments
In orderto make decisionsonwhataspectsof the current portfoliotochange itwasessential to
revalue all assetsattoday’sprices(31st
March 2015) thisthengave us a picture of how that portfolio
had performedandwhichassetsshouldbe removed. Before the revaluation (see appendix 1) itwas
clearthat thiswas an inappropriatelyhighrisk ‘aggressive’portfolio,twothingsthatacharity’s
portfolioshould avoid.Afterthe revaluation(seeappendix 2) itisclearthat the value of this
portfoliohasincreasedsomewhatwhencomparedtothe previousvaluationpoint. The previous
total investmentof assets(includingcash) amountedto£5,274,871 and the revaluationamounts to
£7,156,006. Althoughthisdoesshowasignificant increase,the range of sharesandthe lackof
diversifiedindustries reflectsmore riskthandesired.The primary increaseswereseenwithinthe
Investmenttrusts withAllianceTrustincreasingby12.22%, MonksInvestmentTrustincreasingby
13.52% and FidelityChinaSpecial Situationsincreasingby46.53%. Murray International Trustwas
the onlytrust withinthe portfoliotosee areductionwithitreducingby6.24%.
Trustee’sresponsibilities
The Trustee Act 2000 (see appendix4) outlinesthe keyprovisionsandresponsibilitiesof Trustees
(see glossary) andnotesthe investmentspowersthattheyhave.Also,aTrustee maynow make
investmentdecisionsonbehalfof atrust as if theythemselveswere the soleowner.Althoughthis
powerisavailable,settlors (seeglossary) of the trustdonot needtoagree to thisand may opt to
restrictthispower.Equally,asettlorcanlimitor widenthe typesof investmentsthatcanbe made.
An example of thiswouldbe if the settlorrestrictedall trustinvestmenttobe made inpropertyor
theycouldbe more flexible andnotlimitthe trusttothis. The Trustee Act2000 has introducednew
responsibilitiesanddutiesthatordinarilycannotbe removed. Prominentlymentioninghow the
trustee mustact in the bestinterestof the beneficiaries (see glossary) andtrusteesshall not
themselves,profitfromtheirinvesting.Thiswouldvaryinthe eventthatabeneficiaryisatrustee,
howeverinthiscase the trustee muststill investimpartiallybetweenthe beneficiaries.This
referencestoatrust havingmultiplebeneficiarieswherebysome are entitledtoincome andothers,
capital.

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The Act thengoeson to statesthe difference thatprofessional Trusteeshave andthe higher
standardthat theymustfollow.Professional trusteesmustactwill extreme skill anddiligence due to
the assumedlevel of skill andexperience,unlessafamily/friendtrusteehasspecial skillsand
experience themselvestheywouldnotbe expectedtoact to the same standard. Althoughageneral
dutyof care muststill be exercised,especiallyinactinginthe bestinterestof the beneficiaries,trusts
createdafter2001 can omitthispower. Due to theirdutyto diversify (see glossary) trusteesmust
ensure thatthe trust has a soundlevel of diversificationandmusttherefore follow the investment
criteriasetout inthisAct. Thisincludesthe frequentreview of all assetsandaswe have seenfrom
the date thatthischarity’sportfoliowaslastupdated(i.e. 6monthsago) thisisan importantarea of
concern.
Trustee comments and concerns
The commentsmade by the Trustees (see appendix5) are concerningas itis cleartheyare
vehementlyagainstthe currentportfolio.Withinthesecommentsthere are frequentpointsthat
keeparising.Firstlythereisthe issue of ‘unbalanced’andthe consequential levelof riskthishas
resulted.There isaclearlack of diversification (aspointedoutbythe trustees) whichincreasesthe
riskfor the portfolio –an aspectnot usuallypursued byacharity. One trustee specificallynoteshow
importantsecurityistothemand thisisclearlysomethingtheywouldlookforwithintheirnew
portfolio. Withintheircurrentportfoliorisk istooprominent.There isthe clearlackof diversification
where there hasbeenaconcentrationin similarindustriesasopposedtospreadingthe risk.For
example,the currentportfoliohassharesinTesco,SainsburyandMorrisonsandthenRBS, Barclays,
HSBC and LloydsBank. In addition,the Trusteeshave alsofocusedinonthe bankshareswithan
evidentsenseof concern wherebywe canassume thattheydonot wantheavyinvestmentinthe
bankingsector.
These concernsmade bythe Trusteesshow thatthere is an issue withthe assetallocationandthat
one way of improvingthiscouldbe tochange thisallocationby limitingthe riskiersharesand
investmenttrusts.Ihave therefore includedforconsideration, asmall numberof investmenttrusts
as they generallyhave lowercosts,improvedperformance andincreasedliquidity. The addition of
furtherbondswill furtherhelptomitigaterisk andmake thisportfoliosaferandmore suitable fora
lowriskorganisationsuchas this. A furtherworry made by the trusteeswas that the portfoliowas
out of date by 6 months,thisisconcerning due tothe frequentchangesinmarketpricesparticularly
witha portfoliocarryingthislevelof risk.
Market/Economic background
Due to the general electioncomingthereispotentialheightenedriskwithinthe UKeconomyboth
politicallyandeconomically. Thisuncertainty iscausingconcerntomanyinvestors,predominately
currencyand international investors. Manyeconomistshave become uncertainof the outcome and
have notedto apparentfall inthe value of the pound,lastJulywe saw the pound worth over$1.70
dollarsbefore droppingto$1.49 earlyApril 2015. (Blitz,2015) Blitzgoesonto explainhow some of
thisreduction shouldbe creditedtothe strengtheningwithinthe USeconomy. Currencyinvesting
involves higherriskandunpredictabilityandshouldtherefore be minimised withinthisportfolioas
we do not wantto add an investmentwithsuchhightoa charity portfolio.Itshouldbe notedthat
some dollarexposure isokayandcan aida portfolio’sdiversification. The followingare
considerationstobe aware of priorto establishingourre-investmentstrategy:
 Political environment.
 Timingof re-investmentespecially asthe UK andUS marketsare at all-time highs.
 Economicuncertainty.
 Recordlowinterestrates.

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 Possible deflationarypressure.
 Quantitative monetarypoliciesinEurope andJapan – thoughbothmarketsdue to these
measuresare currentlybetter placedforgrowthinthe mediumterm.
Minutestakenfroma recentMonetaryPolicyCommittee (8th
/9th
April) saw continuedconcernsover
‘headwinds’1
thatthe UK economyiscurrentlyfacinginadditiontothe effectsof the 2008 financial
crisisstill lingering. In2013 this deliberate policywasputinplace by central banksas a way of
discouragingsavingsandencourage consumerstoborrow more. (Buttonwood,2013) These low
interestrate have the abilityto‘boostthe equitymarket’2
asaresultof lowerratesbeingplacedon
bondsleadingtomanyseeingequitiesashavinglargerbenefits. Thisimpactcouldbe the driving
powerbehindthe equityrallyseenin2013.
Risk Management
The Trusteesspecificallynotedthattheywere unhappywiththe level of riskthe portfoliocurrently
holdswhichleadsusto conclude thatwe mustundertake riskmanagement (see glossary) stepsto
reduce thisrisk. The processwill be throughthe portfolio’slifespanandwill notstoponce the
investmentshave taken place (seeappendix7).Regular monitoringwillbe requiredinordertokeep
control of anyminoror major risksthat mayarise.One way we can identifyanyriskswouldbe
throughthe creation of a SWOT analysis(see appendix8) asthis will helpdetermine which
investmentsare goingtoproduce more benefitsandwhichhave toomany threatsor weaknesses
that couldcause the portfoliotolose unnecessaryvalue.
In orderto helpminimise riskour strategyshouldbe toincorporate:
 Bondand giltpooledfunds –investedwithqualitymanagerswithexperiencedtrackrecords
inthese investments.
 EquityIncome fundsthatwill offerconsistentincome,once againwithmanagerswith
consistenttrackrecordsof excellentperformance. However,thesewill likelybe of lowerto
mediumriskwithanticipatedincome returnsof between2% to 4%.
 I alsosuggestincludingsome lowertomediumriskInvestmentTrustswhose strategyisto
preserve wealthandproduce consistentperformance duringturbulentmarkets.
 Achieve arange of investmentsacrossthe majorassetclassesthoughbalancedforlowerto
mediumriskspreadandincorporatingalow cost investmentapproachwhereverpossibleas
highcosts can have a damagingeffectuponthe portfolio.
InvestmentTheoriesand core strategy
Before makinganychangesto the portfolioandinvestmentstrategies,differentinvestmenttheories
shouldbe examinedandstrategiesconsidered.Firstly,we shouldconsiderthe Modern Portfolio
Theory(see glossary) thistheorylooksatanalysinganentire marketoverthe olderalternative of the
analysisof ‘eachinvestment’sindividual merits’3
the latterwayof analysiswillinclude goodanalysis
of eachinvestmentbutitdoesn’tconsiderthe wayinwhichcertaininvestmentsperform
comparativelywitheachother. Equally,MPTheavilyemphasisesthe correlationbetweeneach
investmentwhere itcompareschangesinvalue betweenassetclasses. (SMART401K,2015) A key
issue here isthe wayinwhichriskand volatilityistreatedasthe same thingwheninreality,theyare
different. Thistheorymakesthe assumptionthatwhenaninvestorisapproachedwithtwo
portfolios,bothwithequal return,the investoris more likelytoselectthe one thatcarriesthe least
risk. (SMART401K, 2015) If the customeropts foradditional risk,itisassumedthattheywill receive
1 Fox Business
2 The Economist
3 SMART401K

5
additional return. Thistheoryshowsriskcomingintwoforms,systematicriskandunsystematicrisk
(see glossary).Systematicriskcannotbe mitigatedbythe use of diversificationbecause afall inthe
entire marketwill impacteachinvestment,whereunsystematicriskrelatestoindividualinvestment
and so diversificationintootherinvestmentswillhelptoreduce the impactcaused. The efficient
frontier(see appendix9) illustratesthe level of rewardthatwouldbe receivedwithanygivenlevel
of risk. Portfoliosbelowthe line are notproducingenoughreturnforthe levelof riskthathas been
undertaken.
The efficient-markethypothesis (EMH) (see glossary)hasthree variations,weak-form,semi-strong
and strong-form.Itissaidthat investorsare usingasystemwherebythe price isthe mostaccurate,
adequate price, usingthe available information. (Investing,2015) EMH suggeststhat‘nostock trades
too cheaplyortoo expensively’4
,itexplainsthatthe rationale behindthispricingisthatif anygiven
stock istradingtoo highor too lowthenthe demandwill greatlychange,quicklyalteringthe price to
itsmost reasonable value. (Investing,2015) The new portfoliowill have farmore diversificationwith
lessfocusonthe bankingsectorandmore emphasisonlow riskbondsand low costcollectives. It
will incorporate SociallyResponsible Investing(seeglossary) inordertorespectthe ethical values
that the charityholds.Inadditionwe wouldideallywanttobuildacore fundwithinitial depositsand
then‘dripfeed’the remainderoveran18 monthperiodtoprotectagainstmarket lows.
Portfoliochanges
Due to the riskynature of thisportfoliothere are manychangesthatshouldbe made,changesthat
will make thisportfoliomore appropriate forthe charityitisintendedfor. Firstly,inline with
commentsmade bytrustees regardingtheirdistasteof investinginthe bankingsector.The
specificallymake reference to‘all those damnedbankshares’5
.The currentportfolioincludes
investmentsinfourhighprofile banks,RBS,Barclays,HSBCand LloydsBanks. We would have to
question,what dobanksinvestin?Itisimportantthat we lookintowhatthe banksare investingin,
but alsotheirreputationasa business.(see appendix6) Recently,Barclayshave hadmultiple
episodesof badpressandnegativitysurroundingtheircompanyactivityandthe manytax havens
theyare involvedin. Intermsof ethical investingitwasapparentthatBarclayshave significant
investmentsin‘boththe nuclearandarmsindustries’6
.Recently,HSBChave beenunderfire due to
theirinvolvementinamoneylaunderingschemeandtheysaw multipleofficesbeing‘raidedand
individualscouldface fines’7
.Due tothe unethical nature of the current investmentthe new
portfoliowillomitthese investmentsandindoingsoitwill helpmake the portfoliomore ethical.In
additionbothImperial TobaccoandBritishAmericanTobacco (BAT) will be replacedbymore
ethicallytradingcompanies.The numberinvestmenttrustshave beenreduced due totheirlackof
transparency inadditiontothe Trustees dislikeof thisinvestmenttype.Ihave includedaselectionof
Exchange TradedFunds (ETFs) (see glossary).
 Remove unethical –e.g.tobacco – alongside treasurybondsthathave aclose maturitydate.
 Include ETFs,Unit Trusts
 Aimfor 60% in bondsandcollectives,40% equities
 Lookingforan average income yieldof 3%
 Growth onportfoliobetween3%-4% makingaconservative 7% perannum overall
 Keepportfoliochargesaslowasreasonablypossible asthese will effectnetincome.
 DiversifiedMediumRiskPortfolio
4 Simple Stock Investing
5 Lace and Hosiery Workers Provident Charity (LHWPC) – Comment made by a Trustee.
6 (EthicalConsumer, 2012)
7 www.theguardian.com

6
 Core selectionof wealthpreservationfunds –ideal foracharity particularlyin badeconomic
times.
 Make decisionsthatincorporate consideringthe changesforfunds/investments thatreflect
lowercoststo the portfolio.
o ETFs – Cheapest0.2%-0.4% peryear.8
o InvestmentTrust0.4% -1% (LowerthanUnit Trusts)
o AlthoughUnitTrustshave gone down0.7%-1.25%
The newsuggestedportfoliowith likelyincome
There are some large changeswithinthe new portfoliotoenable the charitytohave more
diversificationandmore protectionagainstinflationarypressure. Certainshareshave beenremoved,
withbothBAT and Imperial Tobaccodue to theirunethical nature andalessinvestmentinthe
bankingsector– as requestedbythe Trustees.InsteadIhave includedaselectionof collectivesthat
include awide varietyof sectorsandindustries (see appendix11).I have to ensure thattheywere
still operatingethicallyandtransparentlythroughouttheiroperationsandsoIresearchedtheir
values(see appendix13).Thisshowsthe core ethicsandmoralsthat the Rathebone Ethical Bond
Fundis basedandit highlighteditsconnectiontoSociallyResponsible Investing.Thiswasincluded
because itallowedforthe once unethical fundtonow include afundthatpridesthemselveson
ethical investingandcompletesaregular‘review of ethical criteria’9
.Inadditiontoincorporating
newsharesand fundsintothe portfoliothere are alsoasmall amountthat have remainedfromthe
original.Diageo(seeappendix 14) have a clearcut ethical policyandone theyappearto stickto.This
has meantthat ithas remained inthe portfolio.
Althoughthe ethical stance of companieswasacrucial factor increatinga new portfolio,Ialso
wantedtoadd some protectionagainstexternalfactors. Ihave therefore includedOdeyOpus
Accumulationfund,despitebeingalowgrowth fundtheyactin anticipationof adownfall and
operate undera smoothcurve.Withinthe selectionof giltsIhave includedUKindex likedgiltsasthis
helpsprotectthe charityagainstinflationrisk. Theseresultedinafinal annual income of
£214,055.22 ona portfoliovalue of £7,156,006.
Conclusion
In conclusion,Ihave includedadiversifiedrange of investmentsthatwillcreate wealthpreservation
for the charitywhilstacting ethically.Ihave alsofocusedmyresearchonthe costs of runningthe
portfolioascoststoo highwouldbecome adrag on performance.WithinmycollectivesIhave
includedanETF whichwill helpwith low riskinadditiontoitbeing low costinvestment. Ididnot
however,wanttocreate a portfoliosolelymade upof low riskinvestmentsandsoI have suggested
the additionof a Global EquityUnitTrust Fundsmith collective ledbyamanagerwithan excellent
track record – Terry Smith.Thisisa mediumrisk(particularlydue tothe investmentinMicrosoft)
investmentwithadividendyieldof 2.60%. Finally,Iconvertedthe new portfoliointothe priceswe
wouldhave paidon30th
September2014 – 6 monthsago (see appendix16) to see whetherthe
marketvalue wouldhave decreasedorincreased.Itisclearthat the marketvalue of the new
portfoliois£1,055,583 higherthan the previousmarketvalue on30th
September2014.
8 The Economist
9 Rathbone Ethical Bond Fund

7
Appendices
Appendix 1– CurrentPortfolio
CURRENT INVESTMENT PORTFOLIO
THE LACE AND HOSIERY WORKERS PROVIDENT CHARITY (LHWPC)
GILTS
Nominal Stock Description Price Value
£200,000 4.00% Treasury2016 £107.10 £214,200
£150,000 8.75% Treasury2017 £123.65 £185,475
£250,000 5.00% Treasury2025 £121.00 £302,500
£175,000 3.50% UK War Loan £84.50 £147,875
Sub Total for Gilts £850,050
InvestmentTrusts
Shares Price (p) Value
60,000 Murray International Trust 1089 £653,400
50,000 Alliance Trust 454 £227,000
70,000 Monks InvestmentTrust 380 £266,000
120,000 FidelityChinaSpecial Situations 98 £117,600
Sub Total for InvestmentTrusts £1,264,000
Ordinary Shares Price (p) Value
25,000 Tesco 302 £75,500
32,000 Sainsbury 346 £110,720
22,100 Morrisons 201 £44,421
18,500 RBS 345 £63,825
36,400 Barclays 248 £90,272
28,000 HSBC 630 £176,400
35,000 LloydsBank 78 £27,300
2,500 BAT 3325 £83,125
10,000 Imperial Tobacco 3616 £361,600
10,000 Diageo 1914 £191,400
10,000 SABMiller 3324 £332,400
10,000 BAE Systems 424 £42,400
19,800 Meggitt 486 £96,228
9,750 A.B.Foods 3028 £295,230
350,000 PremierFoods 60 £210,000
Sub Total for Ordinary Shares: £2,200,821
Total Investmentassets held(excludingcash): £4,314,871
PLUS £960,000 CASH HELD IN A LLOYDS MONEY MARKET ACCOUNT
Total Investmentassets held(includingcash):£5,274,871

8
Appendix 2Re-valuedPortfolio (Trustnet,2015) (Lansdown,2015)

9
Appendix 3– AdaptedPortfolio (Trustnet,2015) (Lansdown,2015)
NOTE
For ‘CFOdeyOpusClass1 – Accumulation’and‘Rathbone Ethical BondInclusive –ClassR–
Accumulation’insteadof anincome paymentthe dividend equivalentisreceivedthroughadditional
sharesor additional shares.

10
Appendix 4Trustee Act2000

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Appendix 5Trustee comments
The chairman of the Trusteeshas also mentionedthat, followingthe appointmentof five new
members,there has beensome heated debate about the progressof the fundsunder their
control. He says that the followingviewshave beenexpressedata recent meeting:
"The currentinvestmentprices and valuesare outof date by at least six months.Also they lookvery
unbalanced.Lookatall thosedamned bankshares.We'velosta fortunethanksto thoseruddy
bankers".
"The shareslooklike they havebeen selected with a pin. And a bent pin at that.These professional
advisorsareuseless.They will tell you to sell something and then investthe money in something else
justas flaming unbalanced and useless".
"Financialadvisorsare justa bunch of roguesand charlatansand areonly in it forthe commission
they makeby churning investmentsaround.Theonething thatthey cannotcontrolis risk and,asa
charity,security is damned importantto us."
"The stockmarketis justa casino and is no place for a well respected charity such asours.You might
as well stick all the money on theNationalLottery or at the very mostkeep it safe in cash".
"Ourshare investmentsseemto be concentrated in similar companiesand notvery well spread
about.A friend of mine,who doesa bit of investing in the stockmarket,tells me this can potentially
be very dangerous,and quiterisky,if anything goeswrong."

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Appendix 6The BigFive (EthicalConsumer,2012)

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Appendix 7RiskManagement(SRA,2014)
Appendix 8– SWOT Analysis
STRENGTH WEAKNESS
We will needtobe made aware of the
strengthsof the company(ies) we are investing
in.Firmsthat we are investinginare more than
likelygoingtobe successful companiesthat
have a core strengthandwe can use themto
helpusanalyse whetherornotwe see themas
a feasible investment.We mayalsolookinto
strengthsof management,their
products/servicesorthe marginstheyretain.
(Amongstothers)
In additiontothe strengthsitiscrucial thatwe
are mindful of any potential weaknessesthe
companymay possess.Mostbusinessesmay
hide these behindtheirstrengths inanattempt
to increase investors.These mayinclude,
management,the financial stabilityof the
companyand any future prospects,both
financiallyandintermsof the life spanof the
product.
OPPORTUNITY THREAT
Thisis an importantsectionasitwill enable us
to determine the future forpotential growth
and if theyare able toenternewmarketswhich
wouldopenupa widerconsumerbase.
Before investingitiscrucial to lookat the
threatsto the investmentsandanypotential
downfallsthatcouldoccur as a resultof these.
Thissectionisparticularlyrelevantatthispoint
if time due to the upcomingelectionandthe
changinginlegislationthatthiscouldbring
about. Both internal andexternal threatsmust
be considered.

45
Appendix 9– ModernPortfolioTheory,EfficientFrontierandRisk (SMART401K,2015)
Appendix 10– The EfficientMarketHypothesis (Boundless,2015)

46
Appendix 11– CF Odey OpusClassI – Accumulation(GBP) (FundsLibrary,HargreavesLansdown,
2015)
Appendix 12– Rathbone Ethical BondInclusive –ClassR – Accumulation(GBP) (FundsLibrary,
HargreavesLansdown,2015)

47
Appendix 13– Rathbone Ethical Bond (Rathbone,2015)
Appendix 14– Diageo– Ethics(Diageo,2015)

48
Appendix 15– SABMiller– Ethical Practices (SABMiller,2014)

49
Appendix 16– NewPortfolio6Month Previously (Trustnet,2015) (Lansdown,2015)

50
Glossary
Trustee – Thisis whenanindividual orfirmadministratespropertyorassetsfora thirdparty where
theymustact intheirbestinterest.There maybe multiple reasonsforatrustee tobe appointed,for
example,acharity,pensionplansortrustfunds.(Amongstothers)
Settlor – The settlorwill setupthe trustand payintoit.
Beneficiary– These are those whohave an entitlementtoreceive the benefitsof the trust.
Duty to Diversify– The trustee mustinsure sounddiversificationthroughoutthe trustinorderto
mitigate risk.
UnsystematicRisk – Thistype of risk isspecifictoa companyor industry.Itisalso knownas
diversifiable riskasyoucan preventthisriskthroughdiversification. Forexample,bypurchasing
stocksin multiplecompaniesandina variationof industriesthisriskwill be lowered.
Systematic Risk – Alsoknownas marketrisk,systematicriskisthe inherenttoanentire market.
Unlike unsystematicrisk,thistype of riskcannotbe mitigatedbyusingdiversification.
Risk Management– Thisis the procedure aninvestortakestotry and eliminate riskidentifyingthe
areas of risk,analysingthemandfindingwaystocontrol those risks inanattemptto maximise
results. These potential riskwill alsohave tobe monitoredtostopanypotential damagescausedby
these risks.
Exchange Traded Funds(ETFs) – These are low cost marketable securitiesthatcantrack a
commodity,anindex,abondor a collectionof assets. Due tothe lowercostsinvolvedthese canbe a
more attractive substitute toa highercostinvestmenttrust.
Efficient-MarketHypothesis(EMH) – Thistheoryassumesthatmarketsare ‘informationally
efficient’10
suggestingthatan investorcannotcontinue toearnreturninexcessof marketlevels.
There are three forms:
 WeakForm
 Semi-StrongForm
 StrongForm
SociallyResponsible Investing(SRI) – Investmentscoveredunderthiscategoryare those where the
companyacts in an ethical nature. Commonthemesthatsurroundthistopicinclude avoiding
companiesthatare involvedin gunmanufacturing,alcoholandtobacco (amongstothers).
ModernPortfolioTheory (MPT) – The ModernPortfolioTheoryexplainsthe wayinwhicha risk-
averse investorcancreate a portfoliothatwill maximisereturninline withthe levelof risktaken.
Thistheorystressesthe conceptof higherriskleadingtohigherreturns. Inordertocreate a portfolio
basedon thistheorythere are fourbasic stepsthatwill be taken:
 SecurityValuation
 AssetAllocation
 PortfolioOptimization
 Performance Measurement
10 Boundless 2015

51
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