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Objectives and Risk

Key to successful long term investment management is the setting of appropriate portfolio objectives and a clear understanding of acceptable risk. GBIM takes great care to discuss these with new clients and their advisers and takes into account all aspects of a client’s investment objectives and financial situation. Often, after the initial discussions, a recommended ‘scheme’ is presented illustrating the type of investments we feel would be suitable for a client’s portfolio before any investment is made. In this way everyone can be comfortable that all questions have been addressed before any financial commitment is made.

Portfolio objectives

Portfolio objectives are broken down into two categories:

General Mandates

Growth portfolios are designed for capital growth and are suitable for those who have no immediate requirement to draw an income, although income is often generated. They are principally equities based, including overseas markets, and can be categorised as Medium Risk or High Risk.

Balanced portfolios are a balance between growth and income. They may be a suitable choice where there is a requirement to draw income from the portfolio but clients wish to maintain good prospects for future capital and income growth, and can be categorised as Low Risk, Medium Risk or High Risk depending on asset allocation.

Income portfolios invest principally in income-generating assets such as fixed interest, equities, property and cash. They are suitable for those seeking to draw a relatively high income from their portfolio. It should be appreciated that there is likely to be less scope for capital and income growth when compared with Balanced or Growth portfolios, and can be categorised as as Low Risk, Medium Risk, Medium Risk or High Risk, depending on asset allocation.

Specialist Mandates

Dividend Growth portfolios are invested mostly or entirely in individual UK equities with a view to generating a relatively high level of income with the prospect of both income and capital growth over time. They do not offer much, if any, asset class diversification and would usually be categorised as High Risk.

Capital Preservation portfolios seek to maintain capital value over the medium term (greater than two years) while producing a stable total return which is higher than cash and may invest principally in Fixed Interest and Alternative Investments including Hedge Funds. They would be usually be categorised as Low Risk.

Portfolio Objective
Typical Asset Allocation*
Low Risk
Medium Risk
High Risk

Benchmark

Growth
N/A
Cash & Bonds
10% – 30%
Cash & Bonds
0% – 20%
N/A
Equities
40% – 80%
Equities
70% – 100%
N/A
Alternatives
10% – 30%
Alternatives
0% – 40%

MSCI WMA Private Investor Growth

Balanced
Cash & Bonds
20% – 60%
Cash & Bonds
10% – 50%
Cash & Bonds
10% – 40%
Equities
20% – 70%
Equities
30% – 80%
Equities
50% – 90%
Alternatives
10% – 30%
Alternatives
10% – 30%
Alternatives
10% – 30%

MSCI WMA Private Investor Balanced

Income
Cash & Bonds
30% – 70%
Cash & Bonds
20% – 60%
Cash & Bonds
10% – 50%
Equities
20% – 60%
Equities
20% – 70%
Equities
40% – 80%
Alternatives
10% – 40%
Alternatives
10% – 30%
Alternatives
10% – 30%

MSCI WMA Private Investor Income

Dividend Growth
N/A
N/A
Cash & Bonds
0% – 10%
N/A
N/A
Equities
80% – 100%
N/A
N/A
Alternatives
0% – 10%

MSCI WMA Private Investor Growth

Capital Preservation
Cash & Bonds
20% – 80%
N/A
N/A
Equities
0% – 70%
N/A
N/A
Alternatives
10% – 70%
N/A
N/A

MSCI WMA Cash Equivalent (GBP LIBOR 1-week – 1%)

AIM
N/A
N/A
AIM Listed Equities 100%

BATS UK Alternative 100 Total Return

 

The above table of Typical Asset Allocation is indicative only. Precise allocations will depend on current market strategy and solutions will be tailored to individual clients’ circumstances. An allocation to cash will normally be part of all portfolios and this can go to 100% with the exception of the AIM portfolio which is intended to be fully invested at all times.

*The above table of Typical Asset Allocations is indicative only and may vary as the market circumstances and client risk profiles change. Precise allocations will depend on current market strategy and solutions will be tailored to individual clients’ circumstances. An allocation to cash will normally be part of all portfolios and this can go to 100%.

GBIM points out that the value of investments and the income from them can go down as well as up, and investors may not get back the full amount originally invested.

GBIM firmly believes that clients should have unique, bespoke portfolios managed in line with their specific aims and objectives. Circumstances change and portfolios should be flexible so that they can adapt to evolving requirements.

A core principle of GBIM is to have risks and opportunities diversified. As such, unlike many firms, we avoid ‘one size fits all’ solutions.

We believe that, as we are entrusted by clients to manage their investments, we should have conviction in our decisions and so we are benchmark aware rather than benchmark constrained. We provide clients, for comparative purposes, with the relevant MSCI WMA Private Investor Index Series or composite indices as indicative benchmarks for the chosen portfolio. However, we do not take positions relative to these indices, and may have zero exposure to certain asset classes within the index. Our aim is to deliver consistent, long-term, performance rather than merely seeking to perform in one market direction.

Portfolio risk

GBIM believes that risk is a measure of the volatility of expected returns and recognises theimportance of diversification – by asset class, sector and geographical region, and across fund managers and counterparties – in seeking to reduce risk. Lower risk portfolios can contain a limited amount of what might be considered ‘higher risk’ investments and vice versa. It is the overall balance of a portfolio which determines its risk and which should reflect individual circumstances and risk tolerance. Other known assets and liabilities should be taken into account, as well as the portfolio’s objective.

The definition of ‘risk’ can be subjective and it is important to discuss this in detail with the client together with their adviser as part of the take-on process and periodically thereafter.

Client objectives and risk profiles will be reviewed and updated at least annually.

Investment process

  • Define asset mix by understanding the client’s circumstances, objectives, time horizons and risk tolerances.
  • Allocate portfolio to asset classes, markets and investment styles.
  • Identify, analyse and monitor suitable investments.
  • Select and subsequently review investments, taking account of client-specific issues.

Questions?

If you have any questions or require more information, please click the button below to send us a message via our contact form, or call one of our offices to speak to us.

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GBIM, Gore Browne and Gore Browne Investment Management are trading styles of GBIM Limited which is authorised and regulated by the Financial Conduct Authority (FCA number 593265) and is a limited company registered in England (07746731). Registered and Head Office at Chequers Court, 37 Brown Street, Salisbury, Wiltshire, SP1 2AS

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Harrogate Office: 01423 508040

Salisbury Office: 01722 424444

Lancaster Office: 01524 222622

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