Accudo’s Investment Philosophy
Having developed into predominantly Investments, Pensions and Income Drawdown managers, where the portfolios are meant to last and provide income for a lifetime, the emphasis in our investment approach, is achieving necessary growth to ensure the capital preservation and income needs of our clients.
This implies optimising the growth potential versus the portfolio volatility or, in simpler terms, achieving the best possible growth with the minimum necessary volatility and downside risk.
Our experience has taught us that clients are much more concerned with reducing scope for reduction of the value of their pension or investment pot than missing out on the best possible growth which has led to this relatively defensive approach to portfolio management.
Our portfolio management is tailor-made to ensure that the specific attitude to investment risk, income and lifestyle needs of our clients are as closely met as possible. i.e. The attitude to investment risk profiling is built around 1 to 10 scale where each 1 represents 10% exposure to equity based investments. For example, a 6/10 risk profile would lead to a portfolio 60% invested in equities (stocks and shares) and 40% in non-equities (fixed interest, property based funds and cash).
The volatility of a portfolio is further tackled by geographic diversification on a global level. The six equity based asset classes used are UK, European, US, Asia Pacific, Global Emerging Markets and Specialist Equity.
Furthermore, the investment vehicles preferred are collective investments: Unit Trusts, OEIC’s and Investment Trusts which all rely on numerous sub-holdings (typically 50-100 per fund). This ensures that non-systematic risk of any one company defaulting is minimised as a typical large portfolio would have in excess of consists of 1000 single company sub-holdings.
Another diversification criteria used, is the ceiling on the percentage of the whole portfolio employed in any one fund which is 10% for smaller portfolios of up to £500,000 and 5% for larger portfolios above the value of £500,000.
Volatility is also combated by employing asset classes and investments with negative correlation.
Negative correlation means that if one investment goes down the other one will go up which hedges the risks when employed in the portfolio construction process. For example, Fixed Interest and Property based funds are likely to suffer less or even advance in periods of negative returns in global stock markets. This is not always the case, which was highlighted in the 2008/2009 downturn (“Credit Crunch”) when all asset classes suffered, but is still more likely to cushion the blow than not.
Applying all of these principles and the genuine concern for clients individual needs has enabled us to circumnavigate all the pitfalls of the investment markets that have been quite challenging over the last two decades and deliver very satisfactory outcomes to our clients since becoming directly authorised by the FSA (now FCA) in 2005.
The average risk profile of our client is between 6 and 7/10 and the average time-weighted return that we have achieved at this risk level is in the range of 6% – 7%*.
Portfolios with higher risk profiles generally produce higher returns on a long-term basis and vice versa.
*These are long term rolling average figures based on performance data since 2005. Please remember that past performance may not be indicative of future results and there can be no assurance that the future performance of our portfolios referred to directly or indirectly on this website will be the same as the historical past performance and has been given here for guidance only.