ADVISER INVESTMENT APPROACH

Dynamic Asset provides Goals Based Investment portfolios and management services. It is a distinctly different investment business for independent financial advisers. Dynamic Assets investment solutions provide for significantly improved business efficiencies, scale and investor satisfaction that reduces business risk to advisers.

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A difference that makes sense

It all starts with our investment philosophy. The table below demonstrates the clear difference between Goals Based Investing using a Dynamic Asset Allocation approach and Risk Profile Based Investing using a Strategic Asset Allocation approach. A simple way to consider which method you think is the most appropriate is to ask yourself how you’d want your money to be managed.

Goals based investing

Investors actual needs and goals are the most important starting point when developing an investment strategy

Every investor has numerous different goals - so no one strategy will suit all needs

Forward-looking insights are the best guide to future outcomes

Risk is defined as the probability of not meeting investor goals

Markets are not always efficient and repeatable

The world is continuously changing - more flexible, and broad-ranging Dynamic Asset Allocation tolerances can help derive value and protect against capital losses

Risk profile based investing

Risk profiling is the most important starting point when developing an investment strategy

Your risk profile is appropriate for all your investing needs

Optimal portfolios based on historical data is the best guide to future outcomes

Risk is defined as volatility of capital

Markets are always efficient and repeatable

Markets always revert to historical rates and ratios, so there is little value in managing asset allocation

In summary, Goals Based Advice and Goals Based Investing focuses on the individual investor and specific outcomes, while Risk Profile Based Investing focuses on historical performance and a belief in the efficiency of markets.

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The common approach is failing investors and advisors

Dynamic Asset believes that the conventional Risk Profile (SAA) approach is failing too many investors and, by extension, adviser’s businesses. 

For example, according to research by Schroders the Strategic Asset Allocation approach does not deliver reliable results to investors. Their study showed that SAA underperforms a 5% real return objective 49% of the time on a rolling 5-year basis, and 47% of the time on a rolling ten-year basis. Mark Wills from State Street Global Advisors found that a static balanced fund fails in 35% of market cycles.

These studies demonstrate that over time between one-third and one-half of investors may not reach their financial goals using the SAA approach.  That is a significant risk to the wealth and lifestyle of clients.

There is a better way.

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Goals based investing

Dynamic Asset understands that the world is complex, constantly changing and uncertain. By focusing solely on achieving specific goals and considering them proactively in the current investment landscape, we aim to provide a high probability of meeting portfolios objectives overstated timeframes.

 Clients usually have more than one investment need. At Dynamic Asset we look to resolve this through providing portfolios that satisfy:

  1. Cash flow or liquidity requirements, and/or
  2. Risk tolerances, and/or
  3. Capital growth requirements.

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Investors will require one or all of these investment solutions at one point or another. Dynamic Asset provides a practical and seamless solution. There is the option to move between goals or blend them as needs to deliver a bespoke approach to meeting each client’s investment needs.

 

GOALS

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Preserve capital and grow
investor’s wealth

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Target a real rate of return on every
portfolio – after fees and inflation

Our investment philosophy

We believe in helping investors to achieve their goals.

We believe that:

  1. Protecting your client’s capital is extremely important
  2. Providing real rates of return – after fees and inflation – is the most meaningful benchmark.
We believe that the approach that best helps achieve investors goals is to:
  • Apply flexible and wide asset allocation across a broad range of potential investments. Including alternative investments, cash and cash-based securities, fixed income, direct securities, real estate, managed funds, exchange-traded funds and derivatives
  • Apply a robust and disciplined risk management framework to actively manage the risk and return profile of each investment in line with its objectives
  • Be medium to long-term focused
  • Focus on value and not follow the crowd or common benchmark assumptions
  • Ensure each investment is well understood, transparent and well managed
  • Be mindful of tax implications and transaction costs

LEARN MORE IN THIS VIDEO

Watch Jerome Lander, Portfolio Manager and Goals Based Investing specialist, discuss the Dynamic Asset approach to managing Goals Based Investment Portfolios.

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investment-process

Investment approach


To achieve specific investment outcomes, we need to be mindful of history, carefully consider the dynamics of the current investment landscape and then take a forward-looking approach to manage our investment portfolios. We dedicate significant time and resources to carefully consider to objectives of each portfolio in this context and follow a robust and disciplined three-step investment approach.

1. asset allocation

Asset Allocation is often referred to as the most important driver of investment returns. We start our process by carefully determining the most appropriate asset allocation to achieve the portfolios stated objectives.

The asset allocation of each portfolio is regularly modelled and reviewed using expected returns and potential risks. The results are considered alongside current asset allocations, valuations, outlooks for markets, sentiment and momentum to determine whether any adjustments to the asset allocation of each portfolio is appropriate.


2. investment selection

Once the appropriate asset allocation is determined, it is implemented by selecting those investments and managers which are considered best placed to produce the targeted risk-adjusted returns when combined as an overall portfolio across the relevant timeframe.

During this stage, detailed investment and investment manager due diligence is conducted to ensure they meet the required objectives. We select based on quality, competitive advantage, independent thinking and the ability to deliver strong returns relative to cost. Performance is monitored and managed.


3. portfolio management

The final element involves the implementation of the investment strategy and management of the ongoing compliance and operational requirements of each portfolio.

Every selected investment is managed according to a target weighting, determined by:

  • The risk and return target of each portfolio
  • The way it interacts with other investments
  • Its impact on asset, sector and theme weightings
  • The entire portfolio is continuously monitored, assessed and optimised

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SECURITY OF INVESTOR CAPITAL

In keeping with our purpose of making the investment experience better for investors, we have taken great care in creating a robust system of governance and security that overlays the management of your clients’ investments. We want to ensure that we not only manage investments towards your clients’ goals but also make sure that their money is secure if something goes wrong.

The mechanics of this process are very involved as you would expect. Every detail of this is provided within the offer documents. The summary is:

  • You and your clients have full transparency over all investments, transactions and fees. Your control everything - 24 hours a day, 365 days of the year
  • Every investment mandate we manage has a pre-agreed set of parameters to which it must operate. These parameters cover aspects like return targets, risk allowances, types of assets in which we can invest. All these have been assembled with great care and due diligence
  • Dynamic Asset has established extensive governance measures over how the assets are managed. This begins with the Investment Committee. Its role, in addition to mandates, is to ensure that all rules are kept
  • Although Dynamic Asset is the manager of the investments, we have no access to any of the capital. Our role is to ‘instruct’ on investments
  • A Managed Discretionary Account (MDA) Operator and Administrator, provides the licencing, trading and administration capabilities, and platform. They also ensure mandates compliance and that every transaction is in keeping with what you ask us to do
  • The investments are held by a Custodian, while the beneficial ownership of all assets remains with the investor, always. The Custodians role is to keep the money at arm’s length from everyone in the day-to-day process with the objective of securing of assets in the interests of you and your clients
  • For superannuation investors, there is another layer of oversight through the Trustee. Their role is to ensure that everything that is managed is in the superannuation fund member's best interests, and in line with regulations
  • Overarching all of this is the fact that everything we do is heavily regulated and that we have a robust legal system in place if anything goes wrong

In short, our business focus and reputation hinges on taking great care of your client’s money. However, if something does go wrong, then there are layers of protection that ensure their money stays under their legal ownership, giving you and your clients ultimate control and surety.

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