According to research by Schroders, the Risk Profiling or Strategic Asset Allocation (SAA) approach that is commonly used for managing investments does not deliver reliable results to investors. The research showed that they underperform a 5% real return objective 49% of the time on a rolling 5-year basis, and 47% of the time on a rolling 10-year basis.
Mark Wills from State Street Global Advisors also found that an SAA balanced fund fails in 35% of market cycles.
Their research shows that through time, between one-third and one-half of investors may not reach their financial goals.
That is a real risk to the wealth and lifestyle of individual investors. It is why you consider a different approach.
Dynamic Asset understands that the world is complex, constantly changing and uncertain. We believe that to achieve specific results for investors, we must take a dynamic approach to achieve the investment objectives of each portfolio. Sitting back and expecting investment returns to accrue just because you’re investing can work sometimes, but if you’re serious about having your money managed properly, then you should make sure it’s looked after proactively.
At Dynamic Asset all our investment portfolios have clear goals:
Because the world and financial markets are continually changing, we believe a Dynamic Asset Allocation (DAA) approach is the most appropriate way to manage investments and risk properly.
We believe we need to be responsive and flexible enough to cope with rapidly moving markets and to reduce the impact of short-term market volatility.
We believe in providing investors with a high probability of meeting portfolios objectives
We believe that the best way to achieve investment objectives is to:
1. asset allocation
Asset allocation is the single biggest influencer on portfolio performance, so we dedicate time and resources to determine the right allocation for each portfolio. The asset allocation of each portfolio is regularly modelled and reviewed using forward-looking returns and potential risks. The results are assessed 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 are 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 entire portfolio is constantly monitored, assessed and optimised.
Goals based investing
Investors actual needs and goals are the most important starting point when developing an investment strategy
Every investor has different goals - so no one strategy or profile will suit all needs
Forward-looking insights are the best guide to future outcomes
Risk is defined as the probability of not meeting an investor goals
An individual’s portfolio is dependent on the quality of its asset allocation and management
The world is continuously changing - more flexible and broad-ranging Dynamic Asset Allocation tolerances can help derive value and protect against capital losses
Protecting capital is of paramount importance. Buy when value is apparent and sell when it’s not.
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 as markets are always efficient and repeatable. Therefore, history is the best guide to future outcomes
Risk is defined as volatility of capital
An individual’s portfolio will generally adhere to the market averages
Markets will always adhere to historic rates and ratios, so there is little value in managing asset allocation
Investors are always rewarded for risk so a long-term Strategic (or Static) Asset Allocation works best. Buy and hold.
In summary, Goals Based Investing focuses on the individual investor and targeting specific outcomes on a forward-looking basis, while Risk Profile based investing focuses on a belief in the efficiency of markets and that historical performance and behaviour is a reliable indicator of future behaviour.
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 management of this process is very rigourous, as you would expect. Every detail of this is provided within the offer documents. The summary is:
In short, our business focus and reputation hinges on taking great care of your money. However, if something does go wrong, then there are layers of protection that ensure your money stays under your legal ownership, giving you ultimate control and surety.