PSigma Investment Management has seen 10 years of successive growth in the ten years since launch back in 2002. Assets under management now stand at GBP1.3bn, according to chief executive John Howard Smith (pictured).
“Our core investment proposition remains unchanged from when we first started our company; with our main focus on creating bespoke investment solutions tailored for each individual client. We decided to focus our investment philosophy on trying to deliver “real” inflation plus returns for our clients, rather than benchmarking ourselves against indices that we felt were less relevant for clients. Inflation plus investing remains our mantra to this day. We have also recently refreshed our model-based Managed Portfolio Service (MPS), which is specifically designed for clients with smaller portfolios, who want to access our asset allocation techniques easily. We hope that this will become a significant area of growth for us in the years ahead.
“Our assets under management have grown to £1.3bn, following 10 years of successive growth and we have invested heavily in both our business development team and in high quality fund managers to help us maintain our growth in the years ahead. We have set ourselves high targets for expansion in assets, but we feel confident that with our excellent and stable team, solid infrastructure and high quality investment performance are capable of achieving our ambitions, despite the uncertain investment environment that we are forecasting.
“One of our core principles is to provide transparency for our clients and introducers. Therefore each quarter we ask the independent risk analysis company Asset Risk Consultants (ARC) to examine the investment performance of all of our clients and evaluate our investment returns. We are delighted that we have been able to deliver strong outperformance over each of the four ARC indices over 1, 3 and 5 years and our returns are first quartile in each category over 5 years. Most important has been our predictability in performance and our ability to avoid “nasty surprises” for our clients. This has been reflected in our ability to generate strong relative returns with lower volatility than our peer group. This remains an obsession for us and is central to our investment process.
“When I started out with our plans for PSigma early in the last decade, I had no idea what the future would hold for our business or the wealth management industry. It would have been impossible to predict how the investment world would change when we first started and over the last ten years investors have been buffeted by almost unprecedented volatility and uncertainty. We are proud to have been able to grow our business through some very difficult investment conditions.
“In the very early days of our business, investors were still dealing with the negative fall-out from the bursting of the Tech bubble and there was a general distrust of equities after a significant bear market. Conditions improved during the now discredited period entitled the “Great Moderation”, before the near collapse of the financial system in 2008 destroyed any confidence that had built up in the previous five years of positive returns. The last few years have continually tested the patience of investors, as each day seemingly brings another hurdle to clear and another crisis to solve.
“The last ten years have been a challenging but exciting time for PSigma and our aim is to build on the strong foundations that we have created. We believe that it is the reflection of our business that we have maintained all of our key members of staff over the life of the business. We are a long way from the “blank piece of paper” that was all we had in 2002, but equally our ambition to drive the business and our client service forward has not changed and we believe that our business is capable of many great things in the years ahead.”
Thomas Becket, Chief Investment Officer, PSigma Investment Management, says:
“It has been a truly incredible 10 years for investors and the perfect environment for us to develop and test our investment process. We believe that over the life of our business we have created an investment process capable of rivalling any other in our industry. Our multi-asset, diversified approach has allowed us to participate in rising asset markets, but our obsession with risk has meant that we have been able to avoid many of the worst falls in markets.
“Over the last year we have strengthened our focus on risk, through the development of two proprietary risk analysis systems; the qualitative Odysseus System and the quantitative PSigma Asset Allocator. Both systems work in conjunction with each other and their complementary output allows us to identify a variety of risks in our investment strategy and then act to reduce specific risks. With both liquidity and correlation risks having risen enormously in the last few years, the enhanced understanding that we can glean through our systems will be vital to our investment performance in the years ahead.
“As we look backwards, undoubtedly the biggest positive influence on our portfolios in the last decade has been the emergence of China and the other developing nations as global economic powerhouses. We were quick to identify the potential of these countries in the nascent days of our investment business and positioned our portfolios with many direct and indirect investments to benefit from their growth. We expect this to remain a key theme behind our strategy in the next decade, but we are currently refocusing our portfolios away from hard resources towards soft resources and other sectors that we think will benefit from the rebalancing of China’s economy towards consumption.
“Over the life of our business, our investment process has delivered most strongly on a relative basis in falling markets, where we have found that our primary focus on protecting our clients’ assets has proven extremely important. Our recognition of debt issues in the financial system and the developed world allowed us to position our portfolios defensively at various points in the last five years. We remain very cautious on developed market government bonds, where we think investors will suffer losses in real terms in the next decade.
“We feel confident that we will be able to continue to generate good returns in the future, although the investment landscape has been made more difficult to judge because of the manipulating hand of governments and central banks in many asset markets. However, despite the myriad risks that exist in the investment world, we are optimistic that a combination of moderate global growth, easy monetary policy and some attractive valuations should allow healthy investment returns in the years ahead. Our latest 5 year forecast returns show that we expect equity market returns of 8% per annum in the next five years, as investors asset allocate towards equities in search of income and return. Our recent research trip to the US identified that this trend was intensifying.
“Despite our positive views on the medium term outlook for equity markets, we certainly do not believe that such returns will be easy to make and we retain our balanced and diversified approach, spending a huge amount of our time focusing on what might go wrong and where the downside risks may lie. The last ten years have been both exciting and testing, but we feel extremely well placed to achieve our investment aims in the years ahead”.