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KYC gets deep and meaningful


By Peter Lucas – One of the most noticeable legacies of the financial crisis has been the level of engagement that customers want in terms of actively managing their portfolio. In particular, entrepreneurial clients want to be closely involved in how their money is invested and are looking for a partner to work with them to make specific choices.

The growing demand for this brand of ‘teamwork’, especially seen offshore by the Jersey investment team, has led to a shift in our approach, with an even greater emphasis on getting to know your client in a wider, more meaningful sense. Through active engagement and consultation with clients and their advisors we can now establish mandates, tailored for each client to support their individual requirements, and investment priorities and goals based on both their wider wealth and the extent to which the client wants to be involved in the decision-making process.

We have also observed an increase in the number of portfolios established by offshore trust companies looking for longer-term investment options that both protect capital first and then target capital growth. With the natural inclination for trust companies to be cautious, this can be a tricky balancing act that, again, requires a close, partnership-style arrangement, where advising on the overall client’s wealth, even if part falls outside of our direct management, is increasingly part of the process.

Given the significant market corrections seen over the past decade we are also discussing absolute return mandates alongside more traditional balanced portfolios, as these seek to target a positive return, regardless of fluctuations in the market.

To adjust to this more involved, cautious marketplace, Rathbones’ Strategic Asset Allocation Committee works to leverage the global experience of our portfolio managers in order to provide an accurate context of the market and determine the weightings of our core medium to longer-term investment strategies. In doing this, Rathbones has been able to introduce a greater level of structure and a rigorous framework that targets consistent risk adjustment returns whist continuing to adapt to the changing markets. However, managers still retain freedom of movement to target shorter-term opportunities required of a more absolute return or capital preservation mandate, and now strike a good balance between providing reassurance through a structured process and maintaining a flexible and bespoke service.

A key differentiator within our enhanced investment process is how we allocate assets. Instead of dividing assets according to their volatility, we increasingly consider their correlation characteristics. As such, asset classes are based on liquidity, equity-type risk (including assets that are highly correlated to equity markets, e.g. corporate bonds, private equity and industrial commodities) and other diversifiers that have a lower correlation with, for example, UK equities (e.g. global macro trading funds and property and commodities such as gold or agriculture).

We have also introduced a quantitative scoring framework that extends the breadth of our research. We create both short and long-term return forecasts for each asset class and supplement this with historic correlation and volatility scores, to help construct the most efficient strategies.

Clients and their advisors will continue to search for their preferred blend of rigorous process, implementation flexibility and experienced managers to reflect their specific requirements, and clients of Rathbones can therefore expect a tailored service, underpinned by a well researched investment process and designed to deliver appropriate risk-adjusted returns.

Disclaimer: Rathbone Investment Management International is regulated by the Jersey Financial Services Commission.

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