Investment process & portfolio administration

Investment process 

A mutual understanding of a client's expectations in terms of risk and return is essential in order to create a suitable investment proposal and to establish an appropriate benchmark.

i) Asset allocation

Fund managers have full responsibility for their portfolios, but we provide a framework for asset allocation. Our Policy Committee meets monthly to consider reports from in house economists, country and sector specialists, and its conclusions are applied to various benchmarks.

ii) Stock Selection

Our analysts specialise in particular market sectors, all of which are reviewed on a rolling basis.

Sector specialists provide commentary at daily and weekly meetings and contribute to a recommended list of shares, bonds and funds.

We base recommendations on our own research, though we have access to external analysts. We aim to identify businesses with a durable franchise and the capacity to support a rising dividend, and which trade at a discount to their appraised value.

iii) Risk Control

In most cases we manage portfolios with the objective of long term growth or for a balance between growth and income, and we use benchmarks based on equity market indices. In this case risk is relative rather than absolute and the aim is to outperform the benchmark. We ensure that portfolios do not diverge from the agreed asset allocation significantly, or become too concentrated in individual shares or sectors.

All our fund managers are subject to regular peer review. Significant variations of performance from the relevant benchmark are analysed, as is a random sample of portfolios. In this way underperformance is soon identified, while outperformance is scrutinised to ensure that the level of risk is appropriate.

Portfolio administration 

Clients deal directly with fund managers who keep them appropriately informed. We run segregated bank accounts and hold stock in our nominee company. Year end tax schedules are produced in a format approved by HM Revenue & Customs.

i) Nominee Company

We hold securities in our nominee company rather than registering them separately in the client’s own name. This has a number of advantages. We are able to trade without sending stock transfers for signing and on better terms than we otherwise would. From the point of view of security, our nominee company is a separate legal entity from Smith & Williamson and the assets in it cannot be set against any liabilities of the Group.

ii) Banking

We maintain individual bank accounts for our clients. Many use us to pay school fees and other regular bills as well as for settling investment transactions. A typical portfolio includes current, deposit and income accounts, and we can also provide cheque books and place larger sums in the money market. Full details are given in the Banking & Cash Management section.

iii) Reporting

Our regular correspondence includes contract notes, valuations every six months with a list of transactions, and quarterly bank statements. We send an annual review of performance and tax schedules at the end of the financial year. These are prepared in a format which is designed to simplify the preparation of tax returns.  

Contact us

For more information on our discretionary portfolio management service contact a member of the team.