At FE Invest, our investment philosophy is built around managing and adjusting risk to deliver optimal returns for clients. Below we look at 5 key investment successes our robust methodology has offered in 2018.
NOT CALLING MARKETS – THE MERITS OF DIVERSIFICATION
- Focusing on scenarios and stress tests: The FE Invest portfolios are positioned for all the things that might happen rather than our expectation of what will happen. This low conviction approach paid off this year as the market switched violently between risk on and risk off, with strong equity returns bookended by sharp sell-offs.
- Geographical allocation: We have long eschewed the home bias that many solutions bake into their asset allocation. This means we look a little underweight to UK vs some of our peers but that has allowed us to pursue more interesting investment opportunities in US, Europe and Japan that all outperformed the UK market.
- Maintaining our exposure to Gilts: FE has long ignored the conventional wisdom of Gilts being overvalued and maintained a large position in the asset class for 2018. Our premise that they would do well when equities do badly proved correct yet again and it was one of the only asset classes to finish the year in positive territory.
ACTIVE RISK MANAGEMENT
- Responding to changing conditions: Towards the end of the year US equities became more volatile and started to shift the risk profile of the models. Our process picked up these changes early and was able to identify an optimal risk management strategy. This allowed us to keep invested in high growth US Equity funds while keeping the portfolios within our risk limits.
- Schroder US Mid CAP: While we have no concerns with the fund’s performance, our analysts team were able to recognise the risk of manager Jenny Jones departing and recommended we remove the fund six months before she announced her retirement. Whilst we don’t know ultimately what the impact of the manager change will be, we were able to act to remove the additional uncertainty from the portfolios.
The FE Invest proposition goes beyond portfolio management though. As a complete investment service, FE Invest offers ongoing governance and communication to Advisers to provide a comprehensive understanding of our investment decisions and keep the Adviser in the centre of the investment journey. FE also helps Advisers keep their clients informed through the provision of specialised, jargon free written and video content for your onward distribution to clients.
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