Portfolio Construction

Our aim is to construct your portfolio to maximise your potential return for a given level of risk. This means that we seek to combine asset classes in the most effi cient manner to construct a portfolio which has the potential to produce competitive returns in accordance with your risk tolerance.

To do this, we make some long-term strategic assumptions about investment returns and their variability, as well as how the different asset classes interact. For the equity-based element of your portfolio, UK funds provide core holdings while overseas equity funds are included as ‘satellite’ holdings for diversifi cation and to enhance potential returns. This gives us a robust framework for constructing portfolios.

The next step is to overlay this strategic framework with our tactical views of current market conditions, which our Investment Committee reviews monthly based on our extensive research. This disciplined approach is robust to ensure suitable risk management, as well as allowing us to exploit specifi c opportunities in the market to add value to client portfolios. Our risk controls include a maximum holding within the portfolio of 15% in any one fund, and 30% maximum exposure to a single fund management group.

While market conditions are subject to constant change, our aim is to manage portfolios with relatively low turnover, typically 15-20% per annum, by taking a 12-month view on holdings. This is in order to be able to take advantage of market opportunities withoutover-trading.

Fund Selection

The funds we recommend for inclusion in your portfolio are selected on the basis of our extensive investment research. We have a dedicated investment research function to collate information and present it to the Investment Committee.

Funds are selected based on the following criteria:

Qualitative: our assessment of the fund, including the robustness of the investment process employed by the fund manger, the pedigree and track record of the fund manager, the support team, portfolio positioning, and the standing and resources of the fund management group.

Quantitative: ‘number-crunching’ analysis of the historical performance of the fund with regard to risk-adjusted performance, consistency, volatility and charges.

Where funds no longer meet our selection criteria, and there are better alternatives available, we generally recommend a fund switch at the next review date where we act on an advisory basis, unless we consider market conditions require more immediate action. For portfolios managed on a discretionary basis, however, we will implement a fund switch immediately.

Performance

We believe a key part of the ongoing investment management process is measuring performance against a benchmark. A benchmark provides a clear and transparent target against which to measure the relative success of our approach to investment management over time. We will discuss and agree on a suitable benchmark with you.

We issue portfolio valuations every six months, together with commentary on performance both in absolute terms and compared with the agreed benchmark.

Portfolio Reviews

We consider that regular reviews of your investment portfolio are key to successful investment management, so as to be in a position to react to any changes in your circumstances, your risk tolerance and market conditions.

Accordingly, we report and make recommendations at least annually in the case of portfolios where we act on an advisory basis. Discretionary portfolios are monitored continuously, and we will make any changes to the portfolio at our discretion. We will agree the frequency of review meetings with you, although these are generally held either every six months or annually.

Summary

We aim to deliver strong investment performance, and the service that our clients expect, through the strength of our investment process and the quality of our team.

Cathedral Financial Management Ltd is authorised and regulated by the Financial Services Authority. We are not authorised to hold client money, so all investment cheques should be made payable to the investment administration company and not to Cathedral Financial Management. Please be aware that as with all real assets the value of your investments can fall as well as rise. Past performance is not necessarily a guide to future returns.