We run a tight investment ship and always gain client approval prior to investment.
OUR INVESTMENT CHOICE IS CENTRALISED WHEREVER POSSIBLE.
Working on the theory that a good investment for one client can also be a good investment for another, we are not interested in reinventing our research every time we visit a portfolio. Key to our investment strategy is that we choose funds and not individual stocks and shares. We therefore select the areas in which to invest and the best fund managers to manage client money for you.
We place emphasis on a macro view of the investment world.
Because the majority of investment returns come from being invested in the correct sector or asset class, we place much emphasis on our macro view of the investment world. We define this using our investment management committee, a group of five key people who meet regularly to assess the markets in order to help shape our portfolios in a lively and diversified way.
WE FORENSICALLY EXAMINE FUNDS IN THE MARKET.
Once we have agreed in principle where to invest, seeking reassurance about how funds are structured and managed is key as is, most importantly, assessing the fund's managers. This process consists of running a comprehensive qualitative questionnaire, the results of which are rated along with the usual quantitative performance measurements for a robust overview.
McLaren Capital has developed a logical, five stage investment process that selects investment funds, not individual stocks and shares, based on the risk you are willing to take with your capital and managing risk within investment portfolios. All portfolios are benchmarked for ongoing objective assessment.
+ 1. Understanding investment risk
The first essential of investing any capital is to appreciate the significance of risk and the fact that it cannot easily be avoided entirely. Most people are concerned with market risk, i.e. the possibility that you might not get back the amount you originally invested. Even cash held on deposit is at risk, since its real buying power can be eroded by inflation. So, the first step is to discuss the level of investment risk you are prepared to take with your capital and complete a risk analysis questionnaire.
As a general rule, investments that have the highest potential return also carry the greatest level of risk. Risk can be viewed as a pendulum, with risk on one side and reward on the other. The pendulum can swing high on the reward side, but equally high on the risk side. The degree of the swing is the ‘volatility’ or risk of the investment. The assessed time it takes for the pendulum to complete a cycle (this will always be a guess) is also important as this sets the investment time horizon – how long the capital is invested. Low volatility investments can have a shorter investment period than higher risk ones, where the normal investment period should be between 5 and 10 years. The investment horizon should be driven by the period of time after which the investment is made to when proceeds could be needed either as capital or in terms of the production of income, and this in turn will determine the level of risk that can be taken.
+ 2. Investment screening
There are 32 investment Management Sectors and hundreds of UK domiciled investment funds within each. In theory, the investment sectors identify funds with a common investment objective allowing for the comparison of funds against their sector peer group, however, the variation in performance between the best and worst funds within a specific investment sector can be staggering. It is key to select investment funds that are either consistently outperforming their sector peer group, within acceptable risk tolerances, or are consistently outperforming on a risk adjusted basis.
In selecting suitable investments we screen all the various investment sectors within our investment analysis system – “Analytics” and narrow our research to a few funds in each sector that we consider worthy of further examination.
+ 3. Fund analysis
The next step is to evaluate the funds identified in more depth. To do this we carry out multi-faceted research internally to assess individual funds and provide us with an overall risk rating for each fund. Our research combines filtering funds across the whole market as well as looking at quantitative analysis together with qualitative analysis of each fund, their manager(s), the structure of their companies, external risks and infrastructure. The result is a dimensional review of the funds that could form part of our risk adjusted portfolios. Combining this with the output from our investment management meetings gives a clear overall risk appraisal of each fund and whether we wish to include or exclude it from our portfolios.
+ 4. Sector risk assessment
It is essential in any investment portfolio to reflect changing economic conditions so a key part of the overall fund risk rating process is to allocate a risk to the sector in which the investment fund is listed. This represents around 60% of the overall rating, with the sector risk reviewed on a quarterly basis. This is assessed by an Investment Management Committee (IMC) comprising of investment professionals. The IMC look at the global macro-economic picture and determine a sector risk which is factored into the individual fund risk. The objective here is to develop a dynamic process that reflects changing economic conditions and the differing risks they bring to different asset classes.
+ 5. Portfolio risk classification
The final stage of the process is that each funds analysed is allocated a risk classification from our scale of six, ranging from minimal to extreme. Once we have selected funds we allocate them to portfolios based on matching individual fund risk to your individual attitude to investment risk as determined by our risk questionnaire. A risk allocation is not an asset allocation (although it still produces a diversified portfolio). We have formed risk graded portfolios, which combine funds across each of the six risk categories to reflect your overall attitude to investment risk. For example, a balanced attitude to investment risk will incorporate holdings from extreme to minimal in order to achieve a balanced portfolio of investments. We also have within these portfolios variants designed to achieve specific objectives such as income, growth or a combination of the two. We also have an ethical portfolio and portfolios specifically designed for charitable organisations.
Past performance is not indicative of future results and no representation is made that results where stated, will be replicated. Investment values rise and fall and the value of them is not guaranteed. On encashment you may not get back the amount invested.