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Asset allocation
buylist. The end result is a substantial buylist of researched assets for investment managers to use when constructing portfolios. Investment rules Our investment rules have been designed to operate within the harshest of conditions and, while all market crises are different, there is never a reason not to stick to our established investment rules. We apply central investment rules to all our investment products. For our bespoke and managed portfolio services, these are the key inputs into our risk management system which assesses portfolios daily for deviations from expected volatility, asset allocation, buylist and concentration limits. The executive-level Investment Committee is responsible for setting these rules, as well as driving the overall investment philosophy of the firm. Rigorous application of these rules, such as maintaining high levels of liquidity, has put us in a good position to weather any foreseeable investment storm that may occur. We believe that in order to provide the best outcomes for our clients, it is important to integrate consideration of environmental, social and governance (“ESG”) factors into our Centralised Investment Process. We recognise that a broad range of financial and non-financial factors may be relevant in making investment decisions. We have therefore, systematically embedded ESG considerations into our investment analysis frameworks in order to help identify financially material risks and opportunities. Common principles and research disciplines are applied, to the greatest degree possible, across all research activities within a robust and transparent framework.
However, as global multi-asset investors, our approach to assessing ESG factors is tailored to each asset class and the vehicle used to invest in each asset class. We have published a Responsible Investment Policy, which outlines our approach and the key quantitative and qualitative inputs. We will continue to review and develop our approach to ESG integration to ensure we consider the most relevant and material information that can help improve client outcomes. Brooks Macdonald is a signatory to the United Nations supported Principles for Responsible Investing (“PRI”) and we are committed to implementing the six principles of the PRI across our investment management activities. We provide our services through six distinct service lines’ Bespoke Portfolio Service The Bespoke Portfolio Service (“BPS”) is the Group’s flagship offering, designed for clients who want an individual investment portfolio constructed to meet their specific requirements. The investment manager maintains a detailed knowledge of the client’s investment requirements, allowing the manager to construct focused portfolios supporting the delivery of risk-adjusted investment returns appropriate to the client’s investment objectives. The range of investments includes unit trusts, open-ended investment companies, exchange-traded funds, investment trusts and cash, as well as individual equity and bond securities. Investment managers for BPS follow the core asset allocation and asset selection recommendations of the Group-wide Centralised Investment Process (“CIP”).
Within BPS, in addition to our core BPS, we offer four specialised services aimed at clients with a distinct sets of needs: • Responsible Investment Service, designed for clients with the dual objectives of responsible investment and return generation in line with defined risk profiles. We offer two distinct Responsible Investment strategies: Avoid and Advance. The values-based objective of the Avoid strategy is to prevent exposure to companies involved in the production of armaments, tobacco, alcohol, gambling and pornography. For the Advance strategy, the objective is to invest in, and Advance, either businesses that provide solutions to sustainability challenges through their products and services, or businesses that have strong corporate policies and outputs relating to ESG criteria. • Decumulation Service, a bespoke approach, designed to help meet clients’ income requirements by aiming to shield the portfolio from downturns in the early years of withdrawals. Its structure is specifically adapted to address short-term sequencing risk whilst retaining the ability for longer-term assets to contend with inflation risk. • Court of Protection Service, aimed at clients investing following settlement of personal injury or clinical negligence claims, many of whom are vulnerable due to the effects of their injuries. • Gilts Service, a new service aimed at clients seeking to take advantage of the higher interest rate environment whilst avoiding equity risk.
To help diversify and manage risk, we use asset allocation guidance to allocate portfolios between various geographies and asset classes. Depending on the study you read, asset allocation can determine up to 80% of client returns over a longer time horizon, so it is vital to get this right. Our Asset Allocation Committee meets monthly to determine our house view. We use external parties, both independent macro research providers and the research teams of investment banks, to challenge us and help us construct our house view. We encourage external scrutiny of our views and pay the greatest attention to the group that disagrees with our house view the most, inviting them to our monthly investment forum to tell us what, in their view, we are missing. External research is vital as it means our Asset Allocation Committee is powered by the ideas of hundreds of macro economists and strategists. We also use the systems of most major data providers to test our views against history and flag opportunities in markets. This is a major investment for us both in terms of time and Brooks Macdonald’s financial resources. Asset selection Once the Asset Allocation Committee has set the house view, it is passed to our sector research teams. All our investment managers and research analysts have the opportunity to involve themselves in sector research and they form the core of the sector research teams. With oversight and peer review from our Asset Selection Committee, the ideas generated by the sector teams drive the
Brooks Macdonald Group plc Annual Report and Accounts 2024
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