Asset Allocation : Asset Classes We Use

Fixed Interest

This includes bonds and gilt-edged securities, such as those issued by the British Government. Gilts offer a good diversification from equities, although returns are generally more modest. Corporate bonds (issued by companies) are considered slightly riskier than gilts but, they offer the potential for greater return and furthermore, they are negatively correlated with equities.

UK Equity

UK Equities have historically provided high returns over the medium to long term. However equities are quite volatile over short periods and a lack of certainty over future price movements makes them a riskier investment than some other asset classes.

US Equity

Presenting a more diversified portfolio than UK based equities. Exposure to the world`s largest economy can offer the prospect of higher returns, but with a higher level of risk, as these funds are subject to the movements in currency exchange rates. This can lead to above average short-term price fluctuations.

European Equity

Not totally correlated to UK markets and therefore, providing further diversification within your portfolio. Exposure to some of the smaller, emerging markets can offer the prospect of enhanced returns but, once again, with a higher level of risk than UK equities. They are also affected by movements in currency exchange rates.

Far East Equity

The opportunity for exposure to emerging markets which, historically, have experienced dramatic price movements and rapid growth These economies provide potential for higher returns but, there is a corresponding level of risk and the presence of short-term price volatility.

Specialist Sector

The funds in this sector can invest in areas not currently covered within the asset allocation model. The funds we select currently include such funds as BRIC funds i.e Brazil, Russia, India & China, Natural Resources and Latin America depending on clients risk profile. This list maybe expanded to include other specialist sectors dependant on prevailing market conditions and performance. The specialist sector will provide further diversification although more volatility.

Property Funds

In previous years property funds enjoyed relatively low volatility and positive, stable returns. Despite falling from favour in recent years this sector is recovering well and continues to provide diversification from equities.

There is no guarantee regarding how any of these asset classes will perform in the future. You should retain some liquid funds in a deposit account, which may also be held within you portfolio.

We can now move on, to explain how we expose your portfolio to the benefits of Asset Allocation and how we set the best possible risk and return balance to match you personal requirements.