Matching Funds to Asset Classes

We use a number of independent investment research facilities to help us choose those funds which, we believe, have the greatest potential for providing an above average return, without incurring an unacceptable level of risk.

We examine recent past performance on a year-by-year basis and, if a fund can consistently demonstrate above average returns, then clearly its long term performance will be significantly above average. Whilst past performance does not guarantee future performance, by looking at annual performance as well as overall returns, we can get a measure of a fund’s consistency.

We also use Standard & Poor’s and Morningstar to provide us with an indicator of the fund’s risk adjusted performance. These organisations carry out in depth research into fund management groups, their various managers and the systems they employ. Morningstar carries out more than 5000 fund manager interviews each year, yet they will give ratings to only 250 funds.

For example, a single A rating from OBSR would only be given to a “highly commendable” fund and their highest rating (AAA) is a indication of true excellence.

Morningstar and Standard & Poor’s also offer their own Fund Research ratings and again these are graded A through to AAA. An A rated fund is one which is considered to benefit from above average investment management abilities, coupled with above average risk adjusted returns, when measured against similar funds.

There is no guarantee that any chosen fund will achieve above average returns, but we believe that our research process gives us a greater confidence in the selections we make.

Over time, a Fund manager will buy and sell shares in the companies in which his Fund invests. For example the manager of the Fidelity Special Situations Fund may decide that he no longer wants to hold shares in, say, Vodaphone and that he would rather invest in, say, Shell Oil. It is important that we are aware of such changes, so that we can ensure your investments remain diversified.

Two other tools which we make use of are the Correlation Matrix and Risk and Reward Scatterplots. These may appear quite complex, but they provide us with valuable information that helps us to check whether the funds we select are offering the right mix of Risk and Return for your portfolio.