Our Approach

Asset Class Investing

Asset Class Investing is the most disciplined means of constructing a broadly diversified investment portfolio, which embraces the tenets of Modern Portfolio Theory as the basis for achieving superior risk adjusted long term returns. Its concepts are well documented and measurable. They have stood the test of time in every market around the world. The development of computer technology has enabled academic studies to be conducted, analysing almost 80 years of investment market data.

The collection of data and measurement of returns has demonstrated that the traditional approaches to managing money by stock picking and market timing do not work. What is most concerning is that investors en masse continue to employ investment strategies that simply do not work over the longer term.

The practical application of our Investment Philosophy allows investors to structure their plans with greater precision and focus. Investors who stay disciplined to the evidence-based ‘asset class’ management methodology will reap the rewards over time.

Asset Allocation

The asset allocation decision (how assets are allocated in a portfolio among asset classes) is the dominant factor (94%), which determines the long-term variance of returns generated from an investment portfolio. This should be the main focus of the portfolio construction.

The residual factors affecting long-term performance are market timing (shifting portfolio assets in and out of markets or between asset classes), which contributes only 2% to long term returns, and security selection (inclusion or exclusion of specific shares, bonds or other securities), which contributes merely 4% of total return.

The additional costs and tax of switching usually eliminates any benefit of this activity. (Source: Study of 91 large pension plans over 10-year period. Brinson, Randolph & Beebower. Financial Analysts Journal, 1986 and 1990)

Structured Approach

The Money Managers Ltd applies scientific methods to investing, just as science has been applied in other fields. Over the years, we have developed our investment strategies based on solid research.

This structured approach uses insights about risk and return characteristics, securities pricing and the asset class building blocks to develop a total portfolio solution in line with each investor’s unique situation. Integral to our process is defining and measuring risk on an ongoing basis.

The evidence proves the risk/return attributes of an asset class will determine the behaviour of a portfolio and can be relied upon to deliver a measurable result.