As an investor, do you know who is looking after your life savings? Trust is vital in a relationship, but it is important to look behind the curtain. This article looks at the methods of the Investment Committee at Capital Asset Management. You may not have given this a second thought, so some reassurance in these unusual times is useful.
Your life savings and family wealth are of vital importance. Retirement savings, ISA portfolios, and private education fees can't be at risk. The custodians of your investments are people you may know little about. But you can see what goes on from the inside.
Capital directly influences over £350 million of client money.
The investment decisions are in-house since indifferent third-parties don't care. Capital creates and designs world-class, low cost, and diversified portfolios to fuel your future lifestyle and goals, allowing you to enjoy financial security while spending a few pounds along the way.
The committee ensures that investment decisions remain prudent. The buck starts and stops at Capital.
What is the Investment Committee’s key role?
The committee acts as the forum for any investment related issues that arise. Some are on a regular basis such as portfolio rebalancing and product monitoring updates, while others are on an ad hoc basis.
The Investment Committee is accountable for investment decisions made on behalf of clients. It defines the roles within the team in relation to investment decisions and covers those that should be delegated to specialists outside the firm.
Who attends these meetings and when do you meet?
The committee sits every 90 days to review portfolios and the investment world. There are four permanent members of the committee and one external expert. Graham McCulley is the committee chair, Alan Smith (CEO and Founder), Charles Riches (Director and Compliance Manager), and James Greenly (Fellow of the PFS and Investment Specialist IMC).
Albion Strategic Consulting provides governance to Capital as an independent specialist.
What is discussed at the committee meetings?
In addition to the ad hoc agenda, the discussion items include:
- Review of evidence that either supports or challenges our investment approach.
- Appraisal of academic, economic, and research papers.
- Analysis of asset performance over 20, 10, 5, and 1 year rolling periods.
- Portfolios have allocation to areas such as small and value companies, emerging markets, and real estate. Capital makes decisions to invest money in specific areas such as by hunting for extra returns or reducing risk though diversity.
- Each single component of the portfolio has a role to play. We ensure they perform and behave in line with expectations.
- Discuss new investments or asset classes and monitor and enhance the portfolio mix. If something is not ready for inclusion, it goes on the ‘watch’ list.
- Detailed fund analysis used in your portfolios. There are four fund management firms. Eleven of their funds are deployed to access the investments required. We monitor these managers and their funds and then compare the risk and return data against benchmarks. Capital is independent and free to hire and fire managers.
- Review of portfolio performance on a structural and performance level. This either makes use of index proxies or live fund portfolios against benchmarks. We check that portfolios behave as expected and in comparison with our peers. We use annual, cumulative, and discrete year returns.
Each portfolio is reviewed from top to bottom on a quarterly basis.
Our governance process in practice
What does the Investment Committee think about COVID-19?
COVID-19 is one of the most significant challenges the world has faced for a long time and the committee understands that COVID-19 related issues run deep at a societal level. Nonetheless, the economic impacts of COVID-19 are easier to see.
The economic lockdown has meant that trade and company profits have fallen, while unemployment has risen.
Central banks and governments around the world have offered a strong response which has led to a recovery in portfolio values since April 2020. Markets have no emotion and they have not recovered on the basis of infection rates or the R-number. They have instead recovered due to the cut in interest rates in combination with more quantitative easing and government support for certain economic sectors.
All pandemics come to an end, so the recovery will emerge. Investing is long term and short-term challenges must not be allowed to knock you off track.
Attention is moving away from COVID-19 and there is now greater scrutiny on politics, with the two main subjects being the US election in November and Brexit.
It is likely that politicians will continue to support their economies. Companies in the portfolios are doing their best to survive COVID-19 and are actively planning to recover in the 'new normal'.
There are reasons to remain faithful to businesses who navigate the current headwinds.
The committee serves to keep client money safe and ensure that we make sensible investment decisions. It is a framework that has worked since the Capital portfolios launched in February 2011.
Please contact us if you would like to know more about Capital’s evidence based approach.