Monitoring Investments

In this video, Tony explains in simple terms how we monitor investments at Baker Davies.  You can also read below about the principles we follow, the steps we take and what this means for clients.

Selecting and monitoring your investments

We want your investments to work hard for you so you can achieve your goals and aspirations while we reduce your concerns. So, we conduct a huge amount of research behind the scenes to select, monitor funds and adjust the holdings of your portfolios.

HOW do we do this?

We believe in diversifying asset allocation to reduce risk.

• This is because research has shown by far the dominant contributor to total portfolio return is asset allocation. The appropriate blending of different investments in a portfolio, whose characteristics are not closely correlated to each other can have the effect of reducing portfolio volatility.  We pay a lot of attention to having the right mix within the funds and portfolios we recommend. 

We like active fund managers that have proven their worth and select them based on a robust research process developed by us.

• We narrow the field by regularly conducting both quantitative analysis and qualitative analysis across the entire range of funds available to UK investors. Quantitative analysis involves checking the statistical performance of specific funds over different time frames and economic climates. We measure performance and a range of other criteria which we score and rank in importance. We have software that helps do this analysis.
• Qualitative research seeks to understand in more detail how the fund manager achieved the better performance. This requires a deeper look ‘under the bonnet’, so to speak. We want to know, was the better performance because of the kind of individual stocks they favoured at that time and will that preference still be relevant or indeed favoured going forward? Was their performance just luck, due to the age or size of the fund or a particular set of circumstances at that time. Do we believe they have what it takes for the current and future economic climate? If the current fund manager were to leave, what impact might that have? For example, is it more of a team approach or down to individual flair?

We use stochastic modelling tools to compare different scenarios and the Investment Committee decides the strategic weightings that we take.

• We utilise a forward-looking stochastic modelling tool (which uses advanced modelling of potential future scenarios), and together with historical performance analysis, we arrive at a framework for selecting asset allocation.
• Within this framework, there is scope for weighing portfolios slightly one way or another according to what we believe will be the investment environment going forward. It is the investment committee who decide the strategic and tactical moves for our portfolios to take advantage of economic cycles and market trends.
  

The Investment Committee  

• Strategic decisions about how Baker Davies manage the funds they oversee are made by the Investment Committee. The Investment Committee meets quarterly to discuss stock markets, consider economic factors, market sentiment and to decide the next weightings and allocation of funds for the various Baker Davies Model portfolios.  
• The committee consists of directors, experienced investment advisers within Baker Davies, an independent economist, an independent fund manager plus advisers and researchers from a wealth management firm whom Baker Davies collaborate with to share and supply research and compliance resources.  

What all this means to you

• Your adviser will recommend funds and portfolios that have been vetted by our robust in-house research processes.
• We aim to optimise returns without taking excessive risk. We diversify portfolios across asset class, geographical region, industry sector, fund manager and single security.
• Most clients invest in Baker Davies Model Portfolios, which provide access to an appropriately weighted portfolio of favoured funds. There are different model portfolios for different attitudes to risk and for income or growth, and they contain different mixes of our favoured funds. These portfolios will change over time as we make adjustments to the funds we recommend and the asset allocation weightings within the portfolios.
• For very small investments, we would recommend a diversified well-managed fund rather than a portfolio of funds. We can also recommend ethical funds and provide a 3rd-party discretionary fund service for clients who have specific requirements.