ABC IFA logo - image
FEIFA - logo image
Consumer Duty Alliance - logo image
Financial Vulnerability Charter - logo image

Issue 49 - Managing Risk & Travel Update

Managing Risk Within A Portfolio

In my last newsletter, we were looking at how a managed portfolio is typically structured in terms of asset allocation, geography and currency and having determined what proportions are appropriate, it then comes down to selecting the funds or direct holdings that should be included in the portfolio.

If, for example, it has been determined that 50% should be held in Equity funds (Stock Market linked investments) and that some of that should be UK funds invested in GBP, then it is quite likely that more than one fund will be selected in that sector. It really depends on the size of the portfolio as to how many funds will be included in the portfolio.

It is part of the work of the Portfolio Manager to research the most appropriate funds to be included and to keep all funds under review.

As market trends unfold, it may well be appropriate to vary the proportions that are held in each sector and this leads us on to managing investment risk.

Broadly speaking, it is the Equity content of the portfolio which will determine the level of risk that is associated with it.

A balanced portfolio for example, will typically have a “normal” balance of 50% Equity and 50% other sectors. This proportion could be considered the neutral position if markets are settled and volatility is not an immediate concern.

The graph below, is extracted from an investment report prepared by TAM Asset Management, one of the portfolio managers we work with, and this demonstrates how increasing the Equity content, affects the risk level of the portfolio.

Although the neutral position for a balanced fund is 50:50 between Equity and Non-Equity investments, this does not take into account the current trends and volatility in the markets at any given point in time. One of the “tools” available to the Fund Manager, is to adjust the proportion held in Equities and the chart below demonstrates the degree of flexibility, TAM will allow within their Balance portfolio. The Equity content can go as low as 15% or as high as 65%.

During periods of anticipated volatility or concerns that Equity markets are over-valued, TAM will seek to reduce the Equity content as a “downside” protection and then when they judge that markets are under-valued, they may well increase the Equity content beyond the 50% level to take advantage of the upturn when it comes.

Different approaches are taken by Portfolio Managers, some will regularly adjust the proportions of holdings if they are taking shorter term views, whereas some will look to the longer term with a view to allowing the funds to “ride the markets” and settle naturally over the longer term.

Where Are We On Our Travels?

I am pleased to say that we arrived in the US on Saturday, having spent 16 nights in Canada. The requirements of the US are that we had not been in the UK or any Schengen zone countries, for the previous 14 days and whilst we could prove where we had been (a whole bundle of receipts saved during our time in Canada, just in case proof was needed) we were still a little anxious to know we would be allowed in to the US - past experience has shown that the border staff can be very officious on a good day and that any type of banter should be avoided.

Our departure airport from Canada was Vancouver and we were able to clear US immigration in Vancouver. The staff were very friendly, were happy to have a joke with us and the whole process was much quicker and easier than normal. Having completed that in Canada, it meant that on arrival in Los Angeles, we were treated as a domestic flight and had no further formalities to go through. All round brilliant!

The anxiety over, we were able to enjoy a day in LA, (including a small earthquake at 08.00 on the Sunday morning) and it was really nice to have traded the rain in Vancouver for some warm LA sunshine.

We are now in New Orleans, having taken a 48 hour train ride from LA. The changing scenery across nearly 2000 miles was fascinating and the staff and catering onboard were all exemplary. The accommodation though left quite a bit to be desired - It was very cramped in our bedroom compartment, and yours truly was assigned the top bunk! Negotiating that ladder in the dark, in the middle of the night to answer a call of nature was a sight to behold and a bit of a challenge - I am just glad Chris was asleep and did not have her camera rolling at the time!

We were glad to get off the train as the last few hours seemed to drag but I am pleased we experienced that trip.

New Orleans welcomed us with tornado warnings on Wednesday afternoon and this morning, there was an emergency in our building and we were evacuated, while the fire department made sure the building was safe.

I am pleased to say all was well and that “normal service” was quickly resumed.

I hope all is well with you and we will keep in touch.

As always, stay safe.

Best wishes. From all at RAFP

Alexander Bates Campbell Financial Planning Limited is entered on the FCA Register under reference 817090. Alexander Bates Campbell Limited is an Appointed Representative of Alexander Bates Campbell Financial Planning Limited and is entered on the FCA Register under reference 522399
Alexander Bates Campbell Financial Planning Limited is authorised and regulated by the Financial Conduct Authority. The FCA does not regulate taxation advice.

The guidance and/or advice contained within this website are subject to the UK regulatory regime and the European Markets in Financial Instruments Directive and is targeted at consumers based in the UK.
Alexander Bates Campbell Financial Planning Limited/Alexander Bates Campbell Limited
First Floor, Unit 9/10 Riverview Business Park
Station Road
Forest Row
East Sussex
RH18 5FS
United Kingdom
Tel: 0203 167 0880
If you wish to register a complaint, please write to us at the above address or email us as or telephone 0203 167 0880
A summary of our internal complaints handling procedures for the reasonable and prompt handling of complaints is available on request and if you cannot settle your complaint with us, you may be entitled to refer it to the Financial Ombudsman Service at or by contacting them on 0800 0234 567