A behind the scenes look at how we manage your investments

The Capital Investment Committee – paddling hard beneath the surface

Meeting your financial goals so that you and your loved ones are free to live the lives you aspire to requires high quality, ongoing financial planning and the construction and maintenance of a robust, well-diversified, long-term investment strategy.  

Capital’s Investment Committee is responsible for the ongoing governance of the latter.

In most walks of life, when you employ a professional or craftsman, you expect a little bit of ‘action’ for your money.  ‘Now is better than later’, and ‘more is better than less’.  However, this generality does not apply in some areas.  

Take the case of a GP, for example, where a patient comes into the surgery with a sore throat and flu-like symptoms. Today, many GPs feel under increasing pressure from patients to provide some ‘scientific’ solution – such as the prescription of antibiotics – to their ailments and some feel cheated when the advice they receive is simply to take a couple of paracetamol tablets and go to bed for a day or two.  

Do we doubt the GP’s training, experience, and wisdom because of the advice we receive? Hopefully not. After all, science tells us that antibiotics don’t work on viruses, only bacteria.

These same pressures apply to advisers like us when it comes to investing.  Adopting an evidence-driven, systematic approach to investing can sometimes feel like there is little portfolio ‘action’.  The evidence tells us not to jump in or out of markets, pick individual stocks, or chase recent ‘hot’ funds’, but to set a long-term strategy, populate it with excellent funds and rebalance it regularly.  

That removes much of the ‘action’ from the portfolio. Thinking this results from a ‘set-and-forget strategy’ would be wrong. Above the surface, it can seem that not much is going on, but that is far from reality.

Figure 1: Systematic investing – the view from a client’s perspective

Image source: Albion, generated using ChatGPT

The seeming lack of investment activity on a portfolio from one period to the next belies the considerable time, effort, and discipline that goes into achieving this for you as a client. Capital’s Investment Committee sits at the heart of this effort, and one central question drives its efforts: ‘Does the investment approach adopted still provide our clients with the greatest chance of a favourable investment experience, based on the latest evidence, research and fund products available to us?’. 

The Investment Committee is always open to challenging the status quo and questioning if our philosophy still works. However, the evidence supporting a systematic approach is highly compelling, and any small portfolio changes that may arise are likely to be evolutionary rather than revolutionary.

In reality, the Investment Committee is paddling furiously beneath the surface to ensure that your portfolio remains robustly structured, issues and concerns are raised and resolved, and the funds used remain best-in-class choices. 

Ongoing oversight is both regular and robust. The chart below outlines the key responsibilities of the Investment Committee.

Figure 2: Systematic investing – the view from the Investment Committee’s perspective

Image source: Albion, generated using ChatGPT

External, independent input

The firm works closely with Albion Strategic Consulting (Albion), which provides third-party, independent input and challenges to the Investment Committee. Albion sits as a guest member during our quarterly meetings and conducts ongoing research on investment matters. This includes reviewing the latest evidence supporting or challenging our approach at the philosophical, asset allocation, and fund levels.

Less is more when it comes to investing.

It takes fortitude and discipline to stay calm at times of market crisis, to remain invested, and to rebalance the portfolio, if necessary.  It takes fortitude and discipline not to chase ‘hot’ parts of the markets (bitcoin, gold, tech stocks, etc.) or ‘hot’ managers, or to restructure the portfolio to take advantage of perceived short-term opportunities and challenges or give up on certain parts of the diversified portfolio that happen to be suffering at any point in time. 

It also takes fortitude and discipline to keep meeting with clients and to tell them again that, despite hiring us to manage your portfolio, it does not need changing. We’ve built the most elegant, reliable and proven ‘investment engine’  to fuel your future plans, and we don’t believe in changing it often.

We will never change a portfolio just to look busy, but only when the change improves it. 

This approach has rewarded patient investors over time, as our portfolios have outperformed most of our competitors, who seem fixated on chopping and changing their strategy regularly.

The next time you review your latest portfolio valuation report, remember that despite the lack of activity on the surface, the Capital Investment Committee continues to work furiously behind the scenes to allow this to continue.

In the immortal words of the investment legend and author Charles Ellis:

‘In investing, activity is almost always in surplus.’

Perhaps we should amend this slightly to:

‘In investing, activity is  (except for within the Investment Committee) almost always in surplus.’

If you’d like to learn more about the work of our Investment Committee, get in touch.

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