In association with

McGraw-Hill

Best practices that build value, drive growth

and create efficiency

Jon Reilly

Chief Investment Officer

Implemented Portfolios

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Best Practices That Build Value, Drive Growth and

Create Efficiency

S&P Dow Jones Indices – ETF Masterclass

October 2013

Jon Reilly

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AGENDA

• What practice are you trying to be best at?

• Outsourced Investment Management

• What competitive advantages do you have?

• The Role of Benchmarking in Portfolio Management

• Different approaches to Asset Allocation

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What practice are you trying to best at?

Asset Allocation

Portfolio Construction

Trading and Execution

Portfolio Rebalancing

Security Research

Managed Fund

Research

Economist

Portfolio Administration

Communication & Commentary

Corporate Actions

Asset Consultant

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What practice are you trying to best at?

Asset Allocation

Portfolio Construction

Trading and Execution

Portfolio Rebalancing

Security Research

Managed Fund

Research

Economist

Portfolio Administration

Communication & Commentary

Corporate Actions

Asset Consultant Life Insurance

& Risk Management

Estate Planning

Tax Planning

Client Reviews

Retirement Planning

Corporate Advice

Key Person

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What practice are you trying to best at?

Asset Allocation

Portfolio Construction

Trading and Execution

Portfolio Rebalancing

Security Research

Managed Fund

Research

Economist

Portfolio Administration

Communication & Commentary

Corporate Actions

Asset Consultant Life Insurance

& Risk Management

Estate Planning

Tax Planning

Client Reviews

Retirement Planning

Corporate Advice

Key Person

Business Owner

Company Director

HR Manager

Sales and Marketing

Networking

Succession Planning /

Exit Strategy

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Where is your expertise?

Where should you focus your time and resources?

What do your clients value?

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Your Advantage – Taking A Genuine Long Term View

“while people need good advice, what they want is advice that sounds good”

“The investor’s chief problem – and even his worst enemy – is likely to be himself.”

Source: Benjamin Graham – The intelligent Investor

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Saving Investors From Themselves

Source: Columbia Management

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A Solution – Outsourced Investment Management

Source: Evestnet / Northern Trust

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What Solution – Outsourced Investment Management

US Retail Investment Market – 2012

Source: Evestnet / Northern Trust

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ADVISER

Setting the objectives

Daily Portfolio

Remodeling

Online Portfolio

Reporting

Comprehensive Investment Solution

Investment Program

Selection

Dynamic Asset Allocation

Portfolio Customisations

Annual Client Review

Ongoing Review

Discussion

Portfolio

Communication

Incremental Remodel Implementation

which minimises sequencing risk

A “Do It With Me” Approach Can Be The Solution

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A “Do It With Me” Approach Can Be The Solution

• Based on Client Specific Objectives

• Investor and Adviser Must Be Intimately Involved

• Requires Control, Flexibility and Transparency

• Communication is the key – No Surprises!

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The Role of Benchmarking in Portfolio Management

What behaviours does it drive?

In Investors? In Advisers?

In Managers?

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What is the value of benchmarks?

“Comparison in the financial arena is the main reason clients have

trouble patiently sitting on their hands, letting whatever process

they are comfortable with work for them. They get waylaid by some

comparison along the way and lose their focus.

If you tell a client that they made 12% on their account, they are

very pleased. If you subsequently inform them that ‘everyone else’

made 14%, you have made them upset.

The whole financial services industry, as it is constructed now, is

predicated on making people upset so they will move their money

around in a frenzy.

Money in motion creates fees and commissions.”

Tom Dorsey, Dorsey Wright and Associates.

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League Tables

• Chant West Survey

• 61 Funds in Sample

• Growth Assets 61% to 80%

• 1 Year Performance

• Range 10.2% to 18.7%

• Median 15.6%

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Asset Consultants

• Ranked on 1 Year Returns

• Same consultants producing

a wide dispersion of returns

• These are very highly

qualified, very well

resourced and experienced

investment professionals

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Asset Consultants

• Ranked on 3 Year Returns

• How do you evaluate

performance of these

professionals?

• Against the underlying

objectives that were

identified for the client

• Ranking should be irrelevant

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SAA approach with some occasional TAA tilts

Source: Lipper

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Dynamic Asset Allocation in Practice

Source: farrellys and Implemented Portfolios

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Why Implement DAA with Exchange Traded Funds?

• Low Cost

• Low Turnover

• Tax Efficient

• Physically Backed

• Transparent Holdings

• Highly Liquid

• Scalable Implementation

• Tight Tracking to NTA

• Tight Bid/Ask Spreads

• Efficient Communication

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30 September 2011

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30 September 2012

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30 September 2013

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