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Ask the Portfolio Manager

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As we head into ISA season we wanted to make sure that all clients have the opportunity to interact directly with our investments teams to discuss everything from smart portfolio allocation, to stock transfers, deal execution and our share dealing offering, to ETF’s, diversification, and trade ideas for your new ISA allowance.

 

Over the coming weeks, up until Friday April 6th, we will bring you senior sales traders, our smart portfolio managers, and our very own IG analysts Chris Beauchamp and Joshua Mahony to answer any questions you may have, so make sure you check out IG Community regularly to keep up to date and make the most out of your investments.

 

Ask the Portfolio Manager

 

I would like to introduce IG Community to  and  who are portfolio managers for IG’s ‘Smart Portfolios’. This longer term investment vehicle, built on a robust partnership with the world’s biggest asset management firm Blackrock, has just reported their year one results, and they are very positive as you can read about here.

 

The 'balanced', 'growth', and 'aggressive' portfolio allocation returns were 4.1%, 5.5% and 7.2% respectively, whilst the moderate came in at 1.8% and conservative at-0.6%. This just goes to show how a diversified exposure to a range of markets reduces volatility over the long run - exactly what you want from this product.

 

If you have any questions at all, ask away. What goes into the decision making process for portfolio allocation and risk appetite? What do you do on your day to day? What do you think are the main market risks for the UK going forwards? Now is your chance…

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I have been investing into an ISA for many years now and have a high risk capital growth strategy.

 

I invest in income funds including OEICS. I invest in around 20 different funds per month using a 'cost pound averaging' strategy but I have invested lump sums only during major recessions, corrections and financial crisis of course! This has helped to maximise my returns and profits. I will continue to only invest lump sums during such periods. My annualised performance is extremely healthy and overall my portfolio has never made a loss. Some of the funds may make a loss for the year but the others more than compensate for the losses. 

 

I invest in 'frontier market' funds, 'emerging market' funds, 'micro cap' funds, 'smaller companies' funds such as Japanese, US, European and UK. Also Asian smaller companies funds. I also have exposure to commodity funds such as metals, energy and agriculture. My funds that I invest in are at the higher risk end of the spectrum but with great risk comes the potential of greater returns.

 

Your returns are far too low for my liking. Your 'aggressive' portfolio is for far more defensive and less adventurous investors than me. I have plenty of diversification over the 20 funds but also some similarities over stronger themes. I accept diversification can reduce the volatility and risk in an investment portfolio. However some of the best performing returns in an portfolio can some by investing in the stronger trending themes over the right period of time.

 

Conviction in certain investment themes backed up by strong research, analysis and understanding is crucial.

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I was looking at these smart portfolios over the weekend actually (because of this post!), and the question I had was actually quoted above: “What goes into the decision making process for portfolio allocation and risk appetite?”

 

And also can I have a smart portfolio ISA and a regular stocks and shares ISA at the same time?

 

Can I edit the smart portfolio? Like if your system put weighting into say - China equities - but I wanted to shift more to Japan or EM’s?

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Hi ,

 

The portfolios aim to profit from long-term 'risk premia' available in different asset classes. By blending asset classes which are less correlated to each other, we hope to be able to smoothe your returns over time. There is a strong top-down element in the portfolios, and they are positioned at the moment for global reflation (albeit with room to increase equity exposure) and rising interest rates. There is a 20-strong team at BlackRock directly behind the asset allocations, and they draw on the research from BR's strategy, investment and risk teams. So a very robust framework behind the portfolios.

 

IG has flexible ISAs, and you can have both a Smart Portfolio and Share Dealing ISA with us using the same year's allowance.

 

You can't edit the Smart Portfolio, as this would change the risk and return profile of the portfolio. Personally, I use a Smart Portfolio as my core holding and trade my best ideas (e.g. Chinese equities) in my Share Dealing account.

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Hi

 

Great to hear you have had success with your investments.

 

Smart Portfolios are not designed to eliminate your requirement to invest elsewhere - I also actively invest in shares through IG, but use an SP as a sensible diversifier against my own strategy going wrong.

 

When investing, I always try and ask myself whether I am being rewarded for the risk I take, whether performance was wholly down to skill, how correlated my investments will be in a downturn (e.g. EM, commodities and small cap can do poorly together), and how much of my return has come from currency risk (Smart Portfolios hedges a lot of this out).

 

We now have a year's track record, and returns have been very respectable vs. global indices, and with less risk.

https://www.ig.com/uk/investments/news/investing/2018/03/05/ig-smart-portfolios--one-year-track-record

 

The longer term BlackRock model portfolio returns have also done well against the UK wealth management peergroup.

https://www.ig.com/uk/investments/smart-portfolios/performance

 

Should add too, that (depending on how much you deal) £15k in a Smart Portfolio means you won't have to pay a £24/quarter custody fee on share dealing.

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,

 

Thank you very much for your response. However, I will politely disagree with the IG Smart Portfolio strategy. I have been investing for many years which in turn has built up some valuable first hand experience. I also am lucky enough to have friends and contacts who are far wiser, smarter and wealthier than me who also have a very similar investment approach to mine. The IG Smart Portfolio is not suitable for my risk appetite and risk tolerance. If one carries out research, quantifies data, establishes the trending themes, has conviction and confidence in ones own ability to judge the current potential and carry out meaningful analysis then it reduces the need to even think about ones strategy going wrong. I am referring to long term investing rather than trading. My approach to trading is very different to my approach to investing long term. I keep both portfolios totally seperate.

 

My personal performance from my long term investment portfolio and my total and annualised returns more than justifies the level of higher risk that I am taking. You miss the 'key point' in my strategy. I accept there will always be downturns along the way in a long term investment strategy. However these will be more than likely to be followed by upturns. During these downturns, I invest lump sums. 'Be greedy when others are fearful'. This has helped me achieve some really excellent performance statistics over the years. During both downturns and upturns I will continue with the 'pound cost averaging' strategy. However, during the downturns I will make lump sum investments. This amplifies the profit potential when these very markets begin trending upwards. Investors tend to focus on total returns. That is important but for me I am more interested in annualised returns over a longer time period.

 

As a long term investor who is not looking to sell or take any profits at this stage due to my long term wealth creation strategy then I embrace downturns. This gives me an opportunity to invest at lower prices on themes or ideas that I support over a longer time horizon. I don't worry about downturns or even see them as a risk. Once you start thinking like the IG Smart Portfolio then you are already reducing your chances of larger returns as the level of risk is being reduced in the portfolio. I accept this product may be suitable for some. However if you want the chance to earn the highest returns then you are better off creating your own smart portfolio and doing it yourself. If you don't have the discipline, time, energy, experience or knowledge then IG's Smart Portfolio may be worth considering. 

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thanks  - I didn't realise there was a 20 man team on it as well, and from Blackrock no less. Mental company. in 30 years they've got like 6 trillion .. TRILLION, with a T, assets under management. 

 

Imagine if you grew a company that big in 30 years :smileysurprised: :smileyvery-happy:

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