“Make no bones about it, these are the most boring portfolios you could ever hope to cover,” exclaims a straight-faced Gary Waite (pictured right). “We are genuinely not trying to give you shoot-the-lights-out performance.”
As tempting as it is to end the interview at this point, I know Waite and his co-manager on Walker Crips’ Managed Portfolio Service (MPS) range, Andrew Morgan (pictured left), are not the only wealth managers with this view.
“Our goal is to deliver plus 2% or 3% relative return year after year, steady as she goes,” says Waite. “Advisers’ underlying clients are pensioners that rely on a certain percentage of income so we do not want to give them any surprises.”
It’s a familiar story. Given the backdrop of monetary policy experimentation, low rates and elevated geopolitical risk, taking big macro bets on global, political events, and the subsequent direction of markets, is well and truly off limits across the wealth manager’s Alpha:r2 range of portfolios.
Waite says the concept behind the range is about giving certainty of outcome for IFAs and their book of business for a certain level of risk and within their tolerance to volatility. Typically, the goal is to deliver a steady 2-3% relative return year after year.
That means if the benchmark is down, say, 10% Walker Crips aims for its portfolios to be down less than 10%, and if it is up 10% the portfolios will be up slightly more than 10%, explains Waite.
“If we’re suddenly shooting the lights out with performance and banging out 15-20% a year and the benchmark is only making 5%, there is something wrong because we would be taking on too much risk,” he adds. “If you go to the casino and put all your money on black and black comes up, that doesn’t make you a good investor, it makes you lucky. We are not aiming to be lucky; we are looking to add incremental positive return against the benchmark after fees.”
View of the world
The Alpha:r2 range comprises five risk profiles aligned to the Wealth Management Association private investor benchmarks: defensive, conservative, income, balanced and growth. There is an additional ‘higher income’ variant of the conservative and income portfolios targeted at clients that require a certain amount of income to meet their day-to-day needs. It also runs an ethical portfolio.
In terms of the house view, the pair are neutral on UK equities and feel pessimism towards sterling is unwarranted. They are also sanguine on the outcome of Brexit negotiations, believing it will yield a deal of some description and whatever shape that takes, UK companies are flexible enough to adapt.
Article continues on next page…
