APC’s Investment Philosophy
APC’s Investment Philosophy
APC’s Investment Philosophy
APC’s investment approach is based on rigorous analysis of investment markets, how they work and how they reward investors. APC’s investment aim, through the portfolios recommended, is that clients achieve the performance that is delivered by asset classes and over time, outperform benchmark indices, while also carefully managing risk.
Some of the key guiding principles of our approach are:
- costs and taxes matter – so keeping these low is important
- investing is not speculating
- discipline and consistency are paramount
- diversification is essential
- transparency is critical to understanding risk factors
Fundamental to establishing an effective investment framework is ensuring a solid understanding of our clients’ objectives, overall circumstances and goals.
APC recognises that a significant proportion of the investment experience is determined by the ‘class’ of underlying assets chosen. Factors like ‘market timing’ and even ‘specific investment selection’ and ‘trading’ playing a lesser role in portfolio performance.
In other words, establishing an appropriate risk profile specific to each individual or couple is a fundamental building block when it comes to the construction of an appropriate investment portfolio. This is because it will be a key determining factor in not only the long term investment performance but also the level of ‘risk’ or volatility experienced.
Understanding that risk and return are related, APC works with you to determine an appropriate risk profile that will carefully balance a range of factors like your individual capacity for and tolerance to investment market risk, together with understanding the return required to achieve your financial goals. From there, APC will recommend a blend of investments such that the overall portfolio provides you with an appropriate risk and return outcome – and ultimately supports your individual objectives and financial plan.
The underlying investments chosen are rigorously researched and reviewed by the APC Investment Committee which, from time to time, may recommend changes to either the underlying investments or the weighting to each underlying investment. But by and large, we recommend a consistent approach underpinned by disciplined and regular rebalancing.
At the core of APC’s investment approach is one of the ‘Classic’ suite of portfolios which employ a high degree of diversification that allow you to harness the returns delivered by traditional asset markets (cash, bonds and fixed income securities, listed property and shares – Australian and Global). This core strategy aims to ensure that you achieve the market rate of return in the long run, at a minimum, to which you are entitled as an investor. Research indicates that many investors fail to achieve even this due to a focus on factors like market timing and active tradingii.
As such the portfolio core places high emphasis on passive-style components. Together with keeping costs low, this creates a high degree of diversification and allows you to harness the returns delivered by broad markets.
In addition, APC may consider with you further investment ‘tilts’ that may be appropriate in your circumstances (and subject to your goals, preferences and long term objectives). These may enhance diversification and/or create other benefits to improve your portfolio outcomes. This is termed a ‘Core and Satellite’ portfolio approach.
APC’s ‘Core & Satellite’ Approach
The objective of the Core & Satellite portfolio approach is to ensure that you keep pace with broad markets via a low cost, market linked, highly diversified and fully liquid ‘Core’ portfolio whilst also creating the potential to achieve particular outcomes through active ‘tilts’ to specialist investment managers. For example, to lower overall portfolio risk through more style diversification or identify opportunities to enhance overall portfolio returns over and above the market via certain investment sectors.
These additional investment ‘tilts’ have been grouped in bands of varying characteristics (e.g. liquidity and type).
As appropriate, ‘satellite’ investments may be recommended with a view to tailoring to achieve specific objectives such as:
- a lower level of investment volatility (through non-correlated strategies)
- a higher level of diversification
- increased wealth creation capability
- increased capacity to generate passive portfolio income
- your specific preferences regarding sustainability or ESG
- exposure to certain market themes e.g. technology, healthcare etc.
Satellite investments may be characterised by:
- a greater reliance on the individual skill of the investment fund manager
- private or unlisted asset exposure
- in some cases, lower liquidity or accessibility to funds requires a patient or long term perspective
- greater concentration on a particular asset class or type of investment
- lower correlation to the broader market which can lead to lower portfolio volatility overall
- potentially higher fees
The objective is not to add unnecessary cost or complexity but rather to add complementary exposure to the majority ‘Core’ strategy.
Your recommended portfolio would carefully consider your individual tolerance to investment risk, needs and objectives with the aim of supporting the achievement of your overarching financial plan and long term goals.
APCs Investment Committee meets on a quarterly basis which will include a formal review of recommended investments, a detailed analysis against various benchmarks and alternatives utilising a range of metrics and data, The Investment Committee will incorporate third party input such as direct updates from investment fund managers together with general market and economic review.
APC may review and consider changes or additions to recommended investments as a result of these reviews from time to time.
How Are Investments Held?
APC will review your circumstances and provide recommendations regarding the entity(ies) in which underlying investments are held for tax, asset protection and / or accessibility purposes. This may also incorporate recommendations regarding an investment platform within which the recommended investments are to be held.
If an investment administration platform is used, this may incorporate the use of a ‘custodian’ that is external to APC to hold investments on your behalf to act as an intermediary. This arrangement adds security to your holdings whilst also providing reporting advantages and administrative and trading simplicity.
9 Keys To Financial Independence
We understand that merging various components to achieve financial organisation and create an effective plan can be challenging.
In working with you to develop and implement a personal wealth management strategy, APC takes a methodical approach which applies our 9 Keys to Financial Independence. Through this process, we help ensure that each component of your financial life is optimal, cohesive and aligned with your personal objectives. Further, a financial plan is not evergreen – it needs to be periodically reviewed and adjusted to reflect the dynamic world in which we live.