Smart Steps To Running A Healthy Portfolio - Barclays

Oliver Gregson

Barclays

2 January 2013

Editor’s note: Here are comments about the issues people should consider when reviewing their investment portfolios. The comments come from Oliver Gregson, who is head of discretionary portfolio management at Barclays. As ever, while this publication is delighted to share such points with readers, it stresses that it does not necessarily endorse all the opinions in the article.

Revisit objectives

With the fast-paced life of today, it is important for investors to regularly check and validate their overall financial goals to ensure they reconcile with their current investments. What is the purpose of the portfolio? Is it still the same, for example, to generate income or capital growth? Do they require some of the capital in the future? Have they recently had a life event – birth, marriage etc? Is their risk appetite still the same?

Evaluate the portfolio

Look at overall positioning. Combine all their assets and liabilities to create a personal balance sheet and investment ledger. Aggregate to a single view of all investments – many of our clients hold multiple securities in a variety of accounts (pensions, Self Invested Personal Pensions, Individual Savings Accounts, etc), what does this all look like together? Then compare this versus their target asset allocation to enable them to see where they are over or under exposed.

Value – what asset classes may provide value in 2013?

Despite 2013 presenting several investment hurdles, the outlook for equities looks relatively positive. As such we suggest investors rotate their portfolios away from cash and Gilts towards developed market equities especially in continental Europe, US and developed Asia. From a bottom-up perspective, we have identified the following key themes:

· Mergers & Acquisition

· Eurotrash and Euro Cash

· The Bond Bubble

· US Industrial Renaissance

· The Return of Real Estate

· Disruptive Mobility

Identify any portfolio changes (can be discussed with a portfolio manager or advisor)

Combine Steps 1,2 and 3 with what the outlook is for 2013 to see if the investments are positioned correctly. Speak to an expert about some of the major holdings within the portfolio so it is clear what is going on – do investors need to sell or switch some holdings? Having pooled an overview of all the investments, how different does it look to what it should? Any big gaps are points to discuss and should be used as identifiers/triggers to the next steps.

Einstein!

Einstein referred to “compounding” as one of the most powerful forces in the universe. One of the most powerful long-term return drivers is ensuring you rebalance your portfolio regularly – at a minimum quarterly.

Work with an advisor to identify new ideas/take action steps

Bringing all of the above together, investors should use the large differences from Step 4 above to guide what actions they take and then ensure these actions fit into their portfolio objectives, the macro environment (their outlook) and the current portfolio positioning.