Smart Investment Management
Defined-Risk Portfolios
2
Smart Investment Management
Introducing the Smart Defined-Risk
portfolio range
The actively managed Smart Defined-Risk portfolio range has
been designed to maximise investment returns for a variety of
risk tolerances. Each portfolio is diversified, offering investors
exposure to asset classes that could include equities, fixed
interest, property, commodities and cash.
You benefit from:
• Access to an experienced investment management team
with a proven track record who will review and manage
your portfolio on a daily basis
• A choice of portfolios designed to meet your investment
objectives and risk requirements
• Clear and competitive fees
• First class administration
• Regular portfolio commentaries and updates so you always
know what’s happening with your investments.
It’s more than just a name...
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Combining the skills of two specialist
finance companies...
Smart Investment Management your discretionary manager
Praemium - the technology
powering Smartim
Smart Investment management (Smartim)
was established by Praemium to develop and
manage a range of innovative, competitively
priced discretionary investment solutions.
Praemium will facilitate efficient administration,
execution and custody of your portfolio via its
leading online discretionary platform.
Smartim will invest and actively manage your
portfolio to take advantage of opportunities
to enhance potential returns and, more
importantly, to minimise the risks you face.
Established in 2001, Praemium is a leading
provider of investment platforms, portfolio
administration and execution with offices
in the UK, Jersey, Australia, Hong Kong and
China. Many of the world’s leading financial
advisers, investment managers and financial
product providers trust Praemium to manage
or administer over 300,000 investor accounts
covering over £50 billion in funds globally.
Clients include RBS International, BlackRock,
Morgan Stanley, E*TRADE, Can-accord, Credit
Suisse and ANZ Bank.
...and one specialist investment
management team.
The investment team responsible for the day-to-day management of your portfolio has over 40
years of combined experience in the investment management market and a proven track record in
designing and managing discretionary portfolios.
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Ari Towli
Nick Stanhope
Ari Towli has over 19 years
of experience in the area of
multi asset, multi manager
investing. He has worked
at Singer & Friedlander,
Quilter & Co., Rothschilds and most recently
Gartmore and North Investment Partners
where he was responsible for fund selection
and the management of North’s multi-asset
portfolios and funds. Whilst at Gartmore, Ari
developed the risk tools that were critical to the
construction and management of the Gartmore
multi manager funds and was instrumental
in the design and development of Gartmore’s
Multi Manager Absolute Return Fund and
North’s range of risk-graded multi-asset
portfolios.
Nick Stanhope has over 13
years of experience in the
investment management
industry and specialises in the
area of multi-asset, multimanager investing. Nick has worked for Abbey,
Legal & General, Chiswell Associates, Cazenove
and most recently at North Investment Partners,
where he spent over six years as a senior fund
manager responsible for fund selection and
the management of all North’s multi-asset
funds and their range of risk-graded multi-asset
portfolios.
The Smartim philosophy
Our starting point is risk
Equities generate the strongest return over the
longer term - but they can also be quite volatile
in the short term. Investors have different levels
of risk (or volatility of returns) with which they
are comfortable, so we make sure we manage
portfolios keeping your tolerance at the forefront
of our minds.
Diversification is essential
Different asset classes act and behave in different
ways in different market conditions. By combining
a variety of different asset classes in your portfolio
we can enhance your investment returns for the
level of risk you are comfortable taking.
The chart below illustrates how five asset classes
performed over the last 10 years. Unsurprisingly,
equities performed the best over the long term but
had the highest short-term volatility. The multiasset portfolio, in black, combines the five asset
classes in equal proportions. Over the same period
this portfolio delivered strong investment returns
but with far less volatility or risk than a portfolio of
equities would have done.
The danger in putting all your investments into one
asset class is that you could either receive lower
returns or experience higher volatility than you
were prepared for.
The benefits of Smartim
discretionary management
The financial marketplace is a
constantly changing environment.
It isn’t enough to have a welldiversified portfolio; to get the most
out of your investments you will
need to fully understand the variety
of investment options available and
to be able to react quickly to market
events.
When you give discretionary
permissions to Smart Investment
Management you are appointing a
team of experienced, professional
investment managers who will
study the market, understand what
drives market trends and react
quickly on your behalf to adjust your
investments when market conditions
change. Further, with Praemium’s
Dynamic Rebalancing technology
you do not have to wait for quarterly
reviews and rebalances to see
these changes implemented, they
are implemented on the very next
trading date.
1600.00
1400.00
Equities
11 Sep 2001
Bonds
September 11
attacks
Hedge funds
1200.00
10 Mar 2000
Multi-asset portfolio
02 Jul 1997
800.00
12 Dec 1992
600.00
19 October 1987
400.00
Sep 2008
Sub-prime
financial crisis
Property
Commodities
1000.00
Apr 2010
European
sovereign debt
crisis
Dot com bubble
bursts
Asian financial
crisis
Black Wednesday
Black Monday
200.00
0.00
-200.00
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The Smartim approach
Smartim has three levels to its investment
approach. Each level is vital to ensuring that
your portfolio has the potential to achieve
your specific investment objectives.
1. Strategic asset allocation
Because different asset classes have
different risk/return characteristics,
getting the strategic blend of asset
classes right is fundamental to determining the long-term direction of your portfolio and ensuring
you are on the right path to meet your investment objectives. The blend of asset classes in your
portfolio is driven by the level of risk you are comfortable taking. The table below shows the
Smartim range of strategic asset allocation models.
2. Tactical asset allocation
Your investment team is constantly monitoring what is happening in the financial markets on your
behalf. They may take tactical positions in different asset classes and regions depending on their
current views. This allows them to enhance potential returns or mitigate portfolio losses in the short
to medium term without changing your portfolio’s long-term risk/return parameters.
3. Fund selection
Smartim will invest into a selection of funds which, in turn, will invest in assets such as equities, fixed
interest, property, commodities and absolute return. Your portfolio will be predominantly invested
in Collective Investment Schemes.
Our investment managers have a rigorous process by which to identify managers who can deliver
long-term out-performance of their targeted benchmark. We also have a selection of index-based
portfolios that we focus on using low-cost strategies such as index funds and exchange traded
funds (ETFs) to keep investment costs to a minimum. It is important to keep in mind that actively
managed funds seek to outperform their benchmarks, while index-based funds seek returns in line
with their relevant indices.
100%
Absolute return
Property
90%
Equities
Fixed interest
80%
Cash
70%
60%
50%
40%
30%
20%
10%
0%
Defensive
Defensive
Cautious
Cautious
Cautious+
Cautious+
Cash
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Fixed interest
Balanced
Balanced
Equities
Property
Balanced+
Balanced+
Absolute return
Aggressive
Aggressive
Aggressive+
Aggressive+
Our unique process
Detailed below are the key elements of the unique and robust process behind the Smartim RiskDefined portfolio range.
Provide access to a comprehensive portfolio range
with each portfolio mapped to individual risk
profiles.
Blend multiple asset classes to create efficient
strategic asset allocation models.
Apply a tactical asset allocation overlay to
take advantage of short- to medium-term
opportunities.
Perform detailed risk and style analysis to “look
under the bonnet” of your investments.
Set strict portfolio construction limits to ensure
diversification and adherence to your risk
tolerance.
Thoroughly measure performance to identify
where value has been added.
Constantly monitor risk at each step of the
process.
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Selecting your Smartim strategy
Your adviser will explore with you several elements that will determine which strategy is right for
you, including your age, financial goals, and your appetite for, or ability to tolerate, risk in your
portfolio.
The below table and the chart on the next page show the back-tested annualised returns, the
targeted annualised volatility and the maximum and minimum annual returns over a 20-year period
(to 31 December 2013) for each of the Smartim strategies. These figures are for illustrative purposes
only and do not provide any indication of potential returns that may have been added through
tactical asset allocation or fund selection.
80%
70%
60%
Expected Annualised Returns *
50%
40%
30%
20%
10%
0%
-10%
-20%
-30%
-40%
6%
8%
10%
12%
14%
16%
18%
20%
22%
24%
Expected Annualised Volatility
* Expected returns are based on back testing the strategies utilising 20 year annual data without any tactical asset allocation applied. Actual returns are likely to differ.
Important information
Source: Smartim, Lipper. All data used in the calculation of the information in the chart is total return in Sterling
terms.
The back-tested illustrative returns shown in the chart and graph are gross and shown before the deduction of any
investment management charges or adviser fees. The strategic asset allocations are simply adjusted to maintain the
volatility near the mean of their pre-set ranges. The maximum volatility target is a hard target but the minimum
volatility target is a soft target and, over certain periods when market volatility declines, the individual risk controls
of the models preclude the Investment Manager from increasing the risk in the model to maintain a particular
level of volatility. The returns are calculated by constructing attribution models with the various asset classes being
represented by IMA sectors where applicable and, if no IMA sector is representative of the asset class, an appropriate
proxy issued. The strategic asset allocations provided are correct as at 31 December 2013 and are subject to change.
The data is only intended to give an indication of how models would have performed over the past 20 years.
The actual returns that a client would have achieved would be altered by tactical asset allocation, fund selection
decisions, discretionary investment management charges and any charges of underlying investments in the
portfolios.
These illustrative back-tested figures have not been audited by an external body. Please note this material is for
illustrative purposes only. It is not an invitation to subscribe and is by way of information only. Nothing contained
herein constitutes investment, legal, tax or other advice, nor is it to be relied on solely in making an investment or
other decision.
The value of investments may go down as well as up and the value will depend on fluctuations in financial markets
outside of Smart Investment Management’s control. As a result, an investor may not get back the amount invested.
Please note that past performance is not indicative of future performance.
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Strategy
Defensive
Cautious
Cautious+
Balanced
Balanced+
Aggressive
Aggressive+
Back-tested historic average returns
5.2%
5.8%
6.4%
7.0%
7.8%
8.4%
8.8%
Targeted volatility
4.0%
6.0%
7.0%
10.0%
14.0%
16.0%
18.0%
Minimum back-tested annual
return
-6.4%
-10.8%
-14.1%
-19.0%
-23.3%
-25.4%
-26.4%
Maximum back-tested annual
return
12.2%
14.3%
17.3%
25.1%
37.0%
45.2%
53.4%
Selecting your Smartim portfolio
Once you have decided which Smartim strategy is right for you, the next step is to select a portfolio
with an appropriate objective to allow you to achieve your financial goals. Our portfolios fall into
the following categories:
• Smartgrowth portfolios are designed to maximise long-term capital growth.
• Smartincome portfolios are designed to deliver an attractive and rising level of income in
addition to some long-term capital growth.
• Smartindex portfolios are designed to deliver long-term growth for a lower overall cost. They
do this by investing predominantly in low-cost passive funds.
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Smartim fees and charges
• Your adviser’s fees: Any initial and/or annual fees you have agreed to pay your adviser will be
deducted from your portfolio and paid to your adviser by Praemium.
• Your custody and execution charges: You will pay to Praemium (via Smartfund Administration
Limited) 0.25%. This is deducted from your account on or around the 15th of each month. In
addition, you will pay an annual account fee of £24 per year.
• Smart Defined-Risk portfolio fees: Smartim aims to keep costs to a minimum to ensure that
you pay competitive fees and charges. All fees are clearly detailed for all of our portfolios in
our separate fee schedule which can be provided to you by your adviser. An illustration of the
average costs of investing in a Smart Defined-Risk portfolio are provided in the table below.
Smartgrowth
Smartincome
Smartindex
Discretionary management fee
(inc. VAT)
0.30%
0.30%
0.18%
Average cost of underlying
investments*
0.80%
0.80%
0.30%
Total investment cost
1.10%
1.10%
0.48%
*average cost of underlying investments in the portfolio as at 1 April 2013
• Underlying investment charges: The underlying funds and vehicles within the smart DefinedRisk portfolios carry an annual management charge. The investment manager, as an institutional
investor, will often be able to invest in funds on terms better than those available to retail
investors.
You should consult your adviser for specific fee information relating to the portfolio in which you
invest.
What are the risks?
As with all investments there are risks associated with the Smart Defined-Risk portfolios. Speak to
your adviser and refer to the Key Features and Terms and Conditions for the Praemium platform
available from your adviser.
We cannot guarantee the level of capital growth or income that will be generated when you invest
in a Smart portfolio; however, the Smart portfolios have been designed to reflect different levels of
risk. The Investment Manager will actively managed the portfolios to ensure they continue to meet
the risk/reward objectives, ensuring you are not exposed to a higher level of investment risk than
expected. The amount of risk you are prepared to accept (in other words the portfolio you choose
to invest in) will determine the level of expected returns.
The value of investments and income derived may go down as well as up and you may not get back
the full amount invested. Any investment you make should be considered medium to long term.
Your adviser will help you determine a suitable time frame for your investment. This will be driven
by your financial goals and your attitude to risk.
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Who do I contact about my portfolio?
You should contact your adviser with any questions about your portfolio.
Important information
•
•
•
•
•
•
•
•
This document is issued by Smartfund Administration Limited in relation to the Smart Managed Solutions.
It is intended to be used for marketing purposes only and does not aim to provide advice.
You should remember that past performance is not a guide to future performance. The portfolio
investments are subject to normal fluctuations and other risks inherent when investing in securities.
There can be no assurance that any appreciation in the value of units will occur. The value of investments
and any income derived from them may fall as well as rise and investors may not get back the original
amount they invested.
There is no certainty the investment objectives of the portfolios will actually be achieved and no warranty
or representation is given to this effect.
The portfolios therefore should be considered as medium to long-term investments.
Smart Investment Management and Smart Risk-Defined portfolios are the marketing names for the
investment team and product respectively.
Smartfund Administration Limited is authorised and regulated by the Financial Conduct Authority under
reference 463566.
Smart Investment Management is a wholly owned subsidiary of Smartfund Administration Limited and
is the entity providing the discretionary management services for the Smart Defined-Risk Portfolios. The
ultimate holding company of Smartfund Administration Limited is Praemium Limited, one of Australia’s
leading suppliers of online financial portfolio administration and Separately Managed Account (SMA)
technology. Praemium Limited is incorporated in Australia and listed on the Australian Stock Exchange.
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PRAEMIUM AUSTRALIA
PRAEMIUM UK
PRAEMIUM ASIA
PRAEMIUM INTERNATIONAL
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a
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