How we manage money.
LNKD Investment Managers is an approved category II investment manager, focused on the delivery of personalised discretionary fund management services.
We believe that staying focused on long-term goal achievement versus short-term performance offers the best opportunities for investors. We use a combination of quantitative and qualitative tools in our rigorous portfolio construction process seeking the optimal balance between risk and reward. We believe our collaborative investment approach of blending active and passive investment strategies allows us to optimally construct portfolios, adapting and reacting to ever-evolving market conditions. Our strategic investing approach looks to determine what proportion of a portfolio should be allocated to Growth Assets, Defensive Assets and Uncorrelated Assets (refer to diagram). The approach provides for the long-term, inflation adjusted spending needs of investors. The strategy is a disciplined, value-conscious, historically informed, risk-managed and a full-cycle approach to long-term investment.
The approach involves a two-step process:
- Valuation-focused asset allocation – measure prevailing valuations, allocating to assets that have the highest average annual expected return adjusted for risk.
- Risk management – adjust investment allocations to manage the risk of the overall portfolio.
Growth Assets – tend to have higher levels of risk, are generally more volatile particularly in the short term and are associated with higher returns. These assets include Domestic Shares, International Shares and Listed Property.
Defensive Assets – tend to carry lower levels of risk, are generally less volatile and are associated with lower returns over the long term. These assets include Cash, Fixed Interest and Bonds.
Uncorrelated Assets – tend to have a low correlation to the market. The price movement of one asset has little effect on the price movement of another asset. These assets include Real Assets, Commodities (Gold), Structured Notes and Alternatives (Absolute Return and Hedge Funds).
Numerous Asset Allocation studies point to the following results:
- Asset allocation is responsible for up to 90% of variations in portfolio performance.
- When assets are invested over time, the key driver of variance of portfolio returns has been the asset allocation decision.
- Ineffective diversification simply adds more securities, without enhancing returns or moderating risk.
- There is no single asset allocation model to fit every investor, or for every stage of life. The asset allocation decision is a personal one.
Building an optimal investment solution involves two levers: The first is the portfolios strategic asset allocation (i.e. identifying the right mix of assets to achieve the investors financial goals), the second is execution which involves the process of selecting the right investment manager.
Our goal is to invest with some of the best managers in each investment universe, which we define as achieving top quartile risk-adjusted returns over a market cycle, typically five to seven years. The approach is to identify managers whose success has been based on their investment skill (rather than luck).
We draw on a multitude of qualitative and quantitative techniques which, when combined, give an informed view. Our due diligence process can be divided into two steps: the investment due diligence which identifies best in class managers and operational due diligence.
Our manager selection process follows a three-step approach:
Quantitative Analysis
PROCESS: Filter the investment universe according to minimum investment requirements criteria.
Thereafter, the defined investment universe is quantitatively screened by using the following metrics; excess returns, alpha, beta, standard deviation, Sharpe ratio, information ratio, risk/reward, up/down capture ration, consistency ratio and correlation.
RESULT: We rank fund managers, reducing the investible universe into a more researchable list of suitable managers.
Qualitative Assessment
PROCESS: Our manager due diligence process can be divided into two distinct steps:
- the investment due diligence which identifies best in class managers and;
- operational due diligence to ensure operational structures are aligned with our requirements.
SEEKING MANAGERS WITH:
- Level of differentiation
- Specialised advantage
- Repeatable investment process
RESULT: In-depth analysis of identified managers into a smaller subset of quality managers.
Monitoring & Attribution
PROCESS: We blend top-down macroeconomic views and bottom-up manager analysis to arrive at our investment decisions.
RISK MANAGEMENT:
DAILY/WEEKLY: We monitor managers, in real-time.
MONTHLY: We review managers’ performance monthly relative to the standards we have set.
QUARTERLY: We undertake a detailed performance review focused on the relative performance & factors impacting the portfolio.
RESULT: Actively managed investment solution targeting superior risk-adjusted returns.
Our bespoke discretionary service results in personalized investment solutions with the day to day responsibility of managing client’s investments being managed by a professional investment manager. Our Managed Solutions offer a selection of South African and global multi-asset solutions covering the risk spectrum to best suit client needs and objectives. The investment solutions target specific outcomes and are designed to suit different client risk profiles. The solutions are designed as core, risk rated holdings, that benefit from the skill of the underlying managers.