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Your Questions
ANSWERED
These are four key questions that I ask potential clients. How have we delivered Absolute Returns?
The answers will differ from person to person but people It sounds simple, we focus upon three things (i) asset
do not link their answers to the performance of an allocation – getting the right mix of asset classes and
investment index they tend to answer in absolute numbers. investment strategies for our clients and managing this
If they link their return expectation to anything it will be mix over time (ii) fund selection - identifying the best
cash rates or inflation which confirms that they are by managers in the areas we wish to invest in and (iii)
nature absolute return investors. controlling risk.
2) Mathematics. We are permitted to use all of the tools in the
If you lose 50% of your money you need to make 100% investment toolbox. Portfolios are multi asset class and
to get back to square one. Any negative performance multi investment strategy as we wish to reduce
needs a higher positive performance to get back to portfolios sensitivity to any part of an economic or
breakeven and highlights the need to focus upon not liquidity cycle. However, we are never obliged by a
losing money. benchmark to hold any asset. For those old enough to
remember this is how money used to be managed when
3) Investment Timeframes. clients put their faith in a Fund Manager rather than an
If you invest on a relative return basis you have to investment market.
accept the investment timeframes of the underlying
asset classes. Your Investment Manager will seek to Asset allocation is dynamic. The mix of investments will
moderate losses in any downturn and will seek to change over time and to ensure that decisions are timely
amplify gains in any recovery but they will not exit the and meaningful key decisions are made by small
asset class, so you have to be prepared to sit with it for committees. Typically no more than 6 of us vote at
however long it takes to recover after any setback. This Asset Allocation or fund selection meetings. We all have
reminds me of the first investment joke I was ever told. confidence in our colleagues and we have all worked in
Question: What is the definition of a long term large institutions in the past so understand that the
investment? Answer: A short term investment gone more people that are involved in a decision the more it
wrong will be diluted.
3 conundrums to consider Fund selection and monitoring is diligent and takes up a
1) If an Investment Market has fallen 20% and a large part of our time as well as that of the New York
relative return investment has fallen 10% has it based advisors we employ. As we invest in a number of
performed well? specialist funds that are only available to “professional
2) If most people are naturally absolute return investors investors” we typically need to meet a fund manager 3
why is most money managed on a relative return basis? to 5 times before we will invest and the time from first
3) Why is most money managed according to the discussion to investment can be 12 months or more.
investment timeframe of the asset classes rather than The review process will cover all aspects of investment
the investment timeframe of the investors? strategy as well as operations and administration.
As we are not a household name it would be fair to ask: We build portfolios upon a stable foundation. We
Are Dawnay Day Milroy qualified to talk about absolute include a number of investments that have a happy
return investments? habit of generating predictable returns in the region of
6% to 12% per annum. Typically, this will include some
The value of Investments that we presently manage or exposure to “skills based” investment strategies that are
advise in the Channel Islands is rapidly approaching USD reliant upon a Fund Managers judgement rather than a
1Bn. Over the last 9 years our core absolute return rising market. If an investment is largely reliant upon a
investment strategy has delivered:- rising market to generate returns we will ensure that
leverage is modest as we understand there are times
i) An average annualised return of 11% per annum. when leverage works against the investor. When cost
ii) Returns in excess of cash in every year. effective we will also seek to minimise currency
iii) A maximum possible loss of less than 5%. exposure by actively hedging out currency risk from
iv) The recovery of any loss in less than 6 months. portfolios as we do not want predictable investments to
become unpredictable due to currency fluctuations.
We all know that historic performance is not a guarantee
of future performance. However, I hope you will agree that If you would like to know more contact:
these returns display our credentials and that you will want David Le Cornu on Jersey 281004 or
to read on to find out how we have achieved these returns. via e-mail: d.lecornu@ddmci.com
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