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Investment approach

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Our investment management approach aims to help investors achieve two things – to grow wealth and income faster than inflation in the long term and to manage short-term capital instability caused by investment markets.

Each of the SMAs managed by Proactive is designed to do this by having  an investment return objective over long-term (10 years) that  is expressed as Inflation plus a margin. The higher the margin, the greater the allocation needed to growth or equity assets.

As a guide to investors, we also assess the risk of not meeting the long-term objectives (because nothing is certain in investment markets) as well as the risk of a negative return on a portfolio in any one-year period.

We call these risk parameters.

How we go about achieving investment objectives

The SMAs managed by Proactive are designed to achieve their investment return objectives within their risk parameters by:

  • Assessing the likely investment market returns over the long-term time scale across all of the major asset classes
  • For each portfolio, setting the long-term allocation to growth or equity assets needed to meet the investment return objective relative to inflation over 10 years while also operating within the risk parameters.
  • For each portfolio a long term multi- asset class allocation is set which will provide diversification in changing market conditions
  • Over shorter time scales the actual asset allocation is managed dynamically to reduce volatility in the portfolio returns. This is done by shifting the allocation to each of the asset classes away from the long-term multi- asset allocation but within specified ranges. The ranges are wide to enable the portfolios to be shifted to meet changing investment market conditions and protect capital value.
  • Finally Proactive aims to add to portfolio returns by selection of assets within each asset class, which are expected to perform well relative to the particular asset class benchmarks. Essentially the approach is to add value over time by avoiding selection of overpriced listed securities or managed funds.