How a Portfolio Manager can give you the edge in investing
Discretionary Portfolio Management is a service where you simply set your long-term portfolio objectives and leave the day-to-day management to us. Your portfolio manager will also adjust your portfolio to leverage on changes in market conditions, and let you review your portfolio at any time.
Say for instance, that you feel strongly about ethical and sustainable investing in Asia, in which case your manager may implement an Asia-tilt, in addition to scrubbing your portfolio clean of palm oil, gaming and tobacco companies.
With that, more investors are now choosing to leverage on the investment skills of a Portfolio Manager. One way their skills give you the edge, is through discretionary portfolio management services — traditionally an exclusive private banking solution that’s now made accessible through collectively investing for multiple investors.
Here’s how a Portfolio Manager can work for you:
Portfolio Managers specialise in crafting a portfolio that produces the best returns for your risk profile. To get the best combination, they access long-term historical data to build a diversified portfolio.
Typically, the asset types represented include stocks, bonds, mutual funds and ETFs.
The actual allocation to each asset class varies, based on your preferences. For instance, you have may a strong conviction on Asia ex-Japan, even if historical market data favours US and Europe equities. The Portfolio Manager will take your unique preferences into consideration when evaluating an asset’s fit with your portfolio.
However unique your goals and preferences are, the Portfolio Manager will work out how these can be expressed in investment terms: as a steady income stream, a specific return, or achieving a certain amount.
With your goal and preferences in mind, the Portfolio Manager will develop a strategy that takes into account your existing financial products, risk appetite, and customisations.
Say for instance, that you feel strongly about ethical and sustainable investing, in which case your manager will search for suitable green equities, and scrub your portfolio clean of palm oil, gaming and tobacco companies.
This search for suitable assets takes place across multiple considerations – from regions, sectors and trends, to investment rates and credit. The level of customisation available depends on the size of your portfolio.
At DBS, the made-to-measure portfolios are managed individually. Even if a standardised portfolio is purchased, performance will be specific to your portfolio and vintage. Not all clients initiate their investments at the same time.
Scientific research has shown that investment decisions are not immune from bias, such as a bias towards local names (‘home bias’) and following the crowd (‘herding’).
Your intuition may result in emotional, knee-jerk reactions to market movements. A Portfolio Manager can place psychological safeguards on your portfolio, one of which is constructing portfolios from a diversified pool of assets. They will select the best funds and stocks to capitalise on areas with more potential.
This is part of the ongoing risk management process that looks at every aspect of your investment – from world events and the economy, all the way to the specific instruments in your portfolio.
Your manager will be on a constant lookout for downturns or market bubbles, and make tactical decisions to tap opportunities quickly, or react to market conditions. For instance, they might add cash buffers to weather economic concerns. Or they might moderate the portfolio’s sensitivity to specific geopolitical events such as Brexit and US Presidential elections.
To construct the optimal portfolio, a Portfolio Manager doesn’t work alone. Instead, they synthesize the skills and insights from various investment experts.
Drawing on macroeconomic views from the Chief Investment Office and research specialists, the Portfolio Manager identifies a strategy that best suits your portfolio – under prevailing market conditions. And in collaboration with the security research teams, the Portfolio Manager will seek the best instruments to fit the strategy.
While the day-to-day affairs are handled by your manager, the DBS digibank platform allows you to keep a pulse on things, anytime, anywhere. This is in addition to monthly statements of portfolio holdings, alongside summaries of transactions and corporate activities.
A Portfolio Manager also keeps your portfolio on track, maintaining the balance of your original allocations so it remains consistent with your risk profile.
When equity markets rally strongly for instance, the Portfolio Manager would sell some equities and buy bonds to maintain the original balance.
In reality, the situation is more complex. First, portfolios typically contain a cash component to facilitate transactions. Second, allocations to specific stocks or bonds may be shifted around – while leaving the overall balance intact – to avoid the risk of single stock concentration.
The Portfolio Manager also ensures that the overall risk of your portfolio remains consistent with your risk profile. For instance, even if the outlook for stocks is very bullish, a Portfolio Manager would not go 100% into stocks as this would raise the risk of the overall portfolio above what you can accept.
With many factors at play, the task of rebalancing can be extremely complicated, complex, and time-consuming.
A Portfolio Manager is thus a valuable partner in your investment strategy, providing a good balance of returns with minimum effort over the long term, giving you the edge to make sharper investment moves.