The wintry storms are upon us, encouraging us to dig out our coats and umbrellas. And there are also reminders all around us, from those blue and yellow “keep 2 metres apart” posters to alerts from our wearables, that we need to be constantly thinking about our health during the winter months.
More recently, the concept of a health check has become a more common starting point for conversations with existing and prospective clients. Undoubtedly, the catalyst for these conversations is the result of the seemingly never-ending volatility circling financial markets. With markets in turmoil and headlines a constant stream of doom, trustees and their clients are paying even sharper attention to their valuations.
As you will know from your health checks with your GP, you can have a “health check lite” or a more extensive top-to-toe set of tests and checks. Our Monitoring service is arguably a “lite” type of health check, making sure that the investment managers are doing what is expected of them. Using a set of pre-agreed benchmarks and targets, aligned to the mandate, our quarterly portfolio reporting provides a summary review including commentary and action points as appropriate for the trustee. This provides the trustee with relevant, cost-effective and independent oversight of the portfolio.
For those “poorly” rated portfolios (which Enhance scores as ‘1’ or ‘2’), our Relationship Managers discuss these with trustees to highlight the areas of concern and the action that can be taken to get the patient (underlying investor) back on track. For the portfolios rated 3-5, the normal course of action is to agree that the investments are acting in line with, or better than, expectations and are therefore given a clean bill of health.
Within the Advisory Team, we too undertake quarterly health checks for clients – scrutinising the investment managers and evaluating the drivers of good, bad or indifferent investment performance. However, more recently, our Consultancy practice has been instructed to undertake even more extensive health checks for some of our clients as well as new clients coming to us with portfolios of concern.
A more extensive check-up will typically include a full performance assessment against benchmarks, target returns and peer groups, ensuring the appropriateness of those measures. We will also revisit the investment management agreement and the investment policy statement and hold discussions with the trustees to determine if the existing mandate remains applicable and then the investment managers to ensure they understand and suitably implement their mandate.
In addition, we will assess the application of investment restrictions and breaches. As an example, increasingly clients are embracing ESG, Sustainable or Responsible investing and including those factors in amended investment mandates. We have found instances where securities have been included in a portfolio which are contrary to the wishes of the client.
Where appropriate, we will also undertake on-site due diligence on the manager(s) using our 5P process of assessing performance, process, people, price and planet. This is the highest level of scrutiny we can apply to an investment manager and involves meeting all key stakeholders within their business. Our objective is to assess whether or not the investment manager and their firm is equipped to navigate prevailing market conditions and future challenges both as a portfolio manager and commercial enterprise.
Enhance is therefore well placed to provide relevant investment oversight for clients of all types and budgets via our Monitoring and Consultancy services and we are passionate about working with trustees and investment managers to help deliver a clean bill of health to investors. For more information about how we can help you and your clients, please contact me directly for an exploratory discussion: