By means of a comprehensive financial needs analysis, which manifests itself in a personalised asset-liability matching profile, your Graviton adviser will accurately determine your appropriate portfolio selection and mix – your optimal portfolio construct at any point in time. This combination of investment strategies ultimately results in a uniquely diversified portfolio of assets, based on your personal financial set of circumstances.
The asset-liability matching analysis is the starting point for establishing an overall financial structure. The main objective of asset allocation is to arrive at a strategic combination of different asset classes in a combined portfolio, which will maximise possible returns for a given level of possible risk. Appropriate asset selection is derived from analysis of past behaviour, and a variety of forecasts of possible future behaviour, for each asset class. This in turn determines the appropriate tactical asset allocation. The best investment view for each investment strategy is maintained in the Graviton Multi-Manager Fund solutions.
Constructing a portfolio within this framework of asset allocation enables your adviser to appreciate the realities of what is possible in the context of the risk/reward trade-off. This is different and unique to each client’s specific financial data. In order to construct your portfolio, your Graviton adviser implements three different Investment Strategies to manage your wealth.
An amount equal to your income needs for the first 2 years will be invested in an interest-bearing and/or a dividend generating portfolio. This ensures that you will always be in a position to fund your short-term liabilities (i.e. cash outflows) from an asset class that is not affected by volatile market movements. This strategy seeks to invest in asset classes where your capital will be safe and liquid.
This represents your medium-term liabilities and ad hoc capital outflows that need to be funded from your assets from year 3 to 5. The purpose of this strategy will be to outperform the Cash Management Strategy over the said period, and also de-correlate with the Capital Growth Strategy. Your investments will be subject to a blend of the following asset classes in this strategy: bonds, property, low volatility alternative funds, protected equity and absolute return funds. The reason for this blend is that these asset classes typically complement each other to the extent that, irrespective of market conditions, one of these asset classes should yield positive real returns. The main objective of this strategy is to de-correlate with your growth assets and therefore improve portfolio diversification.
This represents the asset pool that will need to fund liabilities occurring from year 5 and beyond. The focus is on capital growth and beating inflation over time. Underlying asset classes include a blend of equities, long-short equity hedge strategies, balanced funds and offshore assets. This strategy will typically be overweight equities but balanced with hedge fund and offshore exposure in line with your personal risk profile. In addition, underlying exposure may include different regions and currencies. This pool also typically represents the portion of your surplus assets.
At Graviton, unitised funds are used as the means to access the skills and investment ideas of managers that have been identified as being best able to contribute towards specified investment outcomes. Emphasis is therefore placed on the managers being employed via respective unitised funds as opposed to the unit trusts themselves (i.e. the multi-manager funds construct).
Graviton advisers engage with Sanlam Multi-Managers (SMM) in selecting the primary fund managers for each of the proposed asset classes. The universe of approved fund managers is subject to extensive and ongoing due diligence by SMM.
Ranging from conservative to moderately aggressive, the following Graviton unit trusts are built into the advice process:
Fund objective: Income or alternative to cash
Risk level: Conservative
Target: STeFI +1%
Max equity exposure: 5%
Time horizon: 2 years
Fund objective: Income and capital growth
Risk level: Cautious
Target: CPI +3%
Max equity exposure: 40%
Time horizon: 3 years
Fund objective: Capital growth with a preservation overlay
Risk level: Moderate
Target: CPI +4%
Max equity exposure: 60%
Time horizon: 5 years
Fund objective: Capital growth
Risk level: Moderate Aggressive
Target: CPI +5%
Max equity exposure: 75%
Time horizon: 5 years and longer