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Portfolio management update - MSCI

May 5th 2017

As most of our existing and potential clients know we are incredibly transparent in everything we do. From publishing our whitepaper that tells you exactly how we manage your money to giving you all-in costs fee comparisons, our aim has always been to keep you informed.

In line with this company culture and the portfolio management process we follow we have just updated the MSCI All countries weights in our all our Starter Portfolios and are writing to tell you exactly how this affects your portfolio.

Success is the sum of details

Within all the starter portfolios (with equity allocations to them) we have a global equity market breakdown across various regions. Therefore our portfolios allocate to the US, Europe ex UK, UK, Japan, Asia ex Japan and Emerging Markets. The weights of these various regions are determined by the global market breakdown of the MSCI All Countries World Index. This is a complex way to say that the world capital markets are ranked from biggest to smallest and an index is constructed to track these various regions. For example, the US stock markets tends to have the largest capital and largest companies and therefore North America (US and Canada) makes up the largest part of the MSCI AC World Index. This index is continuously changing due to the various companies’ stock prices in the various regions constantly changing. That means that the weight of North American equities in the index will be different today than 6 months from now.

As we detailed in the rebalancing policy in our whitepaper, our starter portfolios have static weights, based on the various regions of the MSCI AC World Index, that we update periodically. We essentially take a snapshot of the index every year and ensure that your portfolio reflect the latest breakdown of the index at that point.

What does this mean for your portfolio?

We have updated these weights with the latest snapshot. This means the target policy weights or strategic asset allocation of the various regions above have been updated. Given our rebalancing policy this may or may not cause a rebalance in your portfolio. We will firstly use any contributions you make to bring the live drifted weights, that are outside of your tolerance bands, back to the new target allocations by doing additional purchases. If there are no contributions to allocate the portfolio will be rebalanced, where necessary, back to the target weights.

The overall asset class breakdown between equities and bonds that you selected will of course not change and therefore your risk profile will stay exactly the same.

Conclusion

Your starter portfolio’s target weight have therefore been updated and you can rest assured we’ll take care of the rebalancing for you. Your portfolio will stay in line with the target asset allocation you selected and the various regions that make up your equity allocation will be more in line with the current world capital markets.

With all investments your capital is at risk and the value of your investments and the income deriving from it can rise as well as fall. Past performance is not a guide to future performance.