© Brown Shipley 2010
6th April 2009
Private bank, Brown Shipley has introduced an actively managed discretionary 'Cash Alternative Service' which has a target gross yield in excess of 3% for investors with cash balances over £200,000 looking for income whilst keeping risk to an acceptable level.
Peter Botham, Brown Shipley's Chief investment Officer said, “With interest rates at historic low levels, it has become increasingly difficult for investors to obtain an income from their investments without taking excessive risk. In particular we have identified that a number of professional intermediaries will be holding large sums of client monies in cash and may find our new service interesting.”
Brown Shipley will seek to keep risk to a level it believes investors will be comfortable with through an investment strategy utilising a core group of asset classes, including Government Bonds (both UK and overseas), Corporate Bonds, income yielding UK equities and cash.
The service is bespoke to each client and is provided as a discretionary service with both direct investments as well as collective funds.
Botham added, “Even though one is tempted to suggest that cash is the safest investment of all in the current environment, the near collapse of many of the world's leading banks, and the difficulty that some investors have experienced in being able to withdraw their savings from leading financial institutions has led us to seek a strategy which could address these difficulties. We believe that a discretionary portfolio will help us address the individual needs of our clients”
Brown Shipley's asset allocation on a model portfolio at 24 March 2009 would give a gross yield of 4.0%, based on the proposed investments on its current approved holdings list. The suggested allocation split between the various categories is demonstrated in the chart below, but one of the benefits of this service is that it can be adapted to suit the individual needs of the client.
Botham concluded, “Another key lesson of the past two years is that a 'buy and hold' philosophy has not been capable of coping with the rapidly changing economic environment, so active management of a portfolio is a real necessity.
“For example, look at the divergent returns from the Gilt market over the past twelve months to the end of February. Whilst medium dated stock produced a total return of 14.4% for investors who had favoured the long dated tier of the market (over 15 years) a gain of just 7.4% was achieved. Likewise, in the world of corporate bonds. Choosing to search for high income via lowly rated corporate debt has largely led to little overall gain and, quite often, to continuing losses.”