The Who, What, How, Where & Why of Investing
Who are we?
Tavistock Wealth is the investment management arm of Tavistock Investments Plc. The investment team is comprised of 6 highly educated and talented professionals.
We have a long track record managing global multi-asset class portfolios comprised solely of exchange-traded funds (ETFs).
John Leiper, CFA, CFTe – Chief Investment Officer
13+ years experience, Ex Morgan Stanley & Credit Suisse
Sekar Indran – Senior Portfolio Manager
Andrew Pottie – Senior Portfolio Manager
Alex Livingstone – Head of Trading
FX & ETFs
Jonah Levy – Portfolio Manager
James Peel – Portfolio Manager
What do we do?
The investment team is responsible for the centralised investment proposition at the firm and manages circa £900 million. The offering consists of both regulated UCITS funds and model portfolios.
The ACUMEN Portfolio range forms the heart of the proposition. These are broken down into 10 multi-asset class UCITS funds, 3 of which have a contractual bank guarantee provided by Morgan Stanley & Co International Plc, locking in 90% or 85% of the highest-recorded Net Asset Value.
Investors can invest directly into one or any combination of these funds. Alternatively, many customers and investment advisors prefer to invest in model-portfolios. As such, we also offer a platform-based model portfolio solution, which caters to this growing audience whilst maintaining our high-quality approach to ETF based investment management.
How do we manage money?
Our primary goal is to generate long-term capital growth and superior risk-adjusted returns for our investors.
To do so, we adopt a top-down view of the world. This allows us to determine the broad macroeconomic and geopolitical trends that drive markets. We then allocate risk as appropriate around the globe and across asset classes including equities, bonds, commodities and currencies. This investment process is grounded in fundamental economic research and the application of quantitative and qualitative analysis. In addition, our ESG range adheres to a best-in-class environmental, social, governance investment policy which is a data-driven framework designed to distinguish between ESG leaders and laggards.
On mobile: review chart in landscape mode
Whilst the investment rationale is driven by broad fundamental trends, technical analysis also features in the implementation process.
Timing the market can be notoriously difficult. Instead it makes most sense to adopt a long-only approach to investment management. The longer you stay invested, the greater the likelihood of positive returns.
“It’s about time in the markets, not timing the markets.”
Our long-only approach to portfolio construction is benchmark-centric. This means we take positions relative to the market composite benchmark comprised of equities and bonds. For example, we currently like the technology sector in the US equity market and have an overweight position. Conversely, we believe the US high yield bond market is unattractive, so we are underweight versus the benchmark.
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This chart shows our preference for higher quality corporate credit, resulting in an overweight allocation to investment grade bonds and an underweight allocation to high yield debt, relative to the benchmark.
The market composite benchmarks we use are blue-chip and standard within the investment management industry. These building blocks, shown below, are scaled across the investment proposition according to the risk profile defined by Dynamic Planner.
- Sterling Overnight Index Average
- Bloomberg Barclays Global Aggregate Bond GBP Hedged Index
- Bloomberg Barclays Global High Yield GBP Hedged Index
- MSCI World Index GBP Hedged
- MSCI Emerging Markets Investable Markets Index Unhedged
Benchmarks are useful reference points for comparing investment returns.
On mobile: review chart in landscape mode
This chart shows the 5-year track record for ACUMEN Portfolio 4 relative to the benchmark and the IA Sector, which we use for peer group comparisons.
However, benchmarks are also a good guide to risk. Each of our market composite benchmarks, against which we manage the ACUMEN Portfolios and model portfolios, has been mapped to a risk score ranging from 3 (low risk) to 8 (high risk), as designated by Dynamic Planner, an independent risk-profiling company. By managing each ACUMEN Portfolio or model portfolio relative to its benchmark, we can ensure the broad risk classification remains in-line whilst also ensuring sufficient flexibility in our investment strategy.
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In the chart above the blue line represents Dynamic Planner’s long-term volatility curve for risk profiles 3-8. The orange line shows what this volatility curve looks like based on actual market data since October 2014. This is in-line with benchmark volatility in red using live data over the same period.
The benchmarks are largely currency hedged indices. With the notable exception of emerging market equities, the underlying currency exposure has been removed from benchmark returns and volatility. We also hedge the majority of the underlying currency exposure within the ACUMEN Portfolios. This is important because it ensures we remain in the correct risk rating category. That does not preclude our ability to actively adjust our hedge ratios and increase exposure to non-GBP currencies. The model portfolios typically have a lower hedge ratio due to the lack of GBP hedged ETFS. However, we continue to believe sterling is significantly undervalued and with the cost of hedging US dollars at a 4-year low, close to zero, it makes sense to maintain a high hedge ratio across the range of ACUMEN Portfolios.
The ACUMEN Portfolios invest exclusively in exchange traded funds (ETFs) as well as index-linked derivatives such as futures, forwards, swaps and options. ETFs are particularly suited to our active style of fund management. They also benefit from increased liquidity, tax efficiencies and are low cost.
These benefits are compounded by in-house execution. The investment team currently trades ETFs via Tradeweb, which is a quote-driven trade execution system. This set-up allows us to put the largest and most sophisticated ETF market makers (including Jane Street, Flow Traders, Goldman Sachs and Morgan Stanley) into direct competition as counterparty to our trades. When combined with our best execution policy, which considers a range of factors including size, volume, spread and distance from fair value, this results in a notable improvement in execution costs, which directly benefits the end investor.
On mobile: review chart in landscape mode
Since bringing trade execution in-house, the average saving per trade has been 0.11% versus the Bloomberg screen price and 0.06% versus the second-best quote.
The ACUMEN Portfolios also invest in derivatives, which provides the ability to de-risk the portfolios by reducing unwanted currency exposure. For example, the use of currency forwards allows us to separate asset and currency investment decisions meaning we can take long exposure to Japanese equities but hedge the currency exposure if we feel it is overvalued. This ability to customise is particularly applicable to the ACUMEN Protection Portfolios, which use derivative structures to reduce risk and provide enhanced capital protection.
Where we are?
The Tavistock Wealth investment team is based at:
123 Buckingham Palace Road, London SW1W 9SH.
Why invest with us?
ETFs have become increasingly popular over the last few years and their unique characteristics make them ideal for top-down, asset allocation driven investing.
We believe a long-only, actively managed portfolio, comprised of low-cost ETFs will deliver cost effective and superior investment returns over the long-term.
Get in touch today to find out more…
This investment Blog is published and provided for informational purposes only. The information in the Blog constitutes the author’s own opinions. None of the information contained in the Blog constitutes a recommendation that any particular investment strategy is suitable for any specific person. Source of data: Bloomberg, Tavistock Wealth Limited unless otherwise stated.
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Q3-2021 QUARTERLY PERSPECTIVES
Over the last year the investment team have delivered strong risk-adjusted returns during a period of considerable uncertainty and market volatility.
Tide may be about to turn
The following is an abbreviated version of John Leiper’s article ‘Tide may be about to turn’ for Investment Week magazine. Follow the link and read his views on page 23.
Q2 2021 Quarterly Perspectives
Welcome to the Q2-2021 ‘Quarterly Perspectives’ publication.
Innovation in the ESG Eco System
Tavistock Wealth have come together with MSCI and LSE SU Green Finance Society to discuss Innovation in the ESG Eco System, alongside data analytics with MSCI.
Green Finance Summit 2021
Our Portfolio Manager for ESG, James Peel, was recently invited to provide his valuable insights into “Innovating Towards a Greener Future” as part of the London School of Economics Student’s Union Green Finance Society’s video conference: “Green Finance Summit 2021”.
The Great Rotation
In Nothing Is More Powerful Than An Idea Whose Time Has Come, published in November, we introduced the idea of a Great Rotation across US equity markets. As shown in the chart below, this rotation is playing out in textbook fashion with value stocks outperforming growth by about 20% since the end of last year.
The Unemployment Problem
The Fed’s dual mandate is price stability and maximum employment, but Jerome Powell has been unequivocal that it’s all about the latter.
Q1 2021 Quarterly Perspectives
Welcome to the Q1-2021 ‘Quarterly Perspectives’ publication.
This is the first blog since the holiday break. Whilst travel restrictions meant it wasn’t the holiday that had been planned, we adapted, and enjoyed the opportunity to spend some time together as a family and reflect on the last few months.
Rise of the Underdog
In its latest economic outlook, the OECD increased its expectations for global GDP.
Let the Good Times Roll
Markets are ebullient, and they have every reason to be.
Is the Bond Market Smarter than the Stock Market?
Following on from last week’s blog, the dramatic rotation from growth to value remains in place for now. Early signs of quick snapback into the prior channel have not yet materialised and instead the ratio has consolidated and even shown signs of moving.
Nothing Is More Powerful Than an Idea Whose Time Has Come
On Monday afternoon, global stock markets soared on the news BioNTech and Pfizer had created a coronavirus vaccine which proved 90% effective based on initial trial results.
Anatomy of an Election (So far…)
The narrative, heading into the US election, was a ‘Blue Wave’ victory for the Democrats. Polls and betting odds favoured a Biden win and a Senate majority and investors positioned accordingly.
Since the Market Low
The ACUMEN Portfolios continued their strong run throughout October, largely outperforming the market composite benchmark and IA sectors (used for peer group comparison purposes) which lost ground across the board.
Canary in the Vol-Mine
With the US election just 8 days away, financial markets are following the polls and pricing in a Biden win. The prospect for a Democratic clean sweep has contributed to the rising ‘Blue Wave’ narrative benefiting those companies that stand to benefit from Democratic party policy.
Q4 2020 Quarterly Perspectives
Welcome to the Q4-2020 ‘Quarterly Perspectives’ publication.
Further For Longer
On Tuesday Fed Chairman, Jerome Powell, made a speech at the National Association for Business Economics, during which he implied the government should err on the side of caution and provide too much stimulus rather than too little.
Smart Beta Unwrapped
Our Chief Investment Officer, John Leiper, was recently invited to provide his valuable insights as part of ETF Stream’s video conference livestream: “Beyond Beta Europe Digital: Smart beta unwrapped”.
Life Imitating Art
Saturday Night Live has a reputation for expertly parodying presidential election debates. My all-time favourite is Al Gore (Darrell Hammond) versus George Bush (Will Ferrell) and this year didn’t disappoint with expert performances from Donald Trump (Alec Baldwin) and Joe Biden (Jim Carrey).
Emerging Markets: ETF Stream
Our Chief Investment Officer, John Leiper, was recently invited to provide his valuable insights into emerging markets as part of ETF Stream’s video conference livestream: “Big Call: Emerging Markets”.
Last week the FTSE Russell decided to include Chinese government bonds in its flagship World Government Bond Index (WGBI). The decision follows similar moves, from JP Morgan and Bloomberg, and a failed attempt to do so just one year prior which resulted in a number of reforms, to increase accessibility and currency trading options, that ultimately paved the way for benchmark admission.
Let’s Get Cyclical, Cyclical
The following is an abbreviated version of my recent article ‘A Deep Dive Into… UK Equities’ for Investment Week magazine. Follow the link and read my views on page 17.
In last week’s blog we discussed the ‘Nasdaq whale’, Softbank, and the role it played, alongside an army of retail investors, driving tech prices ever higher prior to the recent correction. These short-term ‘technical’ flows are driven by the options market as traders look to hedge their underlying exposure, amplifying moves both lower and higher.
A Speech For The History Books
In a speech for the history books, last week Fed chairman Jerome Powell announced a significant change to the way it conducts monetary policy by formally announcing ‘average inflation targeting’.
Room to Run
Despite the fact the coronavirus has plunged many countries into recession, global equity markets are now back at all-time highs, as measured by the Bloomberg World Exchange Market Capitalisation index.
In The Return Of Inflation (5th June 2020) we made the case for a transition from the existing deflationary narrative to one in which markets start to price-in inflation.
A Currency For All Seasons
Having identified, and benefited from, the 7% fall in the value of the US dollar index since late April, we have now turned tactically cautious.
All That Glitters…
The US dollar index, which represents the value of the dollar against a basket of developed market peers, fell through key technical support to its lowest level in 2 years.
This Time It’s Different
There are growing signs that the US dollar may finally roll over.
Q3 2020 Quarterly Perspectives
Despite suffering the worst pandemic in over a century, and the sharpest economic contraction since the second world war, global equity and bond markets staged one of the fastest recoveries of all time in Q2.
Commodities Move Higher
The 10 year US Treasury yield has remained remarkably steady over the last few months, particularly as inflation expectations have gradually risen.
The Bigger They Are, The Harder They Fall
Those stocks that outperformed during the corona crisis are the same ‘winners’ that outperformed before the crisis.
Pivot To ESG
The recovery in US equity prices, from the corona crisis, has been one of the most rapid in history.
The Chinese Tech Structural Growth Story
China’s economy has transitioned, from an industrial export-led model, towards services.
The Commodity Carve-out
Commodities are nothing if not cyclical. They rise and fall in value with remarkable consistency over time.
The Return of Inflation
Quantitative easing, or QE, is where a central bank creates money to buy bonds. The goal is to keep interest rates low and to stimulate the economy during periods of economic stress.
The Powell Pivot 2.0
In January 2019 Jerome Powell pivoted from a policy of interest rate increases and balance sheet cuts to interest rate cuts and, later that year, balance sheet expansion.
Don’t Fight The Fed
Over the last decade, the Fed has increasingly resorted to unconventional monetary policy, such as quantitative easing, or QE, to stimulate the economy.
Market Notes 20th May 2020
Flying the global economy into the ground from 35,000 feet will go down as one of the most difficult and controversial decisions in the history of mankind.
The Liquidity Crisis Is Dead. All Hail the Solvency Crisis.
In response to the corona crisis, global central banks have unleashed a tidal wave of liquidity.
Economy ≠ Markets
One question I get from advisers and clients, more than any other, is why global equity markets have bounced back so far.
From Liquidity To Solvency
In the early stages of the Corona Crisis of 2020, the global economy faced a liquidity crisis.
In an unprecedented day in the history of oil trading the price of the front month contract for West Texas Intermediate (WTI) oil fell below zero to -$37.63.
ESG in the Spotlight – Earth Day
Earth Day, commemorated each year on 22/04 by more than 1bn people, is the largest annual secular observance in the world.
Market Notes 22nd April 2020
The global economy has been plunged into a deep recession as government leaders struggled with the difficult question of how to deal with the COVID-19 coronavirus.
One Currency To Rule Them All
As the world’s reserve currency, the US dollar is the go-to currency. It is used to price assets, complete transactions and as a store of value.
Q2 2020 Quarterly Perspectives
The COVID-19 coronavirus is a demand shock on a global scale where the economy slows to a crawl, but the overhang of debt remains.
The beginning of the end?
The coronavirus has brought economic activity to a virtual stand-still and transformed a strong global economy, with lots of debt, to a weak economy… with lots of debt.
Return-of-capital is as important as the return-on-capital
Last week, we considered the debt story behind the coronavirus. The fear of a large debt overhang, as the economy slows, led to concern that households and companies could start to default on their debt.
Market Notes 23rd March 2020
In the past three weeks, global equity markets have fallen almost as much as in the Financial Crisis of 2007-08.
Market Commentary – March 2020
In the past week, global equity markets have fallen again and yields on developed market government bonds have collapsed even further.
Today, global equity markets have fallen again and yields on developed market government bonds have collapsed even further. In my opinion, there are two diametrically opposed events playing out at the same time.
A Time to Remain Calm
This is a time to remain calm, patient and focused on fundamentals whilst relying on sound risk management practices. Over the last week the number of confirmed cases of COVID-19 has risen to more than 83,000 people across 50 countries.
ESG – Everyone is talking about it!
Ironically, the turning point may have been President Trump’s withdrawal from the Paris Agreement on climate change in 2017 that set the tidal wave of “doing the right thing” in motion.
Market Commentary – 19th February 2020
2019 was the year in which ESG investing joined the mainstream and became the “new normal”.
ESG in the Spotlight
Environmental, social and governance (ESG), a byword for sustainability, has in recent weeks occupied rarefied real estate on the landing page of several finance industry titans.
Q1 2020 Quarterly Perspectives
Welcome to the Q1-2020 ‘Quarterly Perspectives’ publication, which aims to explain our outlook for financial markets over the rest of the year.
Market Commentary – 11th December 2019
The polls have become notoriously unreliable and nothing can be taken for granted ahead of Thursday’s general election.
Q4 2019 Quarterly Perspectives
Welcome to the Q4-2019 ‘Quarterly Perspectives’ publication, which aims to explain our outlook for financial markets over the rest of the year.