“It is not the number of things you put in a portfolio, it is the number of things that are different”
– Harry Markowitz, author of the Modern Portfolio Theory paper and Nobel Prize winner.
Before European Securities and Market Authority ratings (ESMA) or Committee of European Securities Regulators (CESR) ratings were the norm, before multi-asset funds became a one-stop solution, before target risk funds were talked about, before volatility became part of a Financial Broker’s vocabulary, before diversification was fully embraced by our industry…we at Friends First had already begun looking at ways to build better portfolios. We wanted the portfolios which were being built through the Friends First range of funds to have better returns whilst taking less risk. The opening quote from Harry Markowitz above gave us a great steer on how best to improve our platform of funds.
In expanding our range of funds we knew to look for funds that were “different”. “Different” to us meant different asset classes, different correlations to equities, different fund managers, different distributions of returns and different volatilities. We already had a uniquely different fund to offer to the market with the Insight Currency fund.
2001: Insight Currency fund was launched as the first real “alternative” fund on the Irish Market. The fund was launched to complement the Managed fund and has greatly reduced risk when used in a portfolio. The fund produced positive returns during the “tech bubble crisis” and the “financial crisis”.
As markets advanced and more opportunities came our way we expanded our range of funds providing more building blocks and solutions so that Financial Brokers could maximise their opportunity set by having “different” funds available from the one provider.
Our journey so far
2007: Magnet Portfolio fund was launched as the first truly multi-asset fund in the market and the first target volatility fund.
2008: “Asset Allocation and Target Volatility Based Portfolio Construction” was the theme of investment workshops delivered to Financial Brokers who were creating risk appropriate portfolios for their clients.
2009: The “House Views” programme of assistance to Financial Brokers helped create their own Model Portfolios.
2010: Market Neutral Equity fund, was launched to provide an absolute return strategy that uses investment techniques which have the potential to make money in both rising and falling markets.
2010: Magnet Range of funds, our range of Active Multi-Asset funds was introduced, the first range of target volatility multi funds in Ireland.
2012: Multi Strategy Global Bond fund was introduced, offering an absolute return bond fund that employs several strategies in order to meet its explicit risk, return and volatility objectives.
2013: Compass Range of funds was added to our Multi-Asset range, the first passive range of target volatility multi-asset funds in Ireland.
2013: Investment Suitability Tool was launched, the only ‘numeric’ based Investment Suitability Tool in the Irish Market. We believe in measuring investor’s attitude to risk numerically rather than narratively. (Numbers sometimes count more than words!)
2015: The Magnet Range, reached a 5-year milestone of actual performance numbers for multi-asset funds reached with excellent results across the range.
2015: The CALM Eurozone Equity fund was launched with the intention of improving the life span of an ARF in a drawdown period by replacing the equity exposure with CALM equities and automatically improving the sequence of returns.
Perhaps we recognised the important teachings of the founders of Modern Portfolio Theory William Sharpe and Harry Markowitz before others and set about implementing their better ideas around portfolio construction. The financial crisis certainly showed how far a traditional portfolio could fall but it also helps us as a gauge when looking at a new funds movements during the periods from July 2007 to March 2009, before committing to any new fund or idea.
W.B Yeats once said, “The future is an uncertain place” so we can only prepare as best we can for what the markets throw at us. However, with more solutions and opportunity sets at our disposal we know we have improved our odds and equipped Financial Brokers with the tools to work with risk and get the best results!
For more information on the Friends First range of funds, please contact your Financial Broker or visit the Fund Centre on our website.
This article by Brian Flanagan originally appeared in Irish Broker.