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Local Model Portfolios

Benefits for advisers

A model portfolio addresses the adviser’s challenges by providing a complete solution through a single investment product. MiPlan’s model portfolios are designed to simplify an adviser’s work as they are scalable and cost-effective investment strategies which individually, or in combination, can be used for any type of client. This simplification is particularly necessary for advisers who have a big client base which makes managing their clients’ investments on an individual basis almost impossible. Model portfolios are also key if an adviser is wanting to scale their business and client base. On a day-to-day basis, an adviser will no longer have to worry about the following:

• Portfolio creation
• Administration and compliance
• Risk management
• Investment process
• Due diligence
• Portfolio monitoring

The basic principle of a model portfolio is the grouping of more than one unit trust to form a portfolio, the premise being that a single unit trust fund seldom ranks consistently as the top performing fund. Different managers have different areas of expertise, be it asset allocation, stock selection, investment style, etc. A well-structured model portfolio solution will focus not only on the identification of superior funds but also on blending them together in a way that takes advantage of complementary manager skills. With the right mix of funds, synergy can be achieved.

Additionally, all advisers who use the MiPlan model portfolios are granted complimentary access to MI-PLAN – advanced time-based, liability matching financial planning software. This allows the advisor to integrate the model portfolios into their client’s overall financial plan.

Benefits for clients

A model portfolio provides access to the skills of some of the best investment managers, blends funds synergistically, and improves the client’s chance of achieving their investment goals. By opting for a model portfolio solution, the client may be afforded the following benefits:

• Diversification of manager risk
• Cost effective
• Comprehensive due diligence of all managers
• Ongoing portfolio monitoring
• Focus on investment objectives

MiPlan’s investment philosophy is based on selecting the right asset managers, understanding their ‘DNA’, and blending them together to achieve synergy. Important aspects of manager DNA are:

• How have the managers performed in comparison to peers?
• How volatile have they been in comparison to peers?
• How consistently has the manager “got it right”?
• Have the managers successfully protected the downside?

MiPlan offers both generic and bespoke (personalised) model portfolio solutions. Typically, an adviser will be given access to a range of target return portfolios which aim to achieve returns in-excess-of benchmark returns of CPI +2%; CPI +4%; and CPI +6%; and a flexible type portfolio with a composite index benchmark. These portfolios individually or in combination, allow the investor the greatest likelihood of attaining their financial goals. The product design and investment philosophy are key to the achievement of these goals.

Portfolio creation

Funds are first analysed within their full universe alongside all peers. Various risk measures are compared to returns over time. Selecting candidates differs depending on the portfolio. High returns with minimum exposure to risk are ideal but, by design, earning higher returns generally involves taking on more risk. For the more conservative portfolios we are more conscious of protecting the downside and so we are willing to sacrifice some returns to improve the risk characteristics of the portfolio. For the more aggressive portfolios, on-the-other-hand, the focus shifts to higher returns with a greater risk tolerance.

We aim to combine managers with different DNA to create synergy – the 1+1=3 philosophy. The process involves combining some higher risk, higher return managers with some lower-risk, lower-return managers which serve as the stable core for the portfolio.

Additional factors which form part of our process are the likelihood of the fund outperforming its peer average, fees, risk management from a bottom-up holdings perspective, and qualitative factors (reputation, confidence in brand, quality and stability of management team, size constraints of the fund, understanding of manager’s position, remaining true to DNA).

Monitoring

Funds are monitored and reviewed monthly to ensure that they do not deviate from their ‘DNA’ which led to their inclusion in the portfolio. Any drift in the manager’s position within the quantitative framework serves as a trigger for further investigation and qualitative analysis (see points listed above) which may involve onsite visits to the manager to discuss current positions and any changes in philosophy or process.

If ‘DNA drift’ is detected and deemed significant we will drill deeper to establish the cause of the drift – have there been material changes in DNA or is it simply a temporary market related drift? If the fund’s DNA has changed materially then this may warrant removal or substitution of the fund for another.

MiPlan provides advisers with the following documentation:

• Process documentation
• Monthly newsletters
• Monthly reports
• Quarterly reports

All documents are made available online via our portal Mi-Gateway.

Investment Committee Meetings

Investment committee meetings are held at least semi-annually during which the adviser will meet with the MiPlan team who will report back on any changes that have been made to the portfolios, discuss market movements and the MiPlan multi-manager research process, as discussed above.

MiPlan’s model portfolios are available on the following Linked Investment Service Providers (LISPs):

• Allan Gray
• ABSA
• Glacier
• Ninety One (formerly Investec)
• Momentum
• Old Mutual
• PPS
• Stanlib

However, efforts will be made to make the portfolios available on other platforms if it is critical for an adviser to have access to the portfolios on another platform.

Flexible Income

Inflation Plus 2-3

Inflation Plus 4-5

Inflation Plus 6-7

Flexible Growth

Global Flexible Growth