An investment philosophy that delivers security and stability for Barclays’ clients

Our Barclays Advisors

Our broad asset universe, investment advisers and portfolio management approach combine to create the right client outcomes throughout the economic cycle, explains Simon Smith, Head of Crown Dependency Investments, Pete Downey, Investment Adviser (Isle of Man) and Nick Carpentier, Investment Adviser (Guernsey).

Investors have a wealth of options when choosing their investment adviser and portfolio management firm, and each one has to be examined through a number of lenses to get the selection right.

Investors need to assess the firm, its history, size and brand, its array of products and the clients it specialises in. They need to match the right philosophy and style of adviser and manager with their own specific needs. And, of course, value for money has to be a factor. Our aim is to answer all these client needs with a simple ethos of evolutionary risk-focussed investments and careful monitoring of the external environment to ensure client objectives are delivered continuously.

An ethos of continuous improvement

“If I was a client, I would want to be with a company that continually strives to improve using considered intelligence, and that's where we are as an organisation,” says Simon Smith.

That forward-thinking approach is married to both a rich heritage in governance and performance management and with the power of a strong and stable brand. While some have reservations about our scale meaning ‘less personal’ for clients, the reality is that our long-term outperformance has been driven by client service, discipline, an open approach to the global universe of available assets (over bias) and pricing power.

Employing rigorous assessment principles

We operate one of the strictest criteria for analysing the assets we wish to add to our preferred investment universe. This is supported by significant investment in back-office and client-facing systems, and by market-leading policies and procedures to keep our clients’ assets safe.

“Often, banks sit on legacy platforms, or simply add updates to them, creating platforms that are slow, clunky and inefficient. But we are not building on old systems, we are listening to client needs and designing and building approaches that support them,” says Simon.

We also do not believe in over-reliance on an individual. The traditional caricature of a fund manager circling stocks in the pink papers on a Sunday afternoon just does not apply within our approach. Instead, when building a solution, we start with an asset allocation model, layering with optimisation tools. This helps build a base model of strategic asset allocation that ‘tests’ itself constantly on both past and future scenarios.

This is then overlaid with tactical changes to adapt to the real market conditions at any given time (monitored on a constant basis) as well as with a preferred investment universe that has been thoroughly tested via investment analysts and portfolio managers to ensure there is high conviction on the business case. It means clients can be assured we have done thorough due diligence before presenting a range of potential options for consideration.

“These models combine with our teams’ experience to examine not only what actually happened, but what could have happened and its effect. This helps us understand what may or may not transpire in the future and assess risks in a less subjective manner,” says Pete Downey.

Interrogating potential value for clients

“Each potential security is heavily scrutinised, with analysts visiting the premises and meeting management. Our committees then examine the analyst-produced in-depth reports to fully understand the potential. In short, we look into every aspect of a potential purchase and monitor for deviation from these points to advise sales. Only then are we finally ready to populate a preferred asset universe from which advisers and managers can choose the right allocations for clients,” says Nick Carpentier.

“We are long-term investors. Typically, we build portfolios where we are not looking to just take advantage of short term movements,” says Simon. “We want to come in and be a bond or shareholder in a company or a fund that we truly believe has value both now and in the future.”

“I liken the whole process to an iceberg,” adds Simon. “What the client sees at the pinnacle is strong performance and consistently good, risk-adjusted returns. But all the way through it is the principles that make sure the portfolio is well-governed, secure and does what it claims. There are no accidents in that regard.”

Delivering security and transparency

We follow good portfolio theory in balancing and diversifying assets, but what differentiates us is how we apply that theory and how robust our analysis and due diligence is.

“When we consider the main premise of the Offshore markets that predominantly have a skew to wealth preservation, I remain sceptical of the approach of trying to pick star portfolio managers to make decisions on a client’s behalf that may or may not work,” adds Simon.

“This approach is flawed without very active monitoring and understanding of where returns are made – see Madoff as a lesson from history. We advocate transparency and good risk-adjusted returns throughout an economic cycle, not at any given point. We are not a casino. We are not trying to make outside bets with our clients’ money.”

This is equally as important when considering where assets are custodised – see Lehman’s rehypothecation as a lesson from history. “The security of our clients’ assets and ensuring transparency are absolutely paramount. We believe in keeping things simple and do not stock lend,” says Simon.

Gateway to a universe of assets

Our relationship-led approach creates a simple investment process, with investors benefitting from having one, local investment adviser yet still being able to access global solutions. This joined-up way of working means portfolios of any kind (execution only, discretionary or advisory) are managed holistically rather than siloed into different departments or subsidiaries.

“There is a very broad universe across global markets that we can customise across multiple platforms and geographies,” explains Simon. “It is the adviser’s responsibility to ensure suitability; regulators want to see that managers are not just making the solution fit the client’s scenario, but really examining suitability. That’s a real differentiator for us – the adviser is wedded to the client. With a broad global universe to choose from this means bias is actively risk monitored and avoided.

“Additionally, robust training and competency and quality assurance programmes test advisers for client outcomes. Put simply, it means clients can be confident we are delivering the right solution for them,” Simon concludes.

Please remember the value of investments can go down as well as up, and you may get back less than your original investment.

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