Page 11 - PSK Q2_2022_Thomas Ilinkovski

Principle 3: Liquidity
Principle 7: Portfolio investment
As financial markets offer the opportunity management style
to buy and sell assets easily (with minimal
transaction costs and risk involved), they No single investment management style
provide a high level of liquidity. The funds can produce superior returns in a particular
selected and the assets in which model asset over the long term. This makes it
portfolios invest predominantly offer daily important to hold a mix of different
liquidity, meaning your funds are readily management styles in a portfolio to take
available with short notice if unforeseen advantage of opportunities as they arise in
events require this to occur. the economic cycle.
Principle 4: Markets Principle 8: Currency management

Model portfolios only include assets that The portfolios will utilise both managers
are readily available in public markets that hedge their currency exposures and
where there are liquidity, regulatory and those that do not – this positioning will be
transparency regulations in place to protect dependent on market events and our
your interests. longer-term views.

Principle 5: Active investment Principle 9: Fees and taxes
management
Fees and taxation implications are included
During periods of market inefficiency, in a portfolio analysis due to the impact
active fund managers can outperform high fees and poor tax management can
competitors and the relevant market index have on an investors’ returns over the
through prudent investment selection and short and long term. Portfolios are
ongoing monitoring. constructed with investments that charge
competitive fees, with a preference for
The better-quality active managers have those that have fee structures aligned to
demonstrated their ability to outperform the interests of investors and aim to be tax
index funds over the long term. We select efficient.
fund managers on the basis of their quality
and the likelihood of achieving superior
returns relative to competitors and/or the
relevant index over the long term.

Principle 6: Strategic versus dynamic
asset allocation

Strategic asset allocation (SAA) involves
allocating assets in a portfolio to get the
best return for a given level of risk. SAA is
determined based on expected long term
asset class returns and is guided largely by
historical data.

Dynamic asset allocation (DAA) adds value
to a portfolio by taking medium term
positions in an asset class that differ from
the SAA position. It is intended that these
medium-term tilts or deviations will both
protect the portfolio in a downturn and
potentially boost returns in an upturn.