Page 10 - 2020 PSK Portfolio - Client Name

Portfolio construction

Portfolio construction is the process of blending various asset classes and investments to
produce a portfolio that will achieve your long-term investment goals based on your
predetermined risk profile, and is the final step in the process.
The aim is to build a strong, sound investment portfolio that will:

ꟷ perform consistently,

ꟷ deliver superior returns in most market conditions; and
ꟷ be competitive relative to market benchmarks.

Constructing an investment portfolio involves choosing which assets to invest in (asset
allocation) and which investment managers or listed securities to invest in (investment
manager and security selection).

It does not follow a regimented process, but the questions below are some of those we ask
ourselves before providing the final recommendation and implementing it.

ꟷ What allocation will the fund receive?

ꟷ What will drive this?
ꟷ Does the fund fit into the existing portfolio?
ꟷ Where the portfolio is new, can exposure be built around the strategy in question?

ꟷ Are the incumbent or proposed products complimentary?
ꟷ Is there duplication of styles / approaches?
ꟷ If a more active approach to asset allocation is used, for example dynamic asset

allocation (DAA), then what is the manager’s “half life”?
ꟷ Is the product in question effective in executing the DAA decision?
ꟷ What does the rest of the portfolio look like?

ꟷ What is the outcome of a backward- looking analysis post the product’s addition?
ꟷ What is the expected outcome (scenario testing) on a forward- looking basis post the

product’s addition?