Page 8 - 2020 PSK Portfolio - Client Name

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.

Principle 7: Portfolio investment management style
No single investment management style can produce superior returns in a particular asset
over the long term. This makes it important to hold a mix of different management styles in a
portfolio to take advantage of opportunities as they arise in the economic cycle.
Principle 8: Currency management

The portfolios will utilise both managers that hedge their currency exposures and those that
do not – this positioning will be dependent on market events and our longer-term views.
Principle 9: Fees and taxes

Fees and taxation implications are included in a portfolio analysis due to the impact high
fees and poor tax management can have on an investors’ returns over the short and long
term. Portfolios are constructed with investments that charge competitive fees, with a
preference for those that have fee structures aligned to the interests of investors and aim to
be tax efficient.

Selection process

Taking into account the investment policy, the selection process encompasses a number of
steps. The process is flexible in terms of order of execution, and the emphasis placed on
each element of the process may vary depending on the parameters and market conditions,
and to ensure due consideration is given to strategies that may be innovative and
appropriate to evolving circumstances.

1. Consideration of the parameters for each portfolio (investment universe)

Clients will usually provide an objective which includes parameters or specific
requirements. There will be times where this does not happen; however, this is quite
rare. Where this does occur, it is important to attempt to extract any biases or
predispositions that could cause complications at a later date.

Where no requirements or parameters are provided, our investable universe is
guided by the objective of the portfolio. This can result in both a very large or very
small universe.

Where the universe is overly large, we will screen-out managers and products based
on an assessment of best practice and the identification of an investment edge.
Where the universe is so small it hinders sound portfolio construction or meeting of