A few weeks ago, Becketts ran its latest set of portfolio comparison analysis to compare the selection, quality and performance of the Becketts portfolios against independent, industry-wide, risk-related benchmarks.
Our analysis was undertaken by SuggestUs’ ARC Private Client Indices – an award-winning performance reporting firm who use over 130,000 portfolios to provide a unique insight into the actual returns being generated by investment managers, for discretionary private-client portfolios.
Starting with the headlines – four of Becketts five risk-related portfolios were “A” rated.
An “A” rating (or ‘Performance Grade’) means that Becketts portfolio risk-related return sits within the top 10% of all such risk-related portfolios across the industry over the last 176 months (nearly 15 years!).
The Performance Grade analyses the risk characteristics of the portfolio, looking at the returns it has made and compares risk-adjusted returns to a group of similar portfolios. Similar portfolios are those that have the same reference currency and comparable risk characteristics. The Performance Grade is essentially a ranking of risk-adjusted performance against multi-asset class portfolios that have taken a similar level of risk.
This is a key metric of the overall analysis as it ensures that portfolio performance is aligned to the respective balance of assets allocated within each portfolio. Put simply, the performance of a portfolio will be benchmarked against other portfolios across the industry that reflect a similar level of risk taken, making performance comparisons at differing risk levels more valid.
Over the long-term, higher risk portfolios are highly likely to outperform more cautious risk portfolios, therefore the risk-related benchmark ensures a fair comparison of like-for-like portfolio performance.
To have four of our five portfolios consistently being rated in the top 10% reinforces our dedication to fund management via our Investment Management Committee, as well as the consistent monitoring of our asset allocations and fund selections across the entire spectrum of risk portfolio.
The other portfolio was rated “B”, our Moderately Aggressive portfolio, which still places the portfolio between the top 10% and top 30% of portfolios compared across the industry.
For clients familiar with the Becketts portfolios, here is a breakdown of each risk-related portfolio:
Ultra Cautious – Over an observed period of 176 months (since January 2007), the Ultra Cautious portfolio outperformed the Cautious benchmark index in 88 of these months and returned 84% cumulatively over that time period, compared to the index return of 66%. However, this benchmark is for a general Cautious portfolios and is not as defensive as we would consider our Ultra-Cautious portfolio to be. The Becketts Ultra-Cautious portfolio is less volatile than the risk-related benchmark. Therefore, the performance of the Becketts Ultra Cautious is particularly pleasing, reinforcing the conservative approach expected at this risk level and outperforming the peer group in terms of actual returns.
Cautious – The Becketts Cautious portfolio was benchmarked against the PCI Balanced Asset index . Over the same period since January 2007, the Becketts Cautious portfolio outperformed the Balanced Asset index in 94 out of the 176 months observed and returned 150%, compared to the index return of 88%.
Medium – The Becketts Medium portfolio was benchmarked against the “Steady growth” index, which has achieved a cumulative return since January 2007 of 178% compared to the index return of 112% over the same time period and outperformed the index in 99 out of 176 months. This rate of return was achieved at an extremely similar volatility rate as the “Steady growth” index, indicating consistently excellent fund selection and asset allocation in relation to the risk category over an extended time period.
Moderately Aggressive – The higher risk portfolios are largely equity-based, and are therefore considered more sensitive to stock market forces. With that additional volatility risk present, the realisation of greater returns is also higher. As Becketts’ only B-rated portfolio, the Moderately Aggressive portfolio still had a cumulative return of 237% since January 2007, compared to the “Equity Risk” Index return of 136% and outperformed the index in 105 out of the 176 month comparison period. One potential factor in this portfolio receiving a B-rating is the mix of asset allocation and the volatility of the portfolio being slightly greater than that of the index.
Aggressive – The Becketts Aggressive portfolio has returned exactly 300% since policy inception in January 2007, compared again to the “Equity Risk” portfolio, which returned 136% as aforementioned. Due to a higher exposure to equities and volatility, this portfolio out-performed the index in 97 out of 176 months.
In summary, the Becketts portfolios outperform not only industry benchmarks but also peers’ portfolios across the industry. Our investors can rest assured that we certainly don’t intend to rest on our laurels; as the portfolios will continue to benefit from frequent reviews, conviction ideas, active management and a robust investment philosophy.
For more information about our portfolios and their performance, please don’t hesitate to contact the Becketts office and you can talk to a member of our Investment Management Committee directly.
