asset management diagram map property structured products enterprise investment schemes venture capital trusts alternative investments other tax efficient investments core cash

Click on each segment on the diagram to find out more.

Asset Management

After analysing your financial objectives and risk profile, we help you to decide whether your priorities are Income or Growth or a combination of the two. We then help you to assess your liquidity (cash) requirements. This cash forms part of the Core of your portfolio.

Core

The second element of the Core will be the proportion of your portfolio dedicated to traditional liquid investments, including: equities, bonds and property, that can be switched or realised usually at a day’s notice. In many cases we would utilise one or more of our discretionary portfolios (HFMC Quadrant PortfoliosTM ) to provide you with day to day management of the Core.

Satellite

We would then seek to improve your risk adjusted returns by adding potentially less liquid investments which we call “Satellite”. The mix between the two will be a function of your investment needs and preferences. Your private client team will then work with you over time on an advisory basis, to assemble an appropriate mix of Satellite investments.

Property

HFM Columbus has developed a specialisation in sourcing attractive commercial property investment opportunities through a wide range of property connections. The potential benefits of investing in this sector, include the following:

The tax efficiency of many individual deals can provide significant additional value.

An overall old fashioned preference for hard assets versus risky public debt and equity markets does not look like changing in a deflationary world

Low correlation with equity markets combined with, in many cases, yields significantly in excess of those available from debt issued by the same underlying entity provides a potentially attractive home for funds where liquidity is of secondary importance.

Commercial property provides fertile ground for finding “special situations” being a complex, diversified asset class offering significant potential opportunities for unlocking or developing embedded value.

Structured Products

Carefully sourced structured products can be a helpful addition to an investment portfolio providing appealing potential returns together with a degree of capital security. Typically performance is linked to well known market indices, such as the FTSE 100 or S&P 500, with capital protected provided they do not fall below a predetermined level.

There are various different types of structured products but their unifying feature is that any returns and capital protection offered depend on the strength and continued solvency of the bank issuing the investment. The continued creditworthiness of the bank standing behind the structured product is therefore always our primary consideration, given that the return of investor’s capital depends on it.

 

Enterprise Investment Schemes

Enterprise Investment Schemes (EIS) were introduced by the UK Government to encourage individuals to invest in small companies. As this can be high risk in nature a number of tax reliefs are available to investors, providing certain conditions are met, including:

• Income Tax relief of 30% on investments of up to £1m per tax year

• Capital Gains Tax deferral

• Tax free capital gains

• Inheritance Tax relief after two years

• Loss relief (on value net of initial tax relief)

EIS investments come in many forms; from investment in a single company to discretionary managed portfolios and funds. In addition to traditional high/risk return EIS investments we have been able to source opportunities that provide an appealing potential return whilst reducing the risks associated with investing in micro cap companies. Furthermore, our relationships with managers and product providers have also allowed us to provide clients with exclusive access to attractive EIS investments.

 

Venture Capital Trusts

Venture Capital Trusts (VCTs) are companies listed on the London Stock Exchange or other regulated market. Like Enterprise Investment Schemes VCTs were introduced by the UK Government to encourage investment in small companies and have attractive tax incentives due to their higher risk nature provided they operate within a prescribed set of rules. These tax incentives include:

• Income Tax relief of 30% on investments of up to £200,000 per tax year

• Tax free dividends

• Tax free capital gains

The VCT market offers different types of investment including traditional VCTs investing in a range of small companies across all sectors, specialist VCTs investing in a narrowly defined sector, AIM VCTs investing in the AIM and PLUS markets and limited life VCTs which aim to reduce risks and return capital to investors at the earliest opportunity. We regularly review the VCT market to provide clients with investment opportunities that we believe exhibit a potentially attractive return on a risk rated basis.

 

Alternative Investments

Alternative investments can potentially reduce the risk associated with a portfolio via the diversification their low correlation to traditional asset classes offers. Our relationships with investment managers and promoters mean that we are often offered access to alternative investments for clients.

However, alternative investments are often illiquid and expensive with complex structures and little investor protection if they are not regulated by the Financial Services Authority. As such it is imperative that one is aware of all the risks before investing and it is only after careful due diligence that we recommend them.

We have recommended alternative investments in many areas, including those listed below, and will continue to investigate potentially attractive opportunities on our client’s behalf as they arise:

• Hedge funds and funds of hedge funds

• Private equity

• Commodities

• Precious metals

• Film sales

• Renewable energy

 

Other Tax Efficient Investments

Where suitable we recommend that you take advantage of non-contentious tax efficient investment opportunities and wrappers. This may simply mean making pension and ISA contributions or the use of an investment bond, Maximum Investment Plan or National Savings and Investments product to ensure investment returns are tax efficient.

We also due diligence and, where appropriate, recommend investments that can help high earners reduce their income tax liability, such as Business Premises Renovation Allowance schemes, or individuals reduce the impact of Inheritance Tax on their estate via investments benefitting from Business Property Relief or the careful use of trusts.

In addition to this we recommend that you manage your investments so as to make use of lower tax rates available to different family members and allowances, such as the annual Capital Gains Tax allowance, to make sure you don’t pay any more tax than necessary.

 

Liquid Investments

We typically focus on collective investment funds, which can be switched or sold at a day’s notice, to provide this element of your core portfolio. These funds spread risk by investing in a large number of holdings and provide access to a fund management team’s specialist knowledge. On occasion we’ll use cost effective index trackers to access markets where we believe managers struggle to add value.

Many funds we recommend focus on an individual asset class and geographical area, for instance a Japanese equity fund, we look to identify the best of breed in each sector and then use these to construct investment portfolios. The majority of the funds we recommend focus on a single asset class. However, some may hold multiple asset classes which vary in weighting according to investment strategy and prevailing market conditions. Our rigorous ‘Due Diligence Process’ involves quantitative and qualitative analysis to identify funds for recommendation. In addition to analysing performance and industry standard data sets we meet fund managers and use material from independent rating agencies. Given our size we can often arrange discounts on charges or access to lower cost institutional funds producing savings for investors that can enhance performance.

We will advise you on the liquid investment portfolio with the greatest potential to achieve your financial objectives whilst accounting for your risk tolerance and ability to absorb capital losses. For many of our clients this is a discretionary managed Quadrant Portfolio™. Managed on a daily basis Quadrant Portfolios™ are a long term asset allocation and fund selection service. They provide enhanced oversight allowing the manager to react to changing market conditions with the intention of increasing the potential to achieve your financial objectives on a risk rated basis.

 

Cash

In addition to providing you with monies to cover short term expenditure and emergencies, cash is an important part of your investment portfolio and an asset class in its own right. An allocation to cash helps control volatility and can be used as a repository whilst funds are moved between asset classes or for tactical reasons, it can also provide flexibility and the opportunity to capitalize quickly on investment opportunities when they arise. As well as holding cash in bank accounts we encourage clients to invest in Index-linked Savings Certificates from National Savings and Investments, when they are available, given they are tax efficient and serve as useful protectors of your capital against the damaging effects of inflation.

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