Before discussing how to review portfolios and your private asset managers, it is worth remembering the importance of drawing up an investment policy statement when you appoint managers. The statement should set out guidelines and objectives for how they should manage your portfolios.
By detailing the investment objectives and strategy in a written statement, it makes it easier for the private asset manager to construct and manage a portfolio to meet your specific wishes. It also makes the review process more straightforward, as the objectives have been agreed and authorised in writing.
As well as the aims and objectives of the portfolio, the investment policy statement should outline your risk profile and the time frame over which you want to achieve your objectives, any investment preferences, any constraints over the stocks or sectors that the manager can invest in, the asset allocation, benchmarks to be used and how ongoing reviews and reporting will be conducted. It should also highlight the currency to be used within the portfolios and in reports to be sent to you, as well as any liquidity constraints and liabilities due, such as cash for income tax payments and school fees.
When you come to monitor your portfolio, however, it may be that the original investment policy statement is no longer appropriate. In this case, it is necessary to redraft the statement, obtain a new strategy and agree how this will be achieved with the private asset manager.
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