Client
Requirement
Plans, Objectives and Personal circumstances are assessed carefully. Our assessment includes your assets and liabilities, income and expenses, liquidity requirements (short & long-term) and investment goals in a holistic manner.
Risk
Profile
Awareness of your risk-taking ability is critical. Risk taking in this context means your tolerance for temporary (marked-to-market) loss of capital and/or permanent impairments. There is a direct relationship between expected returns and risk in a portfolio. We attempt to determine whether you are Conservative, Balanced or Aggressive, based on your feedback and on your life-cycle and need.
Asset Allocation, Portfolio Construction & Reporting
Core Portfolio: Asset Allocation
- Conviction based, long term and relatively static
- Asset Allocation driven by long-term goals (3 years horizon) and risk appetite
- 65% - 90% of the portfolio; typically more conservative investors will have a higher allocation to the core portfolio
- Composition
- Fixed Income
- 35-70% depending on risk appetite and market conditions
- Mix of Investment Grade (IG) & High Yield (HY) Bonds, Developed and Emerging Markets
- Judicious use of leverage depending on available value or arbitrage
- Equity / Private Equity
- High quality stocks / Dividend Aristocrats to ensure income and growth
- Selected Private Equity investments with high expected IRR
- Limited currency risk depending on geographical allocation
- Alternative Investments
- Insurance linked
- Trade Finance linked, Soft Commodity linked, Private Debt, Securitised Real Estate etc.
- Alternative Investments
- Fixed Income
- Instruments
- Direct purchase of securities
- Use of Funds (Mutual Funds and ETFs)
- Structured Products: for risk management (capital preservation) and/or leverage or enhanced returns
Satellite Portfolio Opportunistic
- Opportunistic, short term and dynamic:
- Market driven themes; arbitrage opportunities; extensive use of derivatives & relatively high degree of leverage.
- 10% and 35% of the Total Portfolio
- Composition:
- Fixed Income
- Short duration bonds (<2 years) offering good yield due to market dislocation
- Very high leverage on highly rated IG bonds (e.g. State Bank of India 3Y at 3MLibor + 175, on 85% LTV and competitive funding can yield close to 10% return on equity
- Leveraged deposits: take advantage of arbitrage opportunities between different Interest Rate curves, e.g. AED and USD where there is a basis despite a sound and reliable peg which affords the opportunity to fund in USD and earn in AED.
- Fixed Income
- Equities
- Identify and selectively purchase single stocks or sectors that have come under stress to an unjustifiable extent
- Use of derivatives, e.g. writing short term puts
- Currency
- Selected currency positions on high conviction ideas
- Mitigate some risk by purchasing fixed income in the long currency
- Direct purchase of securities
- Extensive use of derivatives
- Extensive use of Structured Products, mainly to provide yield enhancement / in-built leverage
Sample Portfolio
Consolidated Investment Reporting
- Investment Reporting:
- Key in order to monitor the performance effectively and make sound investment and risk management decisions
- Consolidated investment reports:
- Comprehensive overview of the total portfolio across different banks and custodians
- Multiple views by (a) Assets, (b) Currency and (c) Geography.
- Performance Reporting at different levels of granularity
- Cashflow and Maturity analysis
- Leverage analysis including stress scenarios to better manage potential margin calls
- External non-financial asset positions can be included upon request
- Frequency of reports:
- To suit the requirement of the client, typically monthly. 3CCA’s monitoring will be more frequent and ad-hoc reports may be provided if required