There is more to maintaining an optimised investment portfolio than adopting a simple buy-and-hold or ‘set and forget’ approach. Even if you are investing with a long-term horizon and not intending to touch your money for some time, your portfolio will still need to be regularly reviewed to ensure it remains appropriately positioned to deliver on your investment objectives.

Our world-class Investment Advisory Committee differentiates Six Park, by complementing our passive investment focus with a thoughtful and expertly framed approach to overall asset allocation and portfolio management.

The assets in your portfolio will likely deliver different returns over time, particularly as markets move and various holdings outperform and underperform others. The composition of your portfolio will therefore inevitably drift away from its original optimal asset mix. This may result in an increase in your risk exposure, particularly if the mix becomes increasingly concentrated to higher risk (and potentially overpriced) asset classes such as shares, and underexposed to the more conservative investments. For these reasons, it is important your portfolio is periodically ‘rebalanced’ back to its target asset mix.

At Six Park, we closely monitor the asset mix in your portfolio and undertake periodic rebalancing to ensure your investments are allocated in line with your intended risk-return profile. Our rebalancing techniques minimise unnecessary transaction costs and tax consequences wherever possible. We do this by systematically directing new cash inflows into underweight asset classes, by favouring overweight asset classes as a source for any withdrawals and by periodic rebalancing when a portfolio’s asset allocation has drifted from its targets by predetermined minimum thresholds.

Rebalancing: research and studies

There is a wealth of research showing the benefits of portfolio rebalancing. One respected paper by Burt Malkiel and Charles Ellis demonstrated that rebalanced portfolios generated an average of 0.4% more per annum over a 10-year period (1996 and 2005) – and with less volatility – than portfolios that were allowed to drift. Numerous other studies (e.g. Plaxco & Arnot 2002, Swenson 2005; Forbes 2011) have found similar results over different time periods.

Of course, it’s not just changes in your portfolio mix that can trigger a need for rebalancing. Over time, changes in your personal circumstances can also alter your investment objectives and tolerance for risk.

At Six Park, we ask you to review your personal circumstances, investment objectives and risk tolerance levels once a year, to ensure your investment plan remains relevant and appropriate. You can also retake our risk assessment at any time throughout the year if your situation or circumstances change. We also remind you to notify us of any other relevant changes in your circumstances as part of our regular reporting processes.

As well as providing regular rebalancing and portfolio reviews, Six Park provides you with an additional overlay of portfolio and risk management oversight under the guidance and stewardship of our world-class Investment Advisery Committee.

While maintaining a focus on passive investment strategies, we use our Investment Advisery Committee’s deep experience and insights to help us:

  • establish the overall composition and weightings of asset classes within the investment profiles offered to our clients;
    select our preferred ETFs (taking into consideration factors such as fund size and liquidity, expense ratios, tracking error and spreads);
  • critically evaluate market developments to determine whether updates are required to Six Park’s approach and offerings from time-to-time;
  • provide guidance in the event of significant market fluctuations and/or severe down-market events; and
    manage factors such as currency exposures and the use of hedged ETFs in our offerings.

In line with our passive investment focus, we use these insights to position our portfolios for long-term growth – rather than to try to time the market and/or pick winners. In other words, our Investment Advisery Committee helps us to spot ‘potholes’ on the investment horizon and navigate around them by leaning into and/or out of long-term asset allocations.

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