The IAM Advisory methodology and the AMps approach has been continuously developed since 1987 and is used for all types and sizes of investment account from UHNW through to Sovereign Wealth. The approach has a proven record of success.
AMps provides a solution to the current problems of market benchmarks that dominate active and passive management. It does this through setting flexible guidelines to control risk. Managers are then mandated to explore all opportunities within the risk profile set, without reference to a static neutral or benchmark position.
In portfolio construction, we can model for the client a large number of portfolios all within the risk guidelines representing the range of investment alternatives that are within acceptable risk profiles (the ‘opportunity set’). Once this risk budget is set for the total client portfolio it can then be allocated, in a similar fashion, through mandates, to the underlying managers or funds in a way that is complementary and optimises the structure and flexibility of the total client account.
Unique to the AMps process, multiple investment objectives can then be set for the client at the level of his total portfolio and, separately, for each of the underlying managers, which are reasonable and achievable.
Where appropriate, a manager is challenged to exceed an agreed real rate of return target over a reasonable time horizon and to maximise investment returns within a client risk profile. This approach is demanding and to be preferred against single objectives where a manager pursues an index return, irrespective of whether it is positive or not or, conversely, pursues a real return when returns available at the same risk level are much higher.
The same process is then used to ‘manage’ the total account and to subsequently monitor the actual performance and risk, providing further detailed information on other portfolio statistics. The managers’ performance and risk can be ‘graded’ monthly by percentile rankings over a series of different time periods. Critically, this is relative to what was available under their specific mandate. It quickly becomes apparent if there is a problem.
Analysis of results can identify opportunities for improved returns, which were missed or areas where decisions were correct. These insights are appreciated by the managers often providing a completely different perspective on the way they make investment decisions.
Using the AMps system fund managers can be freed to consider opportunities and allowed to be truly ‘index-agnostic’ whilst all agreed portfolio risk guidelines are still being respected.