The starting point of any management strategy and thus of the entire investment process is to understand and define the client’s objectives and risk profile, referring to actual risk/return expectations.

Choosing the most appropriate investment strategy for each Client is a consequence of correctly determining his or her goals and risk profile. This choice influences more than any other the returns achieved in the long term.

It is therefore necessary to choose the investment strategy very carefully and review this at least on an annual basis. We propose an allocation among different asset classes (bonds, equities, cash, and other asset classes) capable of maximizing the expected return within the defined risk. This allocation is guided by a principle of broad portfolio diversification and may take into account constraints and preferences specific to each Client. It results in a specific risk/return objective.

If the investment strategy represents the direction along which portfolio management should move, the tactical choices represent the paths that from time to time seem most appropriate to proceed in this direction. These tactical choices are based on an analysis of the levels reached by different market indices, their degree of risk, and the outlook expected in the months ahead. On this basis we can decide to change the allocation among different asset classes within predetermined limits. Tactical allocation choices are made either on the basis of independent research conducted on key economic variables by our in-house Investment Team or by consulting research provided to us by major international investment houses.

Once the most suitable allocation among the different asset classes has been chosen, it is necessary to select for each one the investment mode that seems to offer the best prospects for return. We identify some of the best managers in the different asset classes and follow them in their work. On this basis, a “short-list” of specialists we feel we can recommend to our Clientele and use within the framework of our management mandates is drawn up. Only in these cases is it worth paying management fees in our opinion. Otherwise, it is preferable to use ETFs or other financial instruments capable of low-cost replication of market index returns. This is often the case in the best-performing financial markets, where it is difficult for a manager to systematically have better information or views than the market itself.

Constant review of asset allocation, its risks and performance is essential to maintain the necessary control over the investment process. Many of our Clients conveniently deposit their assets with multiple banks. This allows each of them to reduce their exposure to insolvency risk and take advantage of each one’s best specific skills, but it makes the control of consolidated assets more complex. To overcome this problem, we have equipped ourselves with the “INSA” software that enables targeted and consolidated reporting. All transactions made on behalf of our clients are entered into INSA’s database, which allows us to constantly monitor the performance of both individual bank portfolios and consolidated portfolios, as well as produce accurate, in-depth reporting based on market prices obtained independently of depository banks.

A specific feature of our approach to investments is rigor in controlling and managing their risks. This stems from the belief that the most discerning private clients are no longer willing to tolerate losses greater than those agreed to with their manager as a result of sharp market fluctuations. Avoiding severe losses in difficult times also helps to achieve better results in the medium to long term, and this goal plays a central role in our entire investment process. Our efforts in this regard are not limited to measurement and control. We are committed to actively using available modern financial instruments to reduce the risks related to large fluctuations in stock, bond and currency markets. In addition, we provide a wide diversification of bond investments in order to keep the default risk of an individual borrower within a small percentage of the portfolio value. This is aided by the use of a modern portfolio management system that allows us to simulate and verify the impact of certain transactions before they are executed.