The Portfolio X-Rays service, launched by van Eyk in October 2012, examines the investment outlook, risk tolerance and performance objectives of a model portfolio so advisers can assess its value for clients.
Jonathan Ramsay, head of asset consulting at van Eyk, said the ‘x-rays’ completed so far reveal some important intelligence.
“The results show that most portfolios require at least some adjustments and that it’s possible to reduce the level of risk without giving up performance or radically changing asset allocation,” he said.
“There was also a significant issue with alternative investments,” he added. “Although we are firm believers in using alternatives to reduce volatility and manage risks, some assets considered to be in the alternatives sector don’t offer the diversification and low correlation to traditional assets that investors want.”
Specifically, the research found that many model portfolios are “vulnerable to profound or sudden markets shifts, such as an end to the rally in bond markets or a breakout in inflation” and that “some portfolios had an unintended bias to particular market sectors or a certain investment style.”
The research houses should have X-Rayed their own model portfolios pre GFC…the ones that advisers relied on as being independently and expertly created. I still have a copy of one….looks nothing like the current rendition though. They must have done a 100% tweak.