Family Office Services - Proposition

Diversification

Diversification is the practice of spreading money among different investments to reduce risk. By picking the right group of investments, you may be able to limit your losses and reduce the fluctuations of investment returns without sacrificing too much potential gains.

Strategic asset allocation is a diversification method that establishes and adheres to a ‘base policy mix’. This is a proportional combination of assets based on expected rates of return for each asset class. E.g. if stocks have historically returned 10% per year and bonds have returned 5% per year, a mix of 50% stocks and 50% bonds would be expected to return 7.5% per year.

There are many ways of achieving a base policy mix with diversification acting as the guiding principle. However, diversification as a concept has existed for long in the minds of investors. Many of us would know about the perils of putting all the eggs in one basket. Therefore, more than the idea of diversification, it is important to arrive at an objective method of scientifically diversifying in order to obtain the most efficient risk return combination in the form of the best base policy mix.

This scientific method of arriving at the most efficient risk-return combination that we use is defined by Markowitz’s Mean Variance Optimization Model known more popularly as Modern Portfolio Theory.

Every possible asset combination can be plotted in risk-return space, and the collection of all such possible portfolios defines a region in this space. The line along the upper edge of this region is known as the efficient frontier (sometimes "the Markowitz frontier"). The science is to select the portfolio from combinations along this line such that it either holds the least amount of risk, given the return or to take the best possible return given a level of risk. 

We will always work in your interest. While it might sound clichéd and oft quoted, what is more important is the presence of a process in place to ensure that our commitment is followed across the system. We ensure complete transparency and alignment through our Fee Structure.

It is designed with the concept of a High Watermark in a manner such that the firm earns a fixed fee  ensuring complete alignment towards your side and while eliminating potential conflict of interest.

Through our strict internal Employee Conduct Policy for all employees of the Family Office, we seek to ensure that decisions will be taken on an arms-length basis and a policy of independence will be followed by the employees. Open Architecture model makes sure that your Family Office would leave no land unexplored in trying to get the best available product. It would integrate all the possible options under one roof irrespective of transaction origination with a transparent process for arriving at and implementing portfolio decisions. This would encompass risk/objective assessment, selection of portfolio components, and implementation of portfolio, portfolio rebalancing and portfolio review.