In the UK we are fortunate to have access to NHS healthcare; free at the point of delivery, based on needs not ability to pay, and available to all who may require it. However, many people also access the private sector for healthcare and with that draw on the benefits of seeing a private GP, this may well be the case for patients unable to access the NHS.

Speed of Access

One advantage of seeing a private GP is that they are readily available at a time that is convenient to you and offer a shorter waiting time. Most private GPs offer same day appointments and you should expect to be seen within hours of requesting an appointment, not days. Most private GP’s will see their patients on time, and time spent in the waiting room is significantly shorter then when seeing an NHS GP.

Longer Consultations

A private appointment means there is more time for your consultation. You can bring several symptoms or problems to the attention of your GP, rather than just the one problem as is often the case in NHS General Practice. Most private GPs will offer a consultation time of around 30 minutes or even an hour. In this time you are given plenty of time to discuss your concerns, be clinically examined, be investigated thoroughly and referred to a specialist if required. You can expect a full medical examination and a detailed discussion about your family as well as personal medical history in order to fully assess your condition or any risk factor. This is done in an organised, efficient and timely manner. Therefore, your condition will be treated much more quickly, effectively and appropriately.

Flexibility

There tends to be more flexibility in private general practices, offering extended appointment times to provide their patients with ease of access. This may include early morning, lunchtime, evening or even weekend appointments. The London General Practice offer a 24 hour service. With doctors on call covering every hour of the day including Christmas and Bank Holidays visiting you at home, place of work or hotel.

Personalised Bespoke Treatment

There is normally greater choice in selecting a private GP with patients being able to choose who they wish to see. Patients may have the choice of GPs at a practice and can choose who they prefer to see. This may be for personal reasons or they may prefer a male or female doctor. Similarly, if desired, in the private sector you are more likely to be able to see the same Doctor each time you visit, enhancing the personal experience and quality of care.

Efficiency

Private GPs tend to have access to very best diagnostics, specialists and consultants. Referrals are fast and much quicker. The turnaround time for test results is also quick with blood tests being returned on the same day. For example, we aim to receive results of urgent diagnostic scans on the same day. This means that if you see a private GP in the morning you can expect to have a full examination and the answers to any blood tests or diagnostics by the afternoon, meaning that any concerns are rapidly addressed.

Visits

Private GPs provide house visits coming to you if required. A private GP can see you in your own surroundings and in the comfort of your own home, work or hotel at a time to suit you, for example, after work or at the weekend. Private GPs also offer a one stop shop where patients can access additional services such as travel vaccinations, blood tests and health screens.

Private GPs offer extensive health screening including cardiovascular health screening, screening for cancer, well woman and well man screening.

Article by Dr Angela Rai.  The London General Practice was founded by Dr Paul Ettlinger, one of London’s most respected and well established private doctors. The Practice is based on Harley Street, London and provides UK-based and international patients with a comprehensive range of excellent private healthcare. We pride ourselves on the flexible, personal care we provide to our patients, which is available 24 hours a day, 365 days a year.

The Practice consults for many private families, leading insurers, the entertainment industry, numerous multinational companies and prestigious London hotels.

PRIVATE GP SERVICES

Building personal, meaningful relationships with all patients is of the utmost importance for the Practice, as is allowing adequate time for a comprehensive, thorough and accurate personal health assessment.

The London General Practice has consultation facilities on Harley Street, which is linked to an excellent range of diagnostic and analytical facilities, many of which are available in the same building.

In addition to our comprehensive private primary care service, our preventative healthcare service includes general health screening, and also well-woman and well-man health screening, to address gender specific health concerns. The London General Practice 114a Harley Street, London W1G 7JL (Entrance on Devonshire Street; between Harley Street and Portland Place) Tel: +44 (0)207 935 1000 www.thelondongeneralpractice.com

Putting a coherent strategy around charitable giving can be an important part of an individual’s Wealth Plan. If giving strategies are among actionable priorities, it is important to identify tax-efficient ways to achieve your charitable objectives.

There are often two primary reasons why people give to charities:

(1) To support a cause or organisation about which they care

(2) To leave a legacy through their support.

Whilst charitable giving often forms part of an individual’s estate planning objectives, some also give during their lifetime by transferring a sum of money thus removing it from their estate.

There are many different methods by which an individual can give. One way is by maximising the potential tax benefit and thereby ultimately gifting more.

Ways To Give

Before exploring optimal strategies for US persons living in the UK, it would be good to review some of the different ways to give to charity.

(1) Give directly - This approach is the most straightforward and simple. It involves donating money directly to a charitable organisation of your choice. Any tax benefit is received in the same year in which the donation is made.

(2) Use insurance as a vehicle for gift-giving – If you do not have large sums of money to give during your lifetime and you hold a life insurance policy that is not needed for other important purposes, you could consider naming a charitable organisation as your policy beneficiary. This could result in a larger gift than you otherwise would have been able to make and potentially creates a longer-term legacy. However, serious thought must be given to this method and you should seek guidance from a financial adviser before any steps are taken. Even though the policy may be redundant in terms of the purpose for which it was originally taken out, there may be valuable benefits attached of which you are not immediately aware.

(3) Volunteer time – Giving is not always about money. It can also be about getting involved by giving your time. Many organisations need volunteers to help deliver on their charitable goals. This can be a way to establish a personal connection and give in ways that require little or no money changing hands.

(4) Establish a trust to give money - This is a longer-term approach towards charitable giving. It will allow you to receive tax benefits today on funds allocated specifically for charitable giving, but actual donations may be made at a future point in time. This may be a strategy for people who are asset rich but time poor and have not been able to decide to which causes they want to donate.

A Donor Advised Fund is one type of vehicle that facilitates the giving strategy. Donor Advised Funds have increased in popularity over the last few years due to their offering of administrative convenience, cost savings and tax benefits.

What Is A Donor Advised Fund?

A Donor Advised Fund, or DAF, is a charitable investment fund, administered by a public charity, that is formed for the sole purpose of supporting charitable organisations on behalf of an individual, a family or an organisation. It allows donors to make an irrevocable charitable contribution, receive a tax benefit immediately and then allocate charitable gifts from the fund at some point in the future. Gifts are made to a specified charity whenever they decide it is the appropriate time. While the gifts remain inside the fund, they are invested with an eye to grow the balance.

What Are The Benefits Of A Donor Advised Fund?

DAFs have a number of benefits. First, a DAF is a cost-effective way for donors to maximise the tax benefits of making charitable donations to causes about which they care. A DAF can be set up with a relatively small amount of money (as little as £1,000 or £5,000) so an individual can choose to donate a lump sum or make small contributions in regular intervals over time.

DAFs have relatively few administrative responsibilities. There is generally minimal paperwork that needs to be completed, and quite often grants can be made directly online.

Additionally, DAFs are not subject to the minimum payout requirement each year. Private foundations, for example, must distribute at least 5% of assets annually. The fact that DAFs are not subject to this requirement leads to more flexibility on timing of distributions.

Another benefit of DAFs is that when donors decide to make a donation from the funds held within their DAF, it is possible to choose whether their donation is made anonymously, or if their personal details are disclosed to the donee.

One of the benefits that a DAF offers is not only the ability to receive a tax benefit upon funding the DAF but the ability to invest the pool of money and choose an organisation to donate to at a point in the future. So, if an individual can benefit from funding a DAF today but has not had time to decide which cause they would like to receive their gift, a DAF provides a mechanism to make that feasible.

Under current US tax law and practice, when donating to a US qualified charity ((a 501(c) (3) organisation), an individual can receive a US income tax deduction if they itemise their deductions as opposed to claiming the standard deduction. Under the new tax reforms and the higher thresholds for itemising deductions that have come into effect this year, making charitable contributions in lumps can potentially provide a greater benefit than in previous years. So, for example, if a 37% taxpayer contributes the equivalent of £100,000 into a US qualified DAF, the donation will receive a tax deduction of up to £37,000.

Similarly, when donating to a UK charity, currently the donation will qualify for UK income tax relief. In addition, the donation should qualify for UK Gift Aid which will increase the value of your donation by 25%. So, for example, if a 45% rate individual taxpayer contributes £100,000 to a UK qualified DAF, the donation with Gift Aid will be £125,000 and your additional claim back from HMRC would be £31,250.

How Can A Dual-Qualified Donor Advised Fund Be Beneficial For Americans Living In The UK?

Many charitable organisations are considered to be qualified non-profit organisations in one jurisdiction or the other. As a result, giving directly to charities in either the US or the UK will often result in a tax benefit in only one country.

As Americans living in the UK are generally subject to income tax in both the UK and the US, there are advantages to ensuring that you receive a tax benefit in both jurisdictions for the dollars that you donate.

A dual qualified DAF allows individuals who are taxpayers in both the US and UK to receive tax benefits available in both countries. As such a dual qualified structure will ultimately allow the individual to allocate more money to their favoured charitable causes. Once the money has been donated to the dual qualified structure, it can then be directed towards charitable organisations and causes around the world without the need for the organisation itself to be dual qualified.

Identifying An Appropriate Donor Advised Fund Provider

Awareness of DAFs and their rising popularity seems likely to continue as more people reach retirement and look for ways in which to give away some of their wealth in a tax efficient manner.

There are a number of charitable organisations that will facilitate dual-qualified DAFs. A few of the organisations are listed below:

• Charities Aid Foundation (CAF)
• SharedImpact
• Prism the Gift Fund
• National Philanthropic Trust (NPT-UK)

When deciding which organisation to establish a DAF with, it can be important to identify one that ultimately aligns with your own interests and values. Each charity has their own cost structure, investment options, minimum contribution requirements and account balances and varying ability to transfer the account to another institution. As the organisation will be trustee over the donated assets, the donor should make sure that the organisation will help facilitate their giving in the manner with which they agree.

While charitable giving is not all about receiving a tax benefit, we know that we are often limited in the amount we can give and would like to be able to give more if we had the ability to do so. Giving in a way that maximises the benefit to both the charity and the donor will help ensure that more assets ultimately reach the causes about which we personally care. Utilising a dual qualified DAF is one way to help facilitate this strategy and should be considered when assessing your charitable giving objectives.

Andrea Solana is Head of Advanced Planning at MASECO Private Wealth where she helps to provide financial planning and wealth structuring advisory services to US expatriates in the UK and British nationals in the US. Before joining MASECO, Andrea spent the first part of her career with a well-known Washington DC based international tax and global wealth management firm where she gained considerable experience advising high net worth individuals with multi-jurisdictional financial interests to design and implement strategies for tax-efficient and risk-managed asset growth. She has written numerous white papers regarding fundamental financial planning and investment strategies for US connected individuals and has previously been a speaker on financial planning topics at numerous places including both The World Bank and International Monetary Fund (IMF).

Andrea graduated from University of Virginia’s McIntire School of Commerce with a degree in Finance and Management and completed her MBA at Imperial College London. Visit www.masecoprivatewealth.com for further information.

Risk Warnings And Important Information

MASECO LLP (trading as MASECO Private Wealth and MASECO Institutional) is registered in England and Wales (Companies House No. OC337650) and has its registered office at Burleigh House, 357 Strand, London WC2R 0HS.

MASECO LLP is authorised and regulated by the Financial Conduct Authority for the conduct of investment business in the UK and is an SEC Registered Investment Advisor in the United States of America.

This article does not take into account the specific goals or requirements of individuals and is not intended to be, nor should be construed as, investment or tax advice. Information contained in this article is based on MASECO’s understanding of current tax law and legislation, however, MASECO Private Wealth is not a tax specialist. You should carefully consider the suitability of any strategies along with your financial situation prior to making any decisions on an appropriate strategy. We strongly recommend that every client seeks their own tax advice prior to acting on any of the strategies described in this document.

From Desert to Drizzle By Katrina Boydon

Our final fling in the United States was a six- thousand-mile cross-country adventure with our four children and two dogs. Epic doesn’t even begin to describe it. It was AWESOME. We wiggled our way from West to East and ended up in New York one day before we left forever. But that’s a story for another time. We are naturalised Americans who lived in Reno, Nevada for ten years. Before that, we lived in France and Russia for many years. And before that, Britain, where we were born and raised. When we made the decision to move “back” to Britain, it didn’t feel like that at all. Meaning we had been away for so long that it felt as if we were moving, yet again, to a foreign country. And we were right. The question everyone asked us when we told them of our plans was, but WHY?

Why indeed. There were lots of reasons. I stopped working for a Silicon Valley marketing company a year before we left and had no interest in finding a similar job in Reno or anywhere else. Our children were all British but had never lived in Britain. Our parents, who were in Britain, were in poor health and we wanted to be near them. And we were homesick. Even so, it was a very difficult decision. We loved our home and life in Reno and we had no real idea of what we might do in Britain. The last year in Reno was the most fabulous ever, which made it even harder to leave. I spent more time with my children, rode my horses, volunteered as a 4-H leader, did a spot of consulting, and planned our move.

In retrospect, the decision to spend six weeks travelling across America was wise. Eight of us, including the two huge dogs, living in an albeit good-sized trailer, was excellent preparation for moving into my mother’s house in Wales. The house, quite large for Britain, was a shock to the system for the kids. That and having only one bathroom between all of us. Steve and I chuckled on more than one occasion at a disgruntled teenager sulkily waiting their turn in the hallway.

But it was lovely to be in Britain. It was all so new and exciting, yet familiar. It was easy to settle in apart from the nightmare first month. We had no belongings, no credit history, no past UK address and no internet. Every single service I called told me “just go online...” Funny looking back, but not so amusing at the time.

Then I got homesick for Reno. I still am. I miss my home and life, for sure, but it is more than that. I miss the wide-open spaces and guaranteed sunny weather. I miss the encouragement and enthusiasm of my American friends (thank heavens for Facebook). I miss that lending your car to a friend is normal. Why ARE British people so special about their cars? And I miss the easiness of living. High speed internet. Showers that work. Mixer taps. That my clothes dried quickly inside the house in winter. That my home was easy to clean, warm in winter and cool in summer. That I didn’t wallow in mud when I fed my animals. It’s not that you can’t be comfortable in Britain; but complaining about any discomfort is likely to elicit an eye roll from a proper Brit. There’s no place for softies here. I joke half-seriously that Brits don’t consider they’re really living unless there’s a bit of hardship involved. “Mustn’t grumble”, “can’t complain”, is a way of life.

We’ve settled here happily, even if part of me is still in Reno. I feel more of a connection for The Biggest Little City than anywhere else I have lived. Perhaps it’s true that if you travel and live in different countries you are never completely content anywhere ever again. This makes me sad but also secretly pleased that, truly, I have another country I consider home. Did we really leave forever? We have no plans to move back any time soon, but never say never. I cannot imagine NOT going back to the US at some point.

Oh yes, we found a way to support our life here, too. During our last year in the United States, we had a germ of an idea to start up a glamping (so-called glamorous camping) business in Britain. So, we did it. Within six months of moving back we found a property in Shropshire and set up Barnutopia. Steve’s practical skills and my marketing skills have proved to be a winning combination. Our gorgeous rural location with stunning views in every direction helps a bit, too. You can see us and our glamping site on ITV’s Give It A Year (find it here) with Baroness Karren Brady. Please feel free to drop in and say hi sometime. We’d love to see a friendly face from across the pond.

About Barnutopia Barnutopia is a glamping, wedding and event venue in the Shropshire countryside. The site offers a glamorous camping experience for guests who love the outdoors but prefer the comforts of home. Since opening in 2015, it has earned over one hundred and seventy 5-star reviews from satisfied guests. For more information visit www.barnutopia.com.

Tina Turner’s life has been well documented first in her autobiography I, Tina and then in the film What’s Love Got To Do With It with Angela  Bassett and Laurence Fishburne. Therefore, it should come as no surprise to audiences that this fiercely talented singer endured years of brutal beatings from her husband Ike Turner. This violence is central yet again to Tina Turner’s story in this production, turning what could be a rags to riches, typical jukebox musical into a study of domestic abuse. Of course, we know that she will triumph and go on to record her Private Dancer album, become even more successful without Ike and will eventually find happiness, but the journey that takes her there is a difficult one to watch.

Katori Hall’s script has a lot of ground to cover, so doesn’t have much time to delve into any depth or ask too many questions of its protagonist. We first see Tina waiting to go on stage in Brazil in 1988, calmly chanting Buddhist prayers while a huge audience screams in anticipation. We then jump to the beginning of the story, an outdoor prayer meeting in Nutbush, Tennessee, where little Anna Mae Bullock is told off by her mother, Zelma, for singing too boisterously and showing off. Zelma is reprimanded for her criticism by her husband, Richard, the preacher, who hits her in front of the children, a foreshadowing of Tina’s life to come. Zelma soon takes off with younger daughter Alline to St Louis and Anna Mae is left in the care of her grandmother, a kind woman who encourages her. At sixteen, she joins her mother and sister in St Louis and almost immediately meets Ike Turner at a club, who insists that she join his band and charms her mother into letting her, promising that Anna Mae will be well paid and will send money home. He also promises to take care of her, but the early signs are not good. He loses his temper with everyone around him, showing a narcissistic, bullying personality, threatening fellow band members as well as the singers. Nevertheless, Tina joins him and is soon made the lead singer. Although she falls in love with saxophonist Ray, and has a child by him, Ike renames her Tina Turner and pretends that they are married for the sake of their band, the Ike and Tina Turner Revue. Two years later they do marry, despite Ike beating up both her and Ray, and what follows is years of abuse as well as many hit records.

What is glossed over is why Tina stayed all those years with Ike, who was a drug addict and philanderer. We see plenty of scenes of violence but never any love so it makes her look like an unquestioning victim, perhaps because she considered it normal for a man to beat his wife, as she saw in her childhood. Only after her suicide attempt does she eventually decide to stand up to Ike, fighting back and then escaping from him on the spur of the moment, while they are on tour.

Act Two sees Tina now left with no money, a single mum struggling to support two sons by doing Las Vegas shows, and follows her slow rise back to the top of the charts with the help of a new manager and a fortuitous collaboration in London. Along the way, she also finds love with Erwin Bach, a German music producer who is seventeen years younger than her. The rest is history.

Although Tina Turner’s life story is bleak, it is clear that what kept her going was the music and there is plenty of it in this production. The songs are cleverly interwoven into the story, starting with Nutbush City Limits sung as a hymn by the outdoor church to Gran Georgeanna singing Don’t Turn Around as she sends young Anna Mae off to St Louis, to Let’s Stay Together sung by Ray in one of the rare tender moments.

The music really takes off though when performed by the astounding Adrienne Warren who perfectly embodies Tina Turner; despite not sounding or looking like her, she has Turner’s unbounded energy, strength and size. Her magnificent voice soars in every number. The scene where Phil Spectre is recording the iconic River Deep, Mountain High with Turner, making her do it repeatedly until she gives it her all, is particularly memorable. American actress Warren also captures Turner’s mesmerising stage persona, from the highly energetic, verging on manic dance moves of Proud Mary to the smiling powerhouse of Simply the Best. In addition, she has to age from sixteen to forty- nine, which is no mean feat, even though Tina Turner has always looked remarkably young.

Kobna Holdbrook-Smith, a fine actor who has worked frequently in theatre, including playing Laertes to Benedict Cumberbatch’s Hamlet, has the unenviable task of playing the unrelenting villain of the piece, Ike Turner. He plays it absolutely straight in an unyielding performance that doesn’t ask for sympathy, but unfortunately the script gives him little opportunity to show what first attracted Tina to Ike and what kept her with him for sixteen long years of abuse. He is, without a doubt, a powerful presence, however, and we do sense his resentment at never being recognised as the rock and roll renegade he was. He shapes and forms young Anna Mae into the iconic Tina Turner but cannot control his anger and brutal temper, lashing out at all around him.

Madeleine Appiah as Zelma Bullock, Lorna Gayle as Gran Georgeanna and Francesca Jackson as Rhonda Graam, Ike’s road manager and later Tina’s close friend and personal assistant, all turn in excellent performances. Mention must also be made of the actresses playing the Ikettes, the original back-up singers, who perform with as much gusto as Tina.

This is a musical with heart, showing the bravery, fearlessness and extraordinary talent of Tina Turner, faced with not only an abusive husband but with racism, ageism and sexism from white executives in the music industry. However, it never takes a closer look into the mind of a woman who would endure such abuse for sixteen years, while still asking the audience to witness repeatedly such scenes of violence. It is an uncomfortable story to watch, alleviated by full throttle performances of Tina Turner’s greatest hits by the incredible Adrianne Warren. Although the musical is hard-hitting, it didn’t seem to bother most audience members who happily stood up and danced and sang along to the obligatory end of show numbers including Proud Mary. As Tina Turner had a hand in presenting this version of her life, we have to assume this is what she wants the world to see, that she will not be beaten into submission by anyone and in the end, we just have to keep singing.

Ticket information 

The question I currently find myself asked most frequently is: Should I sell US equities? It is a very good question, but in isolation its answer is insufficient to lead to an investment decision. Many investors agree that US equities are expensive and because of this believe the allocation should be reduced versus the strategic target. From a valuation point of view this is a good idea, as by most measures, such as the Price to Book ratio (P/B) or the Shiller Price to Earnings ratio (also called CAPE = cyclically adjusted P/E), US equities versus their own history have reached lofty valuation levels. At the same time, many investors overlook critical questions such as:

1. Should information beyond US equity valuations be considered?

2. How can tactical asset allocation insights like US equity valuations best be utilised in a portfolio context?

Before we address each of these questions, let’s revisit the basic facts on asset allocation. Asset allocation is broadly understood as the exercise of allocating between different asset classes, such as bonds versus equities, and different market segments, such as UK bonds versus Eurobonds. Holding any asset allocation for a long period is called Strategic Asset Allocation (SAA). SAA has a huge impact on the return outcome as well as the return variability, also known as volatility. A famous study by Brinson, Hood and Beebower(1) examines determinants of portfolio performance and its volatility. The key point to take away is that SAA on average determines over 90% of the return volatility. This is demonstrated in the following graph.

Corresponding results have since been confirmed by similar studies as Brinson et al(2). A study by Ibbotson and Kaplan into the impact of SAA on the return level(3), shows that empirically SAA was on average responsible for 100% of the return level outcome.

Nowadays more and more investors focus their investment efforts on SAA and implement it with cheap, passive index tracking products. That is a very good starting point but should investors stop there?

Both market timing and security selection represent active investment management. Market timing represents short term, Tactical Asset Allocation (TAA) decisions, like temporarily underweighting US equities versus the strategic US equity allocation. Security selection keeps the strategic US equity allocation but varies the weights of individual US stocks within the allocation to US equities.

TAA is traditionally implemented by tilting portfolios away from strategic weights during any year. This creates relative risk (tracking error) but also potential outperformance (excess return) versus the SAA portfolio. The relationship of both variables, excess return over tracking error, is measured by the information ratio, and the aim of TAA is for the information ratio to be positive. A 10% underweight creates a much higher tracking error than a 2% underweight but if the same good idea is applied (the same information ratio), there is potential for higher outperformance. Therefore, investors are required to have a very clear idea about how much tracking error they can withstand when markets don’t behave as predicted and that TAA generates significant underperformance versus a pure SAA portfolio.

Sizing an under- or overweight portfolio can have further implications on the absolute level of risk. For example, if an investor doesn’t like bonds versus equities because of low yield, should they reduce bonds from 50% strategically to 25% tactically? Alternatively, should the investor go all the way and not allocate to bonds at all; in other words switch to 100% equity? The latter will cause a far less diversified and much riskier portfolio. The following graph shows a 50/50 combination of two hypothetical assets, which both have a Sharpe ratio of 0.5 and a volatility of 10%(4): It illustrates a Sharpe ratio deterioration for tilting or switching, which is also larger for portfolios with more diversified assets or strategies (Fig. 2 lower correlations, left).

Therefore, a portfolio including TAA faces an uphill battle just to match the Sharpe Ratio investors would expect from it if no TAA would be attempted.

Let’s now look at using valuations in TAA decision making. In my opinion it is an absolute necessity to consider valuations. However, looking only at valuations can be equally as disastrous. For instance, some of you may remember the ‘TMT bubble’ at the turn of the century.

The below graph displays the Shiller P/E for US equities for the period of January 1881 to November 20175. In December 1995 US equities reached a Shiller P/E level over 25, well above the average level of about 15, which any investor could have calculated from all the data history between 1881 and 1995. 25 was also a level achieved only twice before in a period longer than 100 years. (Fig. 3, below)

Unsurprisingly in 1995 some investors believed that US equities were expensive and therefore started reducing their allocations to US equities. Unfortunately, in the following four years these investors had to experience significant performance headwind as valuation levels climbed even further!

After reading all of this, how excited are you about TAA? Most likely not a great deal. Nonetheless, I suggest to pursue it but in a very different, modern way that until now has predominantly been utilised by sophisticated, institutional investors. It involves the following: (Fig. 4).

Modern TAA combines many characteristics that all serve the main objective: to create positive risk-adjusted returns in most market environments. Firstly, modern TAA strategies are much more diversified. Gone are the days where a manager just shifts money between a few major equity markets or simply allocates between US equities, US bonds and US cash. Nowadays, TAA strategies explore global equity markets in much greater detail as they trade on country or regional equity indices from around the world, including liquid emerging markets. In bonds, futures on different parts of a yield curve are traded. Some strategies even explore credit spreads. Modern TAA strategies additionally allocate between different commodities, from energy contracts to agricultural, precious and industrial metals. They also pursue investment decisions between currency pairs, sometimes including currencies from emerging market countries. Some TAA strategies even trade volatility. In summary, modern TAA strategies have many options in which to invest.

Fig. 4:

All these investments are pursued using derivatives. What sounds scary to an investor who has little or no experience with derivatives, is music to the ears of sophisticated, institutional investors around the world. Most of those derivatives have been used by investors for decades and many of them are standardised instruments traded on exchanges. They bring substantial cost advantages, as liquidity in most derivatives is very deep, sometimes even deeper than the physical market they are linked to. The crucial advantage here is that trading costs are relatively low, which in turn allows a manager to trade more frequently. Derivative usage also allows TAA investors to ‘short’ a market. This means that if the investment thesis is that the price will fall, establishing a short position makes it possible to turn such an idea into a profitable strategy. With shorting you can therefore significantly increase the number of ideas a manager can implement.

Now let’s talk about leverage. While leverage can often be a polarising topic, we believe there is a strong case for allowing it to achieve superior risk management. If an investor wants to have a noticeable impact on overall portfolio returns, modern TAA strategies would need very significant portfolio allocations, if those strategies would only target a small amount of risk. However, if modern TAA strategies can target a high amount of risk, investors allocating to them achieve a much greater degree of capital efficiency, as they can make much smaller allocations and nonetheless achieve the desired level of risk-adjusted return impact. Without leverage, that desired high level of risk could only be achieved by taking on much more equity risk than let’s say interest rate risk. With leverage, however, this objective can also be achieved but with exposing the portfolio to a high concentration of equity risk. Instead, modern TAA strategies can balance out the different risks they decide to hold in their portfolios.

Lastly, modern TAA strategies don’t focus all their attention on valuations any longer. Instead, they are multi-factor strategies that also seek to benefit from momentum, quality and/or low risk as well as carry concepts.

Below an explanation for each idea:

• Value – The tendency for relatively cheap assets to outperform relatively expensive ones

• Momentum – The tendency for an asset’s recent relative performance to continue in the future

• Carry – The tendency for higher-yielding assets to provide higher returns than lower- yield assets

• Quality, Low Volatility – The tendency for lower risk and higher-quality assets to generate higher risk-adjusted returns than high risk and low quality assets.

Going into more detail on each of these may be a topic for future articles. At this stage, it is critical to understand that a multi-factor approach is introducing an additional layer of diversification beyond the typical asset class dimension. This makes the return stream from modern TAA strategies even more robust.

Modern TAA strategies are a real improvement versus TAA strategies most people so far have had experience with. Still, no investment strategy can claim to be the ‘Holy Grail’ of investing as each strategy will undoubtedly have patches of negative performance and what is ‘state of the art’ knowledge today might not be tomorrow - modern TAA strategies are no exception. At this stage, however, I am confident that some of these institutional style, sophisticated strategies stand a decent chance to improve the odds of long-term positive returns of investors.

Sources

1 Brinson, G., Hood, R., and Beebower, G., (1986) “Determi- nants of Portfolio Performance”, Financial Analysts Journal, vol. 42, No. 4, pp 39-44.

2 Brinson, G., Singer, B., and Beebower G., (1991) “Determi- nants of Portfolio Performance II: An Update”, Financial Analyst Journal, vol. 47, No. 3, pp 40-48

3 Ibbotson, R., Kaplan, P., (2000) “Does Asset Allocation Policy Explain 40, 90, or 100 Percent of Performance?”, Financial Analysts Journal, Vol. 56, No. 1:26-33

4 AQR,“AlternativeThinking”, FourthQuarter 2014 5 Online Data Robert Shiller: www.econ.yale.edu/~shiller/data.htm

Risk Warnings And Important Information

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Helge Kostka, Chief Investment Officer Prior to joining MASECO Private Wealth, Helge helped to establish and grow the presence of Research Affiliates in Europe over the last 4 years. He began his career at Deutsche Bank in 1995, serving in a number of investment roles, including as head of qualitative alpha selection and head of portfolio engineering. Helge started at Aviva Investors in 2009, initially heading up the product specialist team in the areas of investment solutions, equity, and multi-asset and later establishing the respective product management function.

Helge holds a bachelor’s degree in finance and accounting from Hogeschool, Utrecht, the Netherlands, and a Diplom Betriebswirt from Fachhochschule für Oekonomie und Management in Essen, Germany. Helge also graduated with an Executive MSc in risk management and investment management from EDHEC-Risk Institute.

Helge is considered an expert in Smart Beta and quantitative investing, and has spoken at various conferences around the globe. Having worked with HNW individuals as well as large institutions in different jurisdictions, his rich experience allows him to bring institutional investment practises into the private client world.

In 2016 the Financial Analysts Journal (FAJ) published Helge’s co-authored research around factor and smart beta exposures. In March 2017 CFA Institute named Helge and two co-authors as the winners of the 2016 Graham and Dodd Award of Excellence via CFA Institute; it is the first time that a Chief Investment Officer at a UK Private Wealth Management firm has received such honour.

Contact: helge.kostka@masecopw.com