The yardstick arrives

Private investors are at last about to get a benchmark by which to measure the performance of their portfolios

Private investors who use stockbrokers to advise them on their equity investments have always had problems in the performance of their portfolio. From this week, their efforts will be made easier by the joint launch between the FT-SE and the Association of Private Client Investment Managers and Stockbrokers (APCIMS) of three new indices, providing a yardstick against which to compare their portfolios' performance.

The indices aim to provide private investors with a tool that will give a visible comparison of returns from income, growth and balanced funds.

They will also provide a comparison basis from which investors can review their asset allocation and structure of their portfolios together with their stockbroker or fund manager.

Finally, the indices aim to provide an industry-wide benchmark for assessing the performance of discretionary fund managers.

Michael Read, head of fund management at Greig Middleton, and an APCIMS board member, says: "Private investors and trustees have long been waiting for readily accessible, highly visible and easily understandable benchmarks.

"There is a real need for such measurement tools and I think investors will be pleased that information which has previously been available to institutional investors is now available to them cheaply and conveniently."

The three indices are based to the key needs of investors: for income, capital growth and a balanced portfolio. A survey of the model portfolios will be carried out quarterly and used to determine the weightings of the asset classes within each of the three indices.

Although the survey will be conducted quarterly, the index weightings will be based on the annualised portfolio weightings, in order to maintain continuity.

In determining asset allocation, the performance of UK equities will be measured by reference to the FT-SE All-Share index.

Foreign equity performance will be measured by reference to the FT/Standard & Poors All World Index, without UK stocks. Bonds and cash will be assessed by reference to FT-SE Gilts All-Stocks index.

A sample of leading discretionary private client fund managers showed the average allocations for model portfolios changed according to whether they were income or growth producing, or balanced.

Indices will be calculated by FT-SE International and both capital and total returns for private investors will be published. The underlying return calculations will assume the private investor purchases and holds the underlying stocks.

Weightings will be adjusted at the end of each month to maintain the chosen weightings for the asset classes within each private investor index.

Back histories will also be created, starting from 1986, in order to give a rough-and-ready reckoner of indication of historical performance.

Experts at APCIMS who collaborated in drawing up the indices agree that they may not provide a perfect model for all clients.

Michael Read at Greig Middleton points out: "For all sorts of reasons the construction of a client's portfolio of investments and its performance is unlikely to exactly mirror the indices.

"Our benchmarks are not perfect. For example, they do not allow for a client's requirements not to invest in certain sectors of the market, nor do they take into account the capital gains tax constraints. None the less, they will be a very useful guide and will provide a good discipline for the industry.

"In the main, we find our clients at Greg Middleton want to participate in growth as the market rises as well as obtaining a reasonable and growing income.

"They recognise that we are not superhuman and do not expect us to achieve `top dollar' appreciation all the time. They want safety and responsible investment management.

"As a by-product, [these indices] will show over time how badly bank and building society deposits have served savers"

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    SThree: Recruitment Resourcer

    £20000 - £21000 per annum + uncapped commission: SThree: As a graduate you are...

    Ashdown Group: Junior Application Support Analyst - Fluent German Speaker

    £25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

    Recruitment Genius: Customer Service Advisor

    £15000 - £16000 per annum: Recruitment Genius: A Customer Service Advisor is r...

    Ashdown Group: Trainee Consultant - Surrey / South West London

    £22000 per annum + pension,bonus,career progression: Ashdown Group: An establi...

    Day In a Page

    Syrian conflict is the world's first 'climate change war', say scientists, but it won't be the last one

    Climate change key in Syrian conflict

    And it will trigger more war in future
    How I outwitted the Gestapo

    How I outwitted the Gestapo

    My life as a Jew in wartime Berlin
    The nation's favourite animal revealed

    The nation's favourite animal revealed

    Women like cuddly creatures whilst men like creepy-crawlies
    Is this the way to get young people to vote?

    Getting young people to vote

    From #VOTESELFISH to Bite the Ballot
    Poldark star Heida Reed: 'I don't think a single bodice gets ripped'

    Poldark star Heida Reed

    'I don't think a single bodice gets ripped'
    The difference between America and Israel? There isn’t one

    The difference between America and Israel? There isn’t one

    Netanyahu knows he can get away with anything in America, says Robert Fisk
    Families clubbing together to build their own affordable accommodation

    Do It Yourself approach to securing a new house

    Community land trusts marking a new trend for taking the initiative away from developers
    Head of WWF UK: We didn’t send Cameron to the Arctic to see green ideas freeze

    David Nussbaum: We didn’t send Cameron to the Arctic to see green ideas freeze

    The head of WWF UK remains sanguine despite the Government’s failure to live up to its pledges on the environment
    Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

    Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

    Set in a mythologised 5th-century Britain, ‘The Buried Giant’ is a strange beast
    With money, corruption and drugs, this monk fears Buddhism in Thailand is a ‘poisoned fruit’

    Money, corruption and drugs

    The monk who fears Buddhism in Thailand is a ‘poisoned fruit’
    America's first slavery museum established at Django Unchained plantation - 150 years after slavery outlawed

    150 years after it was outlawed...

    ... America's first slavery museum is established in Louisiana
    Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

    Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

    The first 'American Idol' winner on how she manages to remain her own woman – Jane Austen fascination and all
    Tony Oursler on exploring our uneasy relationship with technology with his new show

    You won't believe your eyes

    Tony Oursler's new show explores our uneasy relationship with technology. He's one of a growing number of artists with that preoccupation
    Ian Herbert: Peter Moores must go. He should never have been brought back to fail again

    Moores must go. He should never have been brought back to fail again

    The England coach leaves players to find solutions - which makes you wonder where he adds value, says Ian Herbert
    War with Isis: Fears that the looming battle for Mosul will unleash 'a million refugees'

    The battle for Mosul will unleash 'a million refugees'

    Aid agencies prepare for vast exodus following planned Iraqi offensive against the Isis-held city, reports Patrick Cockburn