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; request a free guide on NISAs from Hargreaves Lansdown

A model of a Neanderthal man on display at the National Museum of Prehistory in Dordogne, France
Richard Dawkins dedicated his book 'The Greatest Show on Earth' to Josh Timonen
newsThat's Richard Dawkins on babies with Down Syndrome
Arts and Entertainment
Eye of the beholder? 'Concrete lasagne' Preston bus station
architectureWhich monstrosities should be nominated for the Dead Prize?
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

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

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    AIFMD Business Analyst / Consultant - Investment Management

    £450 - £600 per day: Harrington Starr: AIFMD Business Analyst / Consultant - I...

    Business Analyst Solvency II SME (Pillar 1, 2 & 3) Insurance

    £450 - £600 per day: Harrington Starr: Business Analyst Solvency II SME (Pilla...

    Manager - SAS - Data Warehouse - Banking

    £350 - £365 per day: Orgtel: Manager, SAS, Data Warehouse, Banking, Bristol - ...

    SQL DBA/Developer

    £500 per day: Harrington Starr: SQL DBA/Developer
 SQL, C#, VBA, Linux, SQL Se...

    Day In a Page

    Middle East crisis: We know all too much about the cruelty of Isis – but all too little about who they are

    We know all too much about the cruelty of Isis – but all too little about who they are

    Now Obama has seen the next US reporter to be threatened with beheading, will he blink, asks Robert Fisk
    Neanderthals lived alongside humans for centuries, latest study shows

    Final resting place of our Neanderthal neighbours revealed

    Bones dated to 40,000 years ago show species may have died out in Belgium species co-existed
    Scottish independence: The new Scots who hold fate of the UK in their hands

    The new Scots who hold fate of the UK in their hands

    Scotland’s immigrants are as passionate about the future of their adopted nation as anyone else
    Britain's ugliest buildings: Which monstrosities should be nominated for the Dead Prize?

    Blight club: Britain's ugliest buildings

    Following the architect Cameron Sinclair's introduction of the Dead Prize, an award for ugly buildings, John Rentoul reflects on some of the biggest blots on the UK landscape
    eBay's enduring appeal: Online auction site is still the UK's most popular e-commerce retailer

    eBay's enduring appeal

    The online auction site is still the UK's most popular e-commerce site
    Culture Minister Ed Vaizey: ‘lack of ethnic minority and black faces on TV is weird’

    'Lack of ethnic minority and black faces on TV is weird'

    Culture Minister Ed Vaizey calls for immediate action to address the problem
    Josephine Dickinson: 'A cochlear implant helped me to discover a new world of sound'

    Josephine Dickinson: 'How I discovered a new world of sound'

    After going deaf as a child, musician and poet Josephine Dickinson made do with a hearing aid for five decades. Then she had a cochlear implant - and everything changed
    Greggs Google fail: Was the bakery's response to its logo mishap a stroke of marketing genius?

    Greggs gives lesson in crisis management

    After a mishap with their logo, high street staple Greggs went viral this week. But, as Simon Usborne discovers, their social media response was anything but half baked
    Matthew McConaughey has been singing the praises of bumbags (shame he doesn't know how to wear one)

    Matthew McConaughey sings the praises of bumbags

    Shame he doesn't know how to wear one. Harriet Walker explains the dos and don'ts of fanny packs
    7 best quadcopters and drones

    Flying fun: 7 best quadcopters and drones

    From state of the art devices with stabilised cameras to mini gadgets that can soar around the home, we take some flying objects for a spin
    Joey Barton: ‘I’ve been guilty of getting a bit irate’

    Joey Barton: ‘I’ve been guilty of getting a bit irate’

    The midfielder returned to the Premier League after two years last weekend. The controversial character had much to discuss after his first game back
    Andy Murray: I quit while I’m ahead too often

    Andy Murray: I quit while I’m ahead too often

    British No 1 knows his consistency as well as his fitness needs working on as he prepares for the US Open after a ‘very, very up and down’ year
    Ferguson: In the heartlands of America, a descent into madness

    A descent into madness in America's heartlands

    David Usborne arrived in Ferguson, Missouri to be greeted by a scene more redolent of Gaza and Afghanistan
    BBC’s filming of raid at Sir Cliff’s home ‘may be result of corruption’

    BBC faces corruption allegation over its Sir Cliff police raid coverage

    Reporter’s relationship with police under scrutiny as DG is summoned by MPs to explain extensive live broadcast of swoop on singer’s home
    Lauded therapist Harley Mille still in limbo as battle to stay in Britain drags on

    Lauded therapist still in limbo as battle to stay in Britain drags on

    Australian Harley Miller is as frustrated by court delays as she is with the idiosyncrasies of immigration law