Our Principles

Our only interest is in recommending the assets and funds which hold the best future performance potential rather than those with the best past.

If you only look in the rear mirror when driving your car, you will crash! The same is true of investments: If you select them based purely on past performance then your portfolio is likely to come to a halt.

Investing with hindsight is like picking the Grand National winner the day after the race. Regrettably, this is what many advisers seem to do; they show you a nice graph of an out performing fund, get you invested in it and then leave you to it with no further thought.

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We believe that we can only truly act in your best interests if we remove all forms of bias. What that means is that we will consider any and every investment manager and any and every asset class, including cash if necessary! We receive no rewards or inducements for picking a particular investment house or fund, so you don’t pay any unnecessary costs.

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As the name Equilibrium suggests, we believe in maintaining a balance within our investment portfolios, with the aim of achieving stable and consistent returns.

We feel that it is impossible to say with certainty which asset class is likely to perform best over the next 12 months. We don’t believe it’s possible or prudent to attempt to guess which ‘asset class basket’ would be the one to put all your eggs in to on a reliable and consistent basis.

In fact, we would never suggest that you invest all your capital in just one asset class. We will however from time to time ignore a particular asset class if we feel the risk is just too great and that losses were inevitable. 

Our portfolios are constructed so that they are capable of withstanding the biggest ever falls in the history of any asset class.

For example, in 1973 the UK stockmarket crashed by 33%, followed by a total collapse in 1974 with losses of 51% – a complete disaster for any portfolio with more than 50% of its assets invested in equities. That’s why we limit equity exposure for anybody who requires an income from their portfolio.

Naturally, we want our clients to be able to take advantage of volatile markets but not be victim to them. For that reason we aim to invest no more than 10% of any portfolio’s assets in any single fund and no more than 5% in any one company share.

Over the years, we have seen dozens of examples where clients have invested too much of their money in just one company share and remained convinced that their investment was totally secure, right up until the moment the business collapsed!

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We do not believe that it is sensible or worthwhile to take any more risk than is necessary to meet your personal financial goals. Whilst it is difficult to accurately measure an individual’s attitude to risk, interpreting the feedback on the subject of risk can be even more difficult.

At Equilibrium we utilise a range of methods and yardsticks to assess the degree of risk each of our clients is comfortable with. First, we use tried and tested psychometric profiling methods to identify a client’s TOLERANCE to risk. Then we interpret those results calling on all our investment experience and finally we refer to your own financial plan. This approach helps us to firmly establish and agree your DESIRE for risk.

Many firms build portfolios based purely on risk TOLERANCE, in our view that is a recipe for disaster.

This is our ‘too hard, too good to be true, principle’. In other words, if we do not absolutely understand how an investment works and where its returns come from, then we’ll not invest a penny in it. And even if we do understand how it works, if we can’t explain it clearly to you over a 45-minute discussion then we’ll not recommend it to you.

The Madoff collapse is a fantastic example of such an investment. Had you asked Mr Madoff exactly how they delivered consistent returns of 12% per annum you would have been told that it was a “split strike conversion strategy”. If you were brave enough to enquire further, you would have been told that it was ‘proprietary information’ in as much as the returns speak for themselves using a strategy that they don’t want their competitors to find out about.

We will not be bamboozled by jargon, nor will we be tempted by straight (up) line graphs or ‘flavour of the month’ products.

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