The WAY Investment Process

WAY Investment Manager's innovative portfolio management process has much in common with that used by the majority of portfolio style fund managers. The two major areas where the process is differentiated, the emphasis on contribution analysis and the existence of a 'Star Chamber', can provide a genuine and very practical boost to performance without increasing risk.

The process combines the traditional 'top down' and 'bottom up' approaches and neatly falls into 5 distinct steps as follows:

1. Broad Risk Profile

Using chosen benchmarks (the IMA sector averages or particular indices such as the APCIMS index) as a neutral starting position, the team at WAY devise their own preferred risk-graded blend of asset classes for each portfolio managed - possibly a weighted blend of cash, alternatives, fixed interest and equity positions.

The WAY Investment Process

2. Macro Allocation

Within each asset class, and especially the equity portion, macro allocations are then made giving, for example, broad geographical weightings such as how much in each of UK, Europe, US, Asia and Emerging Markets.

3. Micro Allocation

Within each broad 'macro' sector there is then a sub-allocation process to fine tune the exposure to particularly attractive investment categories (such as growth or income), industries (banks, miners, retail, pharmaceuticals etc.,) or specific geographical areas (Asian emphasis on Indonesia and so forth).

4. Asset Selection

This part of the process is influenced by quantitative and qualitative research and involves the selection of individual holdings comprising the portfolio. These holdings can be direct equities, managed funds, passive index funds/ETFs, currency deposits or hedging instruments (mainly as portfolio insurance measures).

5. Regular Review

Other than in very exceptional circumstances the WAY approach favours gentle re-balancing and fine tuning of portfolios rather than radical restructuring and frenetic dealing. However, every portfolio is kept under constant review and both the WAY team and the 'Star Chamber' are involved in in-depth reviews on at least a monthly basis.

The performance delivered by our process can be dramatically impacted by the two following overarching features.

WAY favours an often forgotten tool in the form of detailed contribution analysis at every decision making level to constantly remind the team of the impact of every aspect of their decisions - for example in Step 1 illustrating why performance has deviated from the benchmark and quantifying the factors involved regarding allocation or fund selection decisions.

The impact of benefitting from the experience of 8 key investment professionals from different firms and backgrounds - the WAY Star Chamber - who are committed to offering honest and independent intellectual input, adds great value to the process. Of course, the magic ingredient of any process is the unique combination of the quality of the decisions and the timing - this cannot be prescribed and is the result of having the right people involved, using the right tools.

Associated Link:

1 Details of WAY's: Investment Process