Helping clients achieve a truly balanced portfolio

Andrew Aldridge | Deepbridge Capital
3rd December 2019
Andrew Aldridge Deepbridge Capital
"The growth potential, coupled with the ‘greater good’ they can achieve is huge"

Balance is important. We hear a lot these days about achieving a balance in our lives, particularly the ‘work/life balance’ – how can we get there?

I read recently about a Labour Party proposal to try and move the country to a four-day working week within a decade as, presumably, a way to achieve a better ‘work/life balance’. Is that the way forward?

Perhaps it’s not so much the hours worked, but the productivity within those hours? The UK tends not to compare well with other countries’ productivity stats and yet we also work some of the longest hours – there’s definitely a disconnect if that’s the case.

Anyway, I digress from the point of these rambling – what about balance in terms of our financial needs, the balance between debt and assets, the balance between having enough to live now and having enough money to retire on, the balance between investment risk-taking and not putting all your eggs in one basket?

Those financial balances are just as important, and that would certainly be a major focus for financial advisers when they look at individual clients, what they have now and what they want to achieve in the future.

In that sense we also hear a lot about achieving a ‘balanced portfolio’, but what makes up that balance and from our perspective, as investment managers active in unquoted equity stocks, should they play a part in achieving that much heralded ‘balance’, and that’s without considering the tax-planning element that can be achieved with, for example, EIS or SEIS or VCT?

Traditionally a ‘balanced portfolio’ has usually focused on equities, bonds, cash equivalents, possibly property and other commodities, all held within quoted funds or stocks. But, would a complete portfolio be complete without an unquoted element – investments in companies which are not correlated with the ‘markets’, who are growth-focused early-stage companies.

There is an argument to suggest that accessing opportunities in high-growth-focused sectors – such as the ones we operate in, life sciences and technology – can be achieved more thoroughly by looking at unquoted companies. Certainly, they should not be overlooked just because they are unquoted but should possibly also be considered from a social impact perspective as well – we work with businesses which, for example, support huge medical advancements and cannot just change their own sector, but the lives of many, many people.

The growth potential, coupled with the ‘greater good’ they can achieve is huge, and because it is an early-stage unquoted stock it could be targeting a significant growth opportunity that can provide considerable returns and make a considerable difference. These are of course high-risk investments and should form part of a portfolio in order to mitigate expected losses – EIS investments qualify for loss relief, which can also offer some considerable downside protection.

No-one is suggesting that this must be the bulk of any portfolio – indeed, that goes totally against the grain of what a ‘balanced portfolio’ is, but having such investments as a small part of the portfolio would undoubtedly create a more balanced look and feel, and deliver a number of longer-term opportunities that clients are unlikely to get elsewhere. In that sense, a balance can be achieved and one that delivers significant benefits for both adviser and client.


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