A Common Sense Approach to Investing 1 A COMMON SENSE APPROACH TO INVESTING DISCRETIONARY PORTFOLIO MANAGEMENT. intelligent portfolio design

Transcription

1 A Common Sense Approach to Investing 1 A COMMON SENSE APPROACH TO INVESTING DISCRETIONARY PORTFOLIO MANAGEMENT intelligent portfolio design

2 2 ARCAPMAN Discretionary Portfolio Management WELCOME TO ARIA Traditional approaches to private client investment management rely to a large extent on rising stock markets, but unfortunately these markets go through periodic, and sometimes severe setbacks. OUR ABSOLUTE RETURN PORTFOLIO STRATEGIES POTENTIALLY GIVE YOU MORE WAYS TO BENEFIT, WHICHEVER WAY THE WIND IS BLOWING. Contents 4 Our Approach 5 Discretionary Portfolio Management 6 Multi Asset Class Investing 9 Guiding Philosophy 10 Determining Your Investment Profile 12 Portfolio Strategies Overview 16 In House or Building Block Funds 17 Portfolio Construction 18 Risks Associated with the Portfolio Strategies 22 Our Services 23 Keeping you Informed

3 A Common Sense Approach to Investing 5 OUR APPROACH. Our absolute return portfolio strategies give you more ways to benefit, whichever way the wind is blowing. OUR APPROACH Investment flexibility that traditional investment approaches cannot match Our approach is designed to be less dependent, or even non dependent upon rising stock markets to perform well. We have the flexibility to concentrate on the asset classes which we belive have the most favourable conditions for capital appreciation. We are therefore able to identify only our highest conviction ideas in constructing portfolios with the greatest return potential for a given level of agreed risk, whilst maintaining sufficient diversification across your portfolio. The freedom to move in and out of asset classes, depending on which are most attractive, makes our portfolio strategies stand out from the crowd of more traditional investment approaches. We consider many asset classes beyond simply those considered as more traditional, and then blend holdings to produce portfolios that should be capable of performing regardless of environment. ARIA s investment philosophy is focussed on identifying the most attractive asset classes at any point in time, be they traditional or alternative, as we target positive returns in all market environments. Our experience in alternative investing has been fundamental in building portfolios which we believe have the flexibility to weather the financial storm witnessed in DISCRETIONARY PORTFOLIO MANAGEMENT Peace of mind in turbulent times Discretionary portfolio management is where we take on the responsibility for building and managing your investment portfolio employing absolute return portfolio strategies. Through delegating the day to day decision making to us, we act on your behalf to look after your investments in line with your objectives and risk tolerance as set out in the discretionary agreement. The very core of our investment philosophy is to make your portfolio s performance become more predictable, smoothing out investment returns so that your capital is being managed in a risk controlled manner. We develop a detailed relationship with our clients, and their advisers, and maintaining the highest service standards is at the core of us offering, a bespoke service as opposed to an off the shelf product. Regular fact sheets, concise, easy-to-understand reporting and direct access to your Portfolio manager are just some of the ways we like to keep in touch. Our wealth management service is designed to be flexible, tax efficient and evolve with you as your requirements change. In that way, and because your investments can be combined with tax efficient wrappers such as Pensions, ISAs and Offshore bonds, we can provide a lifetime investment solution. We design different portfolios for different members of your family, yet provide a simple and easily understood overview of all of your investments, presented and held together in one place.

4 A Common Sense Approach to Investing 7 ABSOLUTE RETURN INVESTING. A GENUINE MULTI ASSET CLASS AND COMMON SENSE APPROACH TO INVESTING. MULTI ASSET CLASS INVESTING Prioritising capital preservation and targeting absolute returns. The significant bull market from 1982 to the early part of this century, during which time stock markets gained significantly meant that the perceived wisdom in the investment industry was to measure performance in relative terms usually compared to an industry benchmark. However, it became clear that in a bear market, outperformance could still mean significant capital loss. This led to a worst-case scenario for many investors and boosted the popularity of bond, property and cash based instruments, whilst making investors acutely aware of the true meaning of risk. Volatility in financial markets in recent years has demonstrated that the traditional approach to asset management has not met the challenges of variable market conditions. Achieving capital gains combined with the lower levels of risk required by risk-averse investors has been conspicuous by its absence, even for supposedly diversified portfolios. We seek solutions that offer better opportunities for protection of capital combined with growth potential and the use of an absolute benchmark of positive returns to measure success a concept that is considerably more intuitive to most investors than the relative outperformance of a potentially falling index. Extended periods in stock market history have demonstrated that a buy and hold relative-return approach may not be beneficial to investors as markets routinely experience pronounced set backs and periods of little or no sustained gains. The past decade, which began with the bursting of the dot com bubble and ended with the credit crunch has been the perfect example of this. Return objective Risk management Investment strategy Relative Return Approach Relative to benchmark. Performance dependent on that of the stockmarket. Relative to benchmark (tracking risk). The risk of underperforming the benchmark. Relative to benchmark (tracking risk). Investments held in fund because they belong to the benchmark they are measured against. Multi asset class investing means considering every asset class available, beyond the most common, to include alternative investments such as precious metals and absolute return strategies. Having gained exposure to uncorrelated asset classes we then seek to increase or reduce exposures as investment conditions fluctuate. When portfolios are constructed using only traditional investments and a relative return approach, their performance tends to be driven by the stock market (in either direction) but they struggle, given their asset Absolute Return Approach allocation, to buck the trend if that trend is down. Traditional investments in this sense, refer to shares and bonds. Spreading your money over a range of investments, having determined your risk profile, is the corner stone of our risk management. Each risk profile has a target return and target volatility score. A central tenet of our investment philosophy is to target equity like returns for bond like volatility which in turn correlates to monetary policy and/or interest rate movements. Absolute, positive return. Performance dependent on exploiting investment opportunities in any asset class. Total risk. Risk of losing money/preserve capital. Complete flexibility. Investments chosen on their own merit. Free to move into asset classes with most favourable investment potential.

5 A Common Sense Approach to Investing 9 GUIDING PHILOSOPHY We target absolute returns. Very simply, our approach is based on common sense principles: All Terrain Investment Management Capital preservation when investment climates are less favourable is key to long-term outperformance. Common Sense Investing Our approach is to measure our performance relative to cash deposits. Peace of mind in turbulent times By diversifying across the widest possible range of asset classes, we seek to smooth out investment returns through multi asset class investing. Thematic Investing Our approach is not just limited to drawing on more asset classes and dynamically managing the asset allocation. We try to go the extra mile. By using a thematic approach, we hope to further improve returns by selecting investments which benefit from broader, enduring themes which impact our everyday lives. Alternative Investments Our portfolios incorporate alternative investments which are generally uncorrelated to stockmarkets, improving the quality of the diversification profile. We are also able to access investments which are typically only available to institutional investors. Disciplined risk management By investing in a broadly diversified portfolio across all asset classes we improve the risk return profile of the portfolio.

6 A Common Sense Approach to Investing 11 Determining your Investment Profile targeting cash plus returns for bond like volatility. Appetite for Risk Determining your risk profile and defining volatility The first step in selecting your portfolio is for you and your adviser to determine your investment profile through our online suitability assessment. This ensures that your money is invested according to your investment objectives and appetite for risk. Once your adviser has recommended which (if any) of our services is suitable for you, we can start work in building your portfolio. How do we Measure Risk? One of the most important considerations with any investment is to balance your attitude to risk with your desire for positive returns. Risk is difficult to define and will mean different things to different people. All types of investment, including our portfolio strategies, carry some risk of making a loss. The important thing is to be comfortable that your investments represent, as closely as possible, a level of risk acceptable to you, and continues to do so. That s why your financial adviser will want to determine your reasons for investing. The most common measure of risk is the extent to which the value of the assets in an investment moves up and down over a given period, relative to their long-term average value. This is often referred to as volatility. Investments with higher volatility are considered to be riskier than those with lower volatility. Although their potential for upward swings is greater, so is their equivalent potential for downward movement, and we set out target volatilities for each portfolio strategy, in order to assist in matching your comfort level for loss to a particular asset allocation. Further Information on risk is included In the later section Risks Associated with the Portfolio Strategies. Please ensure you read this section. Benchmarking Targeting a specified volatility for your risk profile Our investment philosophy seeks to target cash plus returns for bond like volatility, which in turn correlates to changes in monetary policy and/or interest rate movements. Therefore the targeted volatility for each risk profile is referred to using a globally orientated corporate bond index, one example might be the Markit iboxx Liquid Corporates Long Dated Bond Index. The various risk profiles are built using a number of investments, which are combined to target predefined risk/ return criteria with a view to wealth preservation and growth over the medium to long-term. The portfolio composition and exposures will vary dependent on the chosen risk profile, but within these various holdings the portfolio will gain access to multiple asset classes, and hence have broad diversification. A benchmark is a point of reference (usually a recognised stock market index) against which the performance of a portfolio can be measured. A Total Return (TR) index is one that allows for the reinvestment of dividends and we believe that a TR comparison is most appropriate when income is retained within the portfolio. This allows for sensible comparison with alternative forms of investment such as bank deposits. Cash plus investing We use benchmarks that assess performance in absolute terms, relative to a cash return related benchmark regardless of the portfolio strategy chosen. (This is because it is always our aim to deliver positive returns, even when stock markets are falling.) We use 1 month LIBOR (the London Inter Bank Offered Rate) as the reference interest rate plus a percentage depending on your risk profile. (LIBOR is the rate of interest at which banks offer to lend money to one another in the wholesale money markets in London. It is a standard financial index used in global financial markets.)

7 A Common Sense Approach to Investing 13 wealth Preservation wealth enhancement Investment Objective The Wealth Preservation portfolio strategy (formerly the Absolute Return Diversity strategy) seeks to deliver positive returns in all market conditions with low volatility. Investment Strategy By investing in a wide variety of absolute return investment strategies, such as equity long/short, commodities, property, currencies and other absolute return vehicles. Many of the portfolio holdings may use advanced techniques to generate additional returns or guard against market falls. Suitability This strategy is suitable for investors who are seeking steady growth but are willing to forego possible higher returns for steady performance and less volatility. This could suit people who are conservative investors by nature or people who are closer to retirement. Please note this strategy may have exposure to Unregulated Collective Investment Schemes, to the extent they are permitted within the prospectuses of certain holdings at portfolio level. Please consult your financial adviser for further information. Benchmark 1M LIBOR + 2% Return and Volatility Targets TARGETED ANNUALISED RETURN Example Asset Allocation Investment Objective The Wealth Enhancement strategy invests across a range of asset classes whilst conscious of limiting exposure to assets which are highly correlated. Over the course of a market cycle Wealth Enhancement strategy attempts to achieve equity like returns for bond like volatility. Investment Strategy The Wealth Enhancement portfolio strategy has a multi asset portfolio approach which aims to generate positive returns over a full market cycle rather than perform against a specific equity benchmark. The flexibility the portfolio has to move across asset classes dynamically is critical to effectively manage risk and capital preservation. Suitability This strategy is generally suitable for investors who are seeking longer term growth potential with at least a medium term time horizon and who are prepared to accept a moderate level of volatility of returns as the price for potential growth. This strategy is designed to balance risk and reward and is appropriate for investors looking for higher returns than those available from a high street deposit account and who are willing to accept a certain amount of fluctuation in the value of their investments as a result. Investors in this strategy would feel uncomfortable if their investments were to fall significantly in value in any one year. This strategy aims to maintain a broad spread of assets, but with a greater emphasis on equities. Return and Volatility Targets TARGETED ANNUALISED RETURN Example Asset Allocation TARGETED ANNUALISED RISK TARGETED ANNUALISED RISK 0% 5% 6% 8% 10% 15% 20% 0% 5% 8% 10% 15% 20% 16% 16% 14% 14% 12% 12% 10% 10% 8% 8% 6% 6% INCREASING RISK 4% 4% 2% 2% 0 0 International Equity 5.1% Global High Income, 2.1% Wealth preservation portfolio strategy Commodities, 3.3% Cash, 7.7% Gold Miners, 7.7% Asia REITS, 5.0% Cautious Multi Asset, 27.3% Multi Asset Income 16.0% Global Bonds, 6.51% Target volatility: Globally orientated corporate bond index -2% Private Equity, 4.8% Market Neutral, 14.3% This asset allocation example is hypothetical for illustration purposes only. No assumptions should be made that similar asset allocations will be profitable, suitable or held by this strategy in the future. Allocations and their percentages will very depending on an individual investors needs and the market conditions at the time. Please see the latest monthly factsheets for further details of the investments that make up the latest asset allocation. Benchmark 1M LIBOR + 3% Wealth enhancement portfolio strategy Cash, 3.48% Managed Futures, 4.78% South East Asia Property, 5.00% FOHedge Funds, 5.00% Private Equity, 5.27% Precious Metals, 7.29% International Equity, 7.50% Alternative Investment Strategies, 12.10% Target volatility: Globally orientated corporate bond index INCREASING RISK Global Multi Asset (Diversified), 32.16% Alternative Income Strategies, 17.42% This asset allocation example is hypothetical for illustration purposes only. No assumptions should be made that similar asset allocations will be profitable, suitable or held by this strategy in the future. Allocations and their percentages will very depending on an individual investors needs and the market conditions at the time. Please see the latest monthly factsheets for further details of the investments that make up the latest asset allocation.

8 A Common Sense Approach to Investing 15 wealth generation income PORTFOLIO STRATEGY Investment Objective Formerly, our Absolute Return Portfolio Strategy (ARP) approach, this portfolio strategy targets higher capital growth potential, and thus has the highest volatility of our strategies. Investment Strategy Whilst multi asset class in nature, and still having a cash plus benchmark, the portfolio strategy has more exposure to higher risk, higher growth assets including, commodities and strategies such as managed futures. Suitability This strategy is generally suitable for investors willing to accept a much higher level of risk on their investments in return for potentially, higher returns in the longer run. Investors in this strategy are willing to accept what might be significant short term fluctuations in the value of their investments as a result. They would feel comfortable if their investments fell in value more than 3 months in any one year and might well see this as an ideal time to invest further. This strategy aims to maintain a higher exposure to more volatile investments, including equities and commodities. Benchmark 1M LIBOR + 4% Return and Volatility Targets TARGETED ANNUALISED RETURN Example Asset Allocation Investment Objective Our income portfolio strategy, underpinned by the EFA AR Multi Asset Income Fund, gives exposure to a number of different income generating strategies to provide an attractive income stream. Investment Strategy The portfolio s diverse, multiasset approach seeks to preserve capital yet provide an attractive income yield. Active management of a broad range of asset classes further improves risk-adjusted returns. Tactical asset allocation is undertaken to benefit from a variety of global investment opportunities at any given time, with a strong emphasis always placed on risk analysis. Suitability Designed for investors who require an income stream adopting a multi asset approach. Exposured to a broad spread of assets, including limited equities, bonds and potentially some absolute return investments however, predominantly assets held will be at the lower end of the risk spectrum in fixed income or yielding securities. Generally suitable for investors who are seeking a higher return than is available from a high street deposit account and are willing to accept a certain amount of fluctuation in the value of the investments as a result, however would feel uncomfortable if the investments fell in value significantly in any one year. Return and Volatility Targets TARGETED ANNUALISED RETURN Example Asset Allocation TARGETED ANNUALISED RISK TARGETED ANNUALISED RISK 0% 5% 8% 10% 12% 15% 20% 0% 5% 6% 8% 10% 12% 15% 20% 16% 16% 14% 14% 12% 12% 10% 10% 8% 8% 6% 6% INCREASING RISK 4% 4% 2% 2% 0 0 Managed Futures, 6.0% Wealth generation portfolio strategy Cash, 5.8% Alternatives, 4.9% Gold Miners, 8.3% Global Multi Asset, 34.4% International Equity, 19.2% Target volatility: IMA Global Bond Sector + 2% Commodities, 6.8% Private Equity, 5.3% Market Neutral, 9.3% This asset allocation example is hypothetical for illustration purposes only. No assumptions should be made that similar asset allocations will be profitable, suitable or held by this strategy in the future. Allocations and their percentages will very depending on an individual investors needs and the market conditions at the time. Please see the latest monthly factsheets for further details of the investments that make up the latest asset allocation. Benchmark 1M LIBOR + 2% Income portfolio strategy Cash, 3% South East Asia Property, 5% Equity Income, 5% Inflation linked Government bonds, 5% Money Market ETF, 5% Global Bonds, 5% Target volatility: Globally orientated corporate bond index -2% INCREASING RISK Multi Asset Income, 72% This asset allocation example is hypothetical for illustration purposes only. No assumptions should be made that similar asset allocations will be profitable, suitable or held by this strategy in the future. Allocations and their percentages will very depending on an individual investors needs and the market conditions at the time. Please see the latest monthly factsheets for further details of the investments that make up the latest asset allocation.

9 A Common Sense Approach to Investing 17 UNDERSTANDING THE CONSTRUCTION OF OUR PORTFOLIO STRATEGIES. IN HOUSE OR BUILDING BLOCK FUNDS The ability to be able to change asset allocations dynamically As we use certain in-house funds as building blocks within portfolios, (notably the CF Absolute Return Cautious Multi Asset Portfolio (CMA) Fund), we are able to adjust portfolio asset allocations quickly and cost effectively. Moreover, we have access to investments and asset classes that are not offered widely by external funds. Many discretionary managers do this and therefore you should feel comfortable asking what percentage of your portfolio will be invested in unit trusts or other funds managed or sponsored by us (technically referred to as in-house funds) and how well these funds have performed. In ARIA s case, we re very comfortable using our own funds as we feel clients are advantaged by using them in a number of ways. They allow us to manage our client s portfolio asset allocation quickly and cost effectively. Moreover some afford client s portfolios access to investments or asset classes that are not offered widely by external funds. Where invested in in house Funds discretionary clients will benefit from accessing lower institutional pricing for the units they hold, typically not available to retail clients. PORTFOLIO CONSTRUCTION Alternative Investing: Broadening your portfolio s horizons There are a variety of vehicles we can use to gain the diversification we require in our portfolios. For example, Collective Investment Schemes. These schemes, sometimes referred to simply as funds or OEICS, may provide a convenient and transparent vehicle for individual investors to gain exposure to alternative investment strategies. However, they may have higher costs than exchange traded funds (etfs) but their use can be beneficial when we evaluate certain commodities and alternative assets. Therefore, depending on the exposure within the portfolio, we will attempt to balance cost, access, liquidity etc against performance potential. The major vehicles used are: - OEICs - Exchange Traded Funds - Exchage Traded Commodities - Investment Trusts Greater Diversification We believe that the use of alternative investments, brings the benefit of greater diversification to a portfolio and in recent years they have become more accessible to individual investors through the development of funds and products with lower minimums for investment, shorter investment periods and importantly more appropriate tax structures. Lower Correlations Increasingly alternative investment strategies are available inside daily dealt, FSA regulated structures bringing greater client protection and more appropriate tax treatment to such investments. As this market sector matures, portfolios have greater opportunity to benefit from their inclusion than previously, as such strategies are now available without some of the drawbacks previously associated with alternative investments.

10 A Common Sense Approach to Investing 19 RISKS ASSOCIATED WITH THE PORTFOLIO STRATEGIES Risk Profiled Portfolio Strategies What is the typical investor for whom the portfolio strategies are designed for? The risk profiled strategies are made up of a blend of our building blocks funds, other collectives and ETF exposures, and often a proportion held in cash. These portfolios should be suitable for investors who are seeking a well diversified, actively managed investment exposure to the respective asset classes covered by the different building block funds. These investors are expected to have a good understanding of the investment risk and return parameters of the asset classes the portfolios invest into. Please note that investors who require extremely high levels of risk or alternatively do not want to put capital at risk, may not find the All Terrain Portfolio strategy suitable for all their needs. This should be discussed with your financial adviser. Market Fluctuations and Absolute Returns - As markets fluctuate we cannot guarantee the level of capital gains or income that your ATP risk profiled strategy will achieve. The value of investments and the income you derive from them may go down as well as up and you should be prepared that you may not get back the full amount that you invested. Whilst we are focussed on targeting absolute returns over a full market cycle, this does not mean that your capital is guaranteed, or that your portfolio will make positive returns regardless of market conditions. As your financial adviser will explain, when investing into one of the risk profiled ATP strategies, it should be considered a medium to long term investment, and suggested minimum holding periods are detailed along with each portfolio profile. Effect of the Initial Charge The original amount you invest will be reduced by the initial charge levied by your financial adviser. As a result, if you withdrew your investment at that point you would not get back the amount you originally invested. However, investors do get a 14 day cooling off period following application. Diversification Risk The building block funds will seek to achieve their objectives through investments in a range of collective investment schemes, money market deposits, transferable securities and derivative instruments. Subject to the restrictions set out in the prospectuses for each of the building block funds, the portfolio will typically remain fully invested in these funds. There will, however, be no restrictions on the underlying investments held, in terms of investment type, geographical or economic sector, other than those imposed by the Prospectuses, meaning that the Fund manager has the absolute discretion to weight the portfolio towards any investment type or sector, including cash, at any time. Unregulated collective investment schemes may be used to the extent permitted by the Prospectuses. The building block funds may hold exchange traded derivatives for investment purposes as well as for efficient portfolio management purposes (including hedging). It is not intended that the use of derivatives in this way will change the risk profiles of the Fund. Borrowing will be permitted up to the levels stated in the Prospectuses. Inflation risk Inflation will, over time, reduce the value of your investments in real terms. Exchange Traded Funds ( ETF ) The risk profiled portfolio strategies (specifically the Cautious and Conservative profiles) may invest in Exchange Traded Funds, in particular into global government bonds and money market funds. Exchange Traded Funds represent a basket of securities that are traded on an exchange and may not necessarily trade at the net asset value of their underlying holdings. As a result, they may trade at a price that is above or below the value of the underlying portfolio. What risk factors affect Portfolio holdings? Specific risks relating to Portfolio holdings are as follows, (please note the following is not exhaustive, and for a full description of the risks of any portfolio holding please consult the respective Prospectus): Pricing and liquidity Where a Fund has exposure to alternative asset classes there is a risk that the price at which an asset is valued may not be realisable in the event of sale. This could be due to a misestimation of the asset s value or due to a lack of liquidity in the relevant market. As a result, at times, the ACD may have to delay acting oninstructions to sell investments, and the proceeds on

11 redemption may be materially less than the value implied by the Fund s price. Emerging Markets Emerging markets tend to be more volatile than more established stock markets and therefore your money is at greater risk. Risk factors such as political and economic conditions, together with potential currency risk, should also be considered. The reliability of trading and settlement systems in some emerging markets may not be equal to that available in more developed markets, which may result in delays in realising investments within the funds. A counterparty may not pay or deliver on time or as expected. Lack of liquidity or efficiency in certain stock markets or foreign exchange markets in certain emerging markets may mean that from time to time the investment adviser may experience more difficulty in purchasing or selling holdings of securities than it would in a more developed market. Currency Exchange Rates Funds investing in overseas securities are exposed to, and can hold, currencies other than pounds sterling (GBP). As a result, exchange rate movements may cause the value of investments to decrease or increase. Counterparty Risk Where a Fund enters into a derivative contract it will be exposed to the credit of the other party (usually referred to as counterparty ) and their ability to wholly or partly satisfy the terms of the contract. In the event of a bankruptcy or insolvency of a counterparty, a Fund could experience delays in liquidating the position and may incur significant losses. The ACD of the Funds may use one or more counterparties to undertake derivative transactions on behalf of a Fund and may be required to pledge a Fund s assets as collateral against these transactions. There may be a risk that a counterparty will be unable to meet its obligations with regards to the return of the collateral and may not meet other payments due to a Fund. Investing in other collective investment schemes Each Fund may invest in other regulated collective investment schemes. As an investor of another collective investment scheme, a Fund will bear, along with the other investors, its portion of the expenses of the other collective investment scheme, including management, performance and/or other fees. These fees will be in addition to the management fees and other administrative expenses which a Fund bears directly with its own operations. Non-UCITS Retail Schemes (NURS) Both the EFA AR Diversity Portfolio Strategy and EFA AR Multi Asset Income Funds are Non-UCITS Retail Scheme. Such Funds can have wider investment and borrowing powers than UCITS schemes with higher investment limits in various areas. They can also invest to a greater extent in areas such as property and unregulated schemes and have the option to borrow on a permanent basis. Such additional powers can increase potential reward, but may also increase risk. Unregulated Collective Investment Schemes As NURS funds, EFA AR Diversity Portfolio Strategy and EFA AR Multi Asset Income may invest, in total no more than 20% of the scheme property, in unregulated collective investment schemes which are generally considered to be a higher risk than investment in regulated schemes. An unregulated collective investment scheme is unlikely to be subject to regulations which govern how they are managed. For example, they can utilise higher risk investment techniques, they may borrow to invest, they can suspend calculation of net asset value preventing redemption or otherwise limit redemption, they may not adhere to internationally recognised accounting standards and functions such as pricing and custody may not be subject to any rules. NURS may also invest in unregulated collective investment schemes which are valued less frequently than the NURS. As a result, there is a risk that any market movements will not be reflected in the daily price of the Funds. Derivatives and volatility Derivative instruments may be used in the Funds for both investment purposes and the purposes of Efficient Portfolio Management (EPM). The use of derivatives for EPM should not lead to an increase in risk to the Funds. Where the funds invest in derivatives and forward transactions in the pursuit of the EFA AR Multi Asset Income Fund and EFA AR Diversity Portfolio Strategy Fund s objectives, it is the intention that these funds will not have volatility over and above the general market volatility of the markets. It is not the ACD s intention that the use of derivatives and forward transactions in the pursuit of the EFA AR Multi Asset Income objectives will cause its risk profile to change. A Common Sense Approach to Investing 21

12 A Common Sense Approach to Investing 23 INTELLIGENT PORTFOLIO DESIGN. our services Portfolios with the flexibility to weather the storm Traditional approaches to private client investment management rely to a large extent on rising stock markets, but unfortunately these markets go through periodic, and sometimes severe setbacks. Therefore, our approach is focussed on identifying the most attractive asset classes at any point in time, as we target positive returns in all market environments. Our experience in alternative investing has been fundamental in building portfolios with the flexibility to weather the financial storm we have witnessed. Our services include: Multi asset class and absolute return portfolio management for private clients, charities, trusts and companies Fund management: absolute return OEICs, multi asset class and multi strategy hedge funds Tailored investment mandates. Estate planning, capital gains and income tax planning in conjunction with your financial adviser, we can take into account: Alternative investments Cash management Structured products Pensions, Offshore Portfolios Stock broking ISA management Keeping You Informed Our literature is available both online and in hard copy A full description of our services is available online, at: Our website is dedicated to keeping you up to date with the developments in your portfolio in the most transparent way. Online valuations Daily prices, holdings, commentary, buy and sell rationales, etc are just some of the information available to keep you in step with how your investments are performing. Monthly fact sheets Each month we produce fact sheets which detail historic performance, commentaries, fund highlights and statistics, all of which are available by , or to download from the website. Half-yearly reports We will provide you with valuations and commentary on a half yearly basis, whilst producing tax reporting information annually. Personal Fund Manager We strive to provide as much communication and dialogue as you and your adviser wish. The services described may not be suitable for all clients and you should seek appropriate professional advice.

13 About ARIA We are passionate about protecting and growing the wealth of our clients, taking care of all of their investing requirements. We believe in all terrain investment management, which means targeting positive returns in any market environment. We also believe in a fee structure that truly aligns itself with clients best interests, incentivising us to first maintain, then increase our clients wealth in real terms. Unfortunately, it appears to us that many managers within the investment management industry have sought to put their interests before those of its customers, by selling investment performance which compares favourably with certain stock market indices but not in absolute terms. This is little noticed when the wind is at their backs, i.e. when stock markets are rising, but is less satisfactory during periods of decline. We will readily concede that benchmarking as a notion has intuitive appeal, but for most clients (in real life) cash or bank deposit rates or, indeed, inflation, are more relevant-to-real life benchmarks. The relative return investing approach, favoured by much of the industry, justifies losing money by comparing itself to a stock market index, such as the FTSE 100. This is not our approach. We are active, absolute return fund managers. This means that the portfolios we manage are not constrained by any requirement to represent any stock market and we will not buy a particular stock or other holding because it is a prominent constituent of a potentially falling index. Each investment is made on the basis of merit alone: we must genuinely believe that its value is likely to increase and be comfortable that the potential reward justifies any exposure to risk. Importantly, as well, an investment needs to fit with the rest of the portfolio, but whether it is part of the FTSE 100 is, for the most part, irrelevant. ARIA s investment advisory council collectively possess many years of experience in the investment business, combining expertise across a wide spectrum of asset classes, including hedge funds, private equity, commodities, as well as more traditional asset classes. Our investment philosophy is simply all terrain investment management. DISCLAIMER: The material on these pages is provided for information purposes only; it is not an invitation to invest. Income from investments may fluctuate and investors may not recoup the amount originally invested. Please refer to the relevant Fund Offering documents and/or the terms and conditions for any services offered for detailed information. Please seek relevant professional advice before making any investment decision. This document does not constitute an offer or solicitation to sell shares in any of the funds or provide any investment services mentioned, by anyone in any jurisdiction in which such offer or solicitation is not authorised or to any person to whom it is unlawful to make such offer or solicitation. We provide Discretionary Management Services. The suitability of this service for you is determined by your Financial Adviser. We do not assess your suitability for our Discretionary Management Service. We do asses your suitability to determine what Investments would be appropriate for you. In assessing your suitability we rely on the information provided by you and/or your Financial Adviser in our Discretionary Service Agreement. We also ask you, or your Financial Adviser, questions about your income, savings and other circumstances through our online Suitability Assessment tool. The information provided is then considered by us to determine which ARIA model portfolio is suitable for you. Please note we assess your suitability based on information provided to us and only in relation to the model portfolios we offer, these model portfolios may contain investments in related investment funds. We do not assess your suitability in relation to other investment products in the market or management services provided by other 3rd parties. Absolute Return Investment Advisers (ARIA) Limited is authorised and regulated by the Financial Services Authority in the UK, with Firm Reference number A Limited Company registered in England and Wales No: ARIA and ARIA Capital Management are trading names of Absolute Return Investment Advisers (ARIA) Limited. Contact Address: 4 Duke Street, Richmond, TW9 1HP Telephone: +44 (0) enquiries@ariacm.com. For further information please visit Absolute Return Investment Advisers (ARIA) Limited is a Limited Company. Authorised and Regulated by the Financial Services Authority Registered in England and Wales No: Duke Street, Richmond, TW9 1HP Telephone: +44 (0) enquires@ariacm.com, For details visit ARIA, 035, 11/2011