Investment Advisory

Investment Strategy
Tactical Asset Allocation
manager Research
Portfolio Monitoring
Client Service

Investment Beliefs

SECOR’s investment advice is based on our core investment beliefs, driven by our collective experience in managing and allocating assets over many years.

Policy Driven Strategic Asset Allocation:

Objective Setting: Clear articulation of the investment objective – what is required return and how much uncertainty in outcomes is tolerable
Long-term investing: Markets tend to reward institutional investors for bearing risks with high-confidence, long run risk premia
Risk premia include compensation for economic growth risk, inflation risk, and illiquidity risk
Diversification: Risk premia have different drivers and thus combining multiple premia often reduces risk while maintaining return potential
Success = Objective setting + longer time horizon + risk premia diversification
Risk Management and ongoing governance: Failure to identify and manage unrewarded or unintended risks can undo strong investment performance
Efficient implementation: Adjustments of portfolio positions is needed to maintain an optimal risk/reward posture. This is done most efficiently with derivatives overlays such as LDI overlays, futures-based asset class replication, and portable alpha implementation strategies.

Active Management:

Tactical Asset Allocation requires skill and patience. We prefer to wait for only the highest confidence opportunities created by significant market disruption.
Active management can add value. Skilled investment managers can potentially generate higher returns than the associated benchmarks. We believe finding genuinely skilled active managers requires deep rigorous research conducted by an experienced team like ours.
Diversification of active exposure: There are numerous categories of active risk available to exploit, beyond the well-known equity factors. Our clients’ active risk budgets span the full spectrum of alpha styles and alternative beta strategies.

Investment Strategy

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Our investment strategists work in partnership with clients to assess their long-term objectives and construct an investment policy to help them deliver this. The investment policy has three components: Strategic Policy, Dynamic Policy and Active Risk budget.

Strategic Policy

Through our Strategic Policy setting advice, we help our clients determine their ultimate objectives and translate this into a strategic asset allocation. Before discussing funds, products and solutions we focus on defining the bigger picture. Most of the expected investment return is governed by the Strategic Policy.

Dynamic Policy

Dynamic Policy allows for some room to manoeuvre different market conditions. Tactical asset allocation decisions can be made to take advantage of extreme market dislocations and would be governed by this policy.

Active Risk Budget

An Active Risk budget will determine the amount of return we would like to achieve from active management. The budget is set to allow for some active management but should not overly influence the overall risk profile of the scheme.

LDI Benchmark Management

Defined benefit pension schemes manage the funding risks associated with movements in interest rates and inflation by implementing a Liability Driven Investment (LDI) strategy. We typically find most LDI solutions do not address obvious areas of slippage when constructing an LDI benchmark.

To ensure that the strategy accurately reflects the interest rate and inflation risk profile of the scheme, and so prevent unexpected hedging performance, our process emphasises working in partnership with our clients’ actuarial advisors to construct an LDI benchmark.

The result is a better governed LDI solution. SECOR retains responsibility for reconciling the benchmark against the Actuary’s liability calculation and the LDI manager is responsible for implementing against a clearly defined benchmark.

Tactical Asset Allocation

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We believe that good tactical asset allocation requires skill and patience and can add value during periods of extreme market dislocation. Rather than recommending tactical positioning on a regular basis, we are disciplined in our advice and wait for opportunities that meet a threshold of confidence. These views can be implemented in the following ways:

Existing mandates: by giving the investment manager more active management discretion, tactical views can be implemented in existing mandates
Over or underweights: where there are cross-asset views they can be implemented through positioning relative to strategic policy
“Break-glass” (in case of emergency) accounts: as the name suggests, having an account where tactical positioning can be implemented quickly can serve as a useful tool during volatile market conditions where investment opportunities can appear and disappear quickly

Manager Research

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Our manager research team covers a broad range of asset classes and is constantly meeting with new managers. Our aim is to forge long-term relationships with what we believe are best-in-class investment managers. Much of our seasoned team has direct “hands on” investment management experience, having managed large pools of institutional assets in their careers.

Their combined experience has led to our tried-and-tested research process which is composed of the “Six P’s”:

People

People are key. We consider in detail the key individuals involved in making the investment decisions, their backgrounds and experience, their reputations, their motivations and the overall culture they create.

Process

Different asset classes and strategies have their own nuanced investment processes. We dig deep into assessing how rigorously and consistently this process is administered in practice.

Philosophy

The investment philosophy forms the foundation of the investment ideas that investment managers execute in their portfolios. Our experience helps us judge whether the philosophy has sufficient merit to generate a reasonable return for the risk taken.

Performance

Performance matters but it is important to understand how that performance was achieved. We conduct rigorous factor analysis to understand the drivers of historical performance.

Planet

We integrate the consideration of Environmental, Social and Governance (ESG) factors in our manager research. We use a combination of questionnaires and proprietary scorecards to assess how our investment managers are integrating ESG factors in their decision making.

Price

Looking at the terms of a manager goes beyond just negotiating fees. We consider board member positions, fund lock-ups, hurdle rates, high water marks and much more when negotiating terms.

Data

We begin our process with data from our clients’ investment managers or custodian

Analytics

Our proprietary tools analyse the data and compare exposures against targets

Reporting

Based on our analytics we produce automated exposure, risk and performance reports that can be shared with clients

Client Recommendation

Where exposures or risks are misaligned from targets, we make recommendations to our clients

Access to your entire SECOR team

Clients are given access to our entire organisation. Senior decision makers attend client meetings providing direct access to the rationale behind our advice.

Customised client reporting

With SECOR, clients can tailor client reporting to meet their unique governance structures and reporting needs. We offer clients reporting in their desired format and frequency.

All-inclusive service model

We meet with our clients as frequently as they like and offer as much training as they need. As regulatory requirements change, we incorporate this in our existing arrangement rather than charging additional project fees.