My role in the DFS Portfolio Services investment committee is twofold: to provide independent oversight of the decisions made by management using their investment processes; and to contribute to the decisions with my views on world economies and markets.
There is a suite of portfolios under management ranging on a spectrum of risk and return from a conservative portfolio with a high proportion of low volatility assets such as fixed income instruments, to a portfolio aiming for high returns but with more uncertainty in the way these returns are earned over time. Positions are taken around these benchmark allocations based on: (i) a quantitative estimate of future uncertainty in returns and a form of stop-loss mechanism that reduces the effect of long-term declines in markets; and (ii) a qualitative assessment based on the views put forward in the committee. Both forms of positions are vigorously discussed at the IC.
Over my time on the committee I’ve observed that the culture of the IC is to have debate over substantive issues and to recognize that different views can be held on these issues, with all views supported by evidence. The IC has input from two external consultants, myself and Jonathan Pain, with quite different ways of looking at the world. Where committee members (including internal professionals) may disagree is on the weight of various bits of evidence. Rather than a weakness, this is a strength of the committee, as it shows where there is a degree of uncertainty in the economic and market outlook that needs to be taken into consideration when setting portfolio allocation; uncertainty can be on both the upside and the downside.
Stephen Romic, the Chair, ensures that all views are given adequate airing and sufficient challenge where required.Disclaimer