Investment Policy Analysis 

A primary focus within Harpswell’s OCIO model of investment management is the framing and analysis of an institution’s (or family’s) investment policies to ensure they are aligned with their goals, distribution requirements and appetite for volatility.  For some investors, we zero-in on asset sustainability and perform our analysis annually so they can see the path to achieve their long-term investment goals.

It is a generally accepted view that asset allocation is the key determinant of long-term investment performance.  We concur with this view and, therefore, give particular focus to assessing each investor’s policies, helping our clients conceptualize how different investment policy decisions can impact the sustainability or volatility of their assets. 

First, Harpswell presents our analysis of how different asset allocation policies impact a portfolio.  This portion of our work enables clients to visualize varying scenarios to see how different proportions of equities and bonds can impact their ability to meet objectives.

*Model projections are not actual investment returns. As with any investment vehicle, risk of losses are possible and past performance cannot assure any level of future results. Proposed model performance has limitations inherent in model results in that it does not represent actual trading and may not reflect the impact that material economic and market factors might have has on the adviser’s decision-making if the adviser were actually managing accounts. Clients may have had investment results materially different from the results portrayed in the model. Actual proportions to funds and asset classes will vary on a client by client basis and may not match the proposed model allocations.

*Model projections are not actual investment returns. As with any investment vehicle, risk of losses are possible and past performance cannot assure any level of future results. Proposed model performance has limitations inherent in model results in that it does not represent actual trading and may not reflect the impact that material economic and market factors might have has on the adviser’s decision-making if the adviser were actually managing accounts. Clients may have had investment results materially different from the results portrayed in the model. Actual proportions to funds and asset classes will vary on a client by client basis and may not match the proposed model allocations.

Next, we model a range of distribution policies (see above) to highlight the long-term impact that cashflows have on asset levels.  Here, we can be quite creative and can include multiple custom scenarios including a stable payout, escalating payouts, sizeable in/outflows in any given year(s), and inflation-adjusted payouts.  We can also target a particular asset-longevity goal and project payout levels that are commensurate with this objective.  

Finally, once the prospective policies are agreed upon, we look in the rear-view mirror and show how the portfolio defined by these polices would have performed under a variety of stress scenarios.  This exercise helps clients conceptualize how these policies impact the level of volatility inherent in the corresponding investment portfolio.   We can look at up to five different portfolios and show how each portfolio would have done during the tech crash of 2000, the banking crisis of 2008, the flash crash of 1987, along with a variety of other key investment periods of stress.  This function helps clients gain an understanding of how the investment policies impact both volatility as well as investment sustainability.  Many times, this phase of our work has resulted in investors reassessing their desired policies and readjusting the level of risk in their portfolio.

Harpswell welcomes the opportunity to give you a sound understanding of how a well-crafted investment policy can impact your prospects for success in attaining your long-term goals.  While crystal balls do not exist in the investment world, our investment policy review simply utilizes long-term asset class expectations and does not reflect a precise forecast.  Therefore, we encourage stakeholders to revisit this work periodically and we counsel our OCIO clients to utilize this service annually (with no extra fee).