Investment Philosophy

Southwood Financial Planning & Morningstar Investment Philosophy

We recently appointed Morningstar Investment Management (MIM) South Africa (Pty) Ltd to support us in the creation and management of portfolios for our clients. The greater compliance burden has necessitated a sharper focus on our core business, that being the delivery of a professional financial planning service of the highest standard.

The distinctive advantage of utilising a professionally partnered investment capability can be captured in five words; scale, timeliness, cost-efficiency, process and outcome.

The Southwood Portfolios have historically been constructed using multi-asset funds, resulting in outsourced management of stock selection and asset allocation. This methodology has proven to be successful but is also a more costly way to build portfolios and assumes a large reliance on the underlying managers to actively manage asset allocation.

The adoption of building block approach means that the Southwood portfolios will now reflect Morningstar’s in house asset allocation process, which we believe will generate long-term gains for investors through its contrarian philosophy and valuation-focused methodology.

The asset allocation of a portfolio tends to be the biggest driver of its performance. By using specialist funds rather than multi-asset funds we can build portfolios that reflect our conviction in the different asset classes.  The building block approach avoids the flaws of traditional portfolio construction and thereby creates a higher likelihood of achieving superior risk-adjusted performance.

Morningstar offers independent investment management services, software, data, research and ratings; and they combine and deliver them all in whatever way that is best for their clients. The global research team consists of more than 100 analysts and their proven track record has resulted in global assets under management exceeding $180bn.

Morningstar research

 In more than two decades of fund research, Morningstar’s global analyst team has identified five key areas that they believe are crucial to predicting the future success of funds: People, Parent, Process, Performance, and Price.

These five pillars form the spine of their research approach and they evaluate each of them when assessing a fund. In so doing, they not only evaluate each pillar, but also the interaction between them, which we believe is crucial to understanding a fund’s overall merit. |

Managed Portfolio Investor BrochureMorningstar - Southwood

Southwood Investment Philosophy Document