Southwood Financial Planning & Morningstar Investment Management

The legislative environment and investment industry is complex and the pace of change makes it a challenge to focus on running a business that is client-centric, while staying on top of the more technical and administratively cumbersome parts of managing an investment capability. Combine it with the fact that there are over 1500 registered unit trusts to choose from in South Africa alone, complicated pricing models and ever changing markets and the task is even more daunting. This translates into a challenging portfolio construction process, hence the decision to partner with Morningstar Investment Management with whom we share the following investment principles:

We invest for the long term

We offer portfolios designated to stand the test of time. That means investing with patience and the confidence that comes with rigorous research and careful diversification. It also means tuning out the short-term noise that distracts many investors, impeding their chances of reaching their goals.

We are independent thinkers

We don’t play favourites or allow external factors to cloud our judgement when we’re making investment decisions. Instead, we follow Morningstar’s in-house research wherever it leads us, even if it means taking a position that falls outside of the mainstream.

We employ a disciplined, consistent investment process

Because there are no shortcuts to a good investment outcome, we follow a well-defined process that joins quantitative analysis with qualitative research. Every security we evaluate must pass this exacting test before we’ll invest in it.

We actively manage portfolios

We believe that, through disciplined asset allocation and incisive research, we can add value for our clients. Thus, we leverage Morningstar’s deep analytical resources in constructing portfolios and selecting securities. We believe this will yield better outcomes than a purely passive approach.

 We are sensitive to costs and taxes

We appreciate the importance of minimising expenses and use low-cost vehicles, including index funds, whenever possible. We also take steps to avoid transaction costs and taxes, either by favouring managers who trade infrequently or refraining from transacting ourselves.

We invest clients’ money as if it were our own

This properly aligns our interests with investors’ and ensures that we only offer strategies in which we have the utmost confidence.

We communicate in a timely and candid fashion

We strive to clearly explain our approach and investment decisions. We also aim to provide complete and transparent accounting of our investment performance. This includes admitting to any errors we’ve made in managing portfolios and lessons we’ve learned along the way.


Our disciplined investment process drives portfolio construction. It is imperative that the risk, return and time horizon objectives of clients are correctly analysed and matched to investment managers. Portfolios are subject to both a qualitative and quantitative due-diligence process which allows us to identify and select only the best quality unit trust funds for our clients’ portfolios.


Asset allocation is the primary driver of both investment performance and portfolio risk. Asset allocation is the process of allocating a proportion of investment capital to the various asset classes, namely equities, fixed income, property and cash, both in South Africa and offshore. Each asset class has different risk and return characteristics and diversification benefits can be achieved by selecting a mix of the most appropriate asset classes.


When constructing portfolios, specific guidelines are considered to decrease the risk in the portfolio. Limitations are set on the number of funds, the minimum size of the fund, the allocation to a single fund and the allocation to one management company.

We believe in portfolio consistency. Therefore, when we believe in the investment style and philosophy of an asset manager, we construct portfolios with building blocks across all models, moving up the risk profile range of that specific management company where possible.


Morningstar Investment Management South Africa (Pty) Ltd is part of the Morningstar Investment Management group, which offers investment advisory services around the world. As an entity licensed with the Financial Sector Conduct Authority, Morningstar Investment Management South Africa has established an investment practice in South Africa to provide research-driven, innovative and independent investment services to the local market.

Morningstar Investment Management unites the strengths of Morningstar, Inc. with more than three decades of investment experience to help advisers empower investors to meet their financial goals.

Through its global presence, Morningstar Investment Management brings together a rich heritage of local investment-management expertise and experience to craft solutions that cater to the unique requirements of each market.

The investment professionals in South Africa use their knowledge of local markets to help design and manage investment solutions. The South African investment professionals have, on average, more than 10 years of industry experience.

Additionally, their work draws on the research, data and analysis from Morningstar, Inc. Morningstar, Inc. has served South Africa through its Cape Town office since 2009 and is known industrywide as a trusted source of independent investment information.

What sets Morningstar apart from other companies is that they offer 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 $200bn.

This comprehensive global investment process brings together their strengths in proprietary research, patented methodologies, investment techniques and manager selection. It provides the framework we use to create solutions that address the challenges our clients encounter and the varying goals and risks investors face over a lifetime.




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