Investment Philosophy


Southwood Financial Planning & Morningstar Investment Management

Southwood Financial Planning appointed Morningstar Investment Management (MIM) South Africa (Pty) Ltd to support the business in the creation and management of portfolios for our clients. 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 $200bn.

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. |

About Morningstar, Inc.

Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offers an extensive line of products and services for individual investors, financial advisors, asset managers, retirement plan providers and sponsors, and institutional investors in the private capital markets. Morningstar provides data and research insights on a wide range of investment offerings, including managed investment products, publicly listed companies, private capital markets, and real-time global market data. The company has operations in 27 countries.

About the Morningstar Investment Management Group

Morningstar’s Investment Management group, through its investment advisory units, creates investment solutions that combine award-winning research and global resources with proprietary Morningstar data. With more than USD$207bn in assets under advisement and management as of 30 September 2018, Morningstar’s Investment Management group provides comprehensive retirement, investment advisory, and portfolio management services for financial institutions, plan sponsors, and advisers around the world.