ADVERTORIAL Progressive
ADVERTORIAL Progressive proposition PortfolioMetrix – Investment Management by Design PortfolioMetrix (PMX) was founded on the principle that portfolios need to be constructed on needs, not wealth. According to CEO and Chief Investment Officer, Brandon Zietsman, “We recognised the potential in partnerships, and the value of integrating the specialisations of investment management and advice. ”PMX pioneered the use of in–house technology to give advisors the ability to customise client portfolios on a fully scalable basis. Zietsman says that PMX creates a more robust link between the professional advisor and client outcomes. “We multiply the effectiveness of advisors by giving them unprecedented control over the design of clients’ investment mandates. Our proposition produces precision-engineered portfolios that reliably meet expectations.” Add to that a suite of proprietary advice and reporting tools and the whole focus is on efficiency. PMX was launched in South Africa in 2010 and immediately expanded its services abroad. It now employs over fifty people in offices in London, Dublin, Stockholm, Johannesburg and Cape Town. PMX was voted Best Discretionary Fund Manager in the UK in 2019 by Professional Advisor and Best DFM for Greater London in the Citywire Regional Awards for 2017, 2018 and 2019. It further won three of the seven categories up for grabs at the Citywire Annual Investment Performance Awards in 2019 and received a “Gold” award for digital innovation from Portfolio Advisor in the UK for its technology. The DFM market in South Africa is broad, with value propositions ranging from asset consulting, where the DFM collaboratively creates different portfolios with each advisor firm they work with (even though they may have similar mandates), to outright discretionary management. PMX has chosen the latter route, preferring to compete with the big asset management brands based on the quality of its investment proposition and supporting technology. “The firms we deal with earn their fees and add immense value through their advice proposition, preferring to leave investment decisions to us.” According to Zietsman, “You can’t be everything to everyone. “Strategists will tell you that you can compete on cost, quality, flexibility, lead time or service, but only effectively on one or maybe two of these criteria. We choose to compete on quality and service, which resonates well with the calibre of advisors we deal with.” PMX has opted for a “narrow” distribution model, partnering with only around one hundred advisory firms globally. This has not prevented it from accumulating almost R40-billion in assets under full discretionary management, attracting net flows of more than R2-billion per quarter. “Our strategy was built around the ongoing professionalisation of advice and the opportunities associated with it. We avoided getting seduced by approaches that disintermediate the advisor and manage to dodge vertically integrated one-stop-shop business models. While others were trying to ‘purchase’ distribution, we focussed on voluntary associations with independent advisors who shared our strategic vision and values.” 18 www.bluechipjournal.co.za
ADVERTORIAL Investment proposition PMX has developed a highly specialised, multi-management approach to investing, with a significant capability in portfolio optimisation, risk-management and manager selection. According to Zietsman, “Our process is more about engineering than art or theoretical dogma. Pragmatism allows you to leverage sound theory while retaining the sensibility checks and ability to deal with real-world noise. Portfolios are simply tools in an advisor’s toolbox – they need to do the job assigned to them without producing unexpected surprises. Long-term results are important, as is patience, but the ride matters. Big performance swings are a distraction.” Competitiveness Challenged on how PMX competes from a pure investment perspective with larger, well-established asset managers, Zietsman replied, “We have more structure to our portfolio construction, are better resourced, often cheaper and have a more compelling investment track record. It is counterintuitive because those are exactly the challenges and criticisms often thrown at DFMs in general.” Portfolio construction PMX approaches asset allocation differently to most managers. “We don’t obsess with single portfolios, but instead apply our modelling to a full spectrum of risk-profiled funds in a single exercise – the same goes for fund implementation. It starts with engineering, not gut feel or your economic outlook. Industry brochureware tends to depict portfolios neatly arranged and spaced along an efficient frontier, while real-world performance seldom produces similar results. Portfolios should fly in formation – if they don’t, they can render the advice process worthless.” “When it comes to selecting underlying managers, we avoid being ‘boxed’ and rely as much on quantitative techniques as we do on qualitative engagement. We are not being paid to swing for the fences, but to produce well-constructed portfolios that will weather a wide range of market conditions. These have a habit of producing more consistent performance over time.” On the importance of performance, Zietsman contends that, “Outright performance is one dimension of success. “Our process is more about engineering than art or theoretical dogma.” The theory is only good when executed in practice as can be seen in the PMX portfolios detailed below. PMX UK PERFORMANCE PMX SA PERFORMANCE www.bluechipjournal.co.za 19
