DFMi (offshore insurance products)

Step 1

Client Objectives

Step 2

Asset Allocation

Step 3

Investment Selection

Once the overall asset allocation has been determined by tier 1 then individual assets or funds to be invested in within each asset class needs to be determined in tier 2. Initially the funds available need to be filtered according to their investment objective and risk profile to ensure they match the desired profile from the asset allocation process. For example if an investment into an equity fund is proposed then only funds with that investment objective and profile, should be analyzed. Once this initial “filter” of investment options has been made then each fund will be analyzed individually. This is done via a combination of qualitative and quantitative analysis.


The overall investment philosophy is that asset allocation is the most important factor in overall portfolio performance and that the global and individual country macro economic environment, (economic growth, money supply growth, inflation, unemployment, interest rates, current account etc), determines the relative attractiveness of the various asset classes at any particular time.


Qualitative Analysis


The qualitative analysis focuses on the credit rating of the fund management company, its size, length of time in operation, reporting disciplines, transparency, and licensing. These qualitative measures should ensure that only fund management groups of the highest quality are used, and thereby reduce the risk of default, fraud etc that would potentially have a very damaging impact on the overall portfolio.


Quantitative Analysis


The quantitative analysis primary focuses on the performance of the fund, relative to its peers, and the appropriate benchmark. This analysis is in terms of returns but also in terms of volatility of those returns. The goal being to select the fund with the highest risk adjusted return.