In this insight, we take a closer look at how we manage our clients’ portfolios — the factors that drive our decisions, the metrics we rely on, and the performance we generate as a result.
While our approach is forward-looking and based on more than three decades of experience, combining a variety of underlying strategies, there is far more involved in building the ideal portfolio than many might expect.
Understanding Key Ratios
Before examining our current portfolio, it’s important to understand several key ratios that reveal how a portfolio behaves under different conditions. These metrics help explain how effectively returns are achieved relative to the level of risk taken.
Overall Return:
Represents the total gain achieved by a portfolio over a specific period. Steady, consistent returns appeal to investors who value stability over aggressive growth.
Volatility:
Measures how much returns fluctuate, serving as a gauge of risk. Lower volatility means less dramatic swings — essential for investors prioritising capital preservation.
Sortino Ratio:
Focuses on downside risk by penalising only negative volatility. A higher Sortino suggests stronger compensation for downside risk, making it ideal for conservative investors.
Sharpe Ratio:
Assesses risk-adjusted returns, showing how much additional return is earned for each unit of total risk compared to a risk-free asset. A higher figure reflects more efficient risk-taking.
Maximum Drawdown:
Refers to the largest fall from peak to trough over a given period. Portfolios with smaller drawdowns are less prone to panic selling and recover faster, reinforcing resilience.
Beta:
Indicates how closely the portfolio moves in relation to a benchmark. A beta below 1 reflects lower sensitivity to market swings, demonstrating steadiness in turbulent markets.
Correlation:
Measures how closely portfolio returns align with an index. While high correlation shows similar market behaviour, better risk-adjusted metrics set our portfolios apart.
Our Low-Risk Portfolio (Sept 25 R234) is designed specifically for investors who value stability, capital protection, and strong risk-adjusted returns. When compared to the IA Mixed Investment 0–35% Shares index — and even to higher-risk benchmarks — it demonstrates clear advantages.
Portfolio Performance
The accompanying charts show the various ratios, but summarising them helps illustrate why our approach is distinctive. We construct portfolios to maximise consistent performance while keeping risk firmly under control. These ratios not only describe current outcomes but also offer insight into how we expect portfolios to behave during volatile markets.
Total & Annualised Return:
Measuring both overall and yearly growth, our Low Risk (Sept 25 234) portfolio delivered a 1-year return of 17.23%, outperforming the IA Mixed 0–35% index’s 6.14%, as well as all three comparable indices — all with less risk.
Sharpe Ratio:
At 4.94 versus the index’s 2.20, our portfolio provides far greater reward for the same level of risk, again exceeding all comparative benchmarks.
Sortino Ratio:
Concentrating on downside performance, our 4.23 ratio more than doubles the index’s 1.97 — confirmation that losses are minimal and recovery is swift.
Maximum Drawdown:
Over the year, the largest decline from peak value was just -3.27% (and the same over three years), compared to -4.33% for the index. Even the IA Mixed 40–85% Shares index saw a greater drawdown of -10.51% with only a 10.23% return.
Beta and Correlation:
With a beta of 0.72 and correlation of 0.85, the portfolio remains meaningfully linked to market trends but is less vulnerable to sharp downturns.
Alpha:
At 0.93%, this measures the additional value created before accounting for market return — proof of effective management and value added beyond the benchmark.
Building and Monitoring Portfolios
Our process begins with identifying meaningful opportunities across global markets, deciding which regions and sectors warrant exposure. We then allocate investments through a blend of OEICs, ETFs, and investment trusts, selecting managers based purely on performance metrics and without bias. We also focus on cost efficiency — blending active and passive strategies when appropriate to deliver the best results without compromising on returns.
Although the Low-Risk portfolio is highlighted here, we also manage medium and high-risk portfolios, each following the same rigorous framework. With around 19 underlying funds, the Low-Risk model is well-diversified — spreading risk across a variety of strategies and asset classes.
Our proactive advisory service ensures our portfolios are continuously monitored. When we identify meaningful changes or opportunities, we act swiftly — a key advantage that helps maintain performance and ensure we remain aligned with clients’ objectives.
If you’d like to learn more about our investment process or review one of our existing strategies, you’re welcome to book a complimentary 30-minute consultation via our website: www.wisifa.co.uk.
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