Short & Long Term Requirements and Preferences Using a Logical System

INVESTMENT MANAGEMENT
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Investment Management
This discussion will evaluate the high-net-worth client’s (short & long-term) requirements and preferences using a logical system, and his portfolio objectives & investment strategy.
1) Client’s (Short & Long Term) Requirements and Preferences Using a Logical System
The client is a High Net Worth individual, aged 55, looking to invest £2 million for 10 years, has no family financial obligations since he is divorced and children are all grown up and independent. After retiring at the age of 65, the client will not be relying 100% on the income from the portfolio, but rather has a £40,000 per annum that he expects as a Defined Benefit Pension. He wants to achieve some modest growth from the portfolio investment. He is slightly less risk averse, meaning that he can take on some risk, moderate risk. For the 10 years before retirement, he doesn’t intend to take any regular income from the portfolio.
He has a fair knowledge of investing in bonds, equities and alternatives from his history of self-directed investing in Equities. From his experience of investing in equities, his portfolio will have a bigger portion of equities (60%), bonds (30%) and alternatives, cash (10%). Therefore, the client’s investment goals are long-term. The assets are divided into Strategic Asset Allocation and Tactical Asset Allocation to reflect the client’s long-term (10 years) expected returns of at least 15% and short-term (2-3 years) expected returns (Franklin Templeton, n.d.). His long-term expected rate of return is at least 15%.
The mix of Strategic Asset Allocation and Tactical Asset Allocation means that the asset allocation for this client’s investment is Dynamic, with a dynamic capital growth Investment Objective, a risk that is above average, and a portfolio structure consisting of bonds, equity, and cash (Corporate Finance Institute, n.d.). For this portfolio, the strategic allocation will incorporate all the equity securities, and the United Kingdom 10Y Government Bond, with a 10-year yield of 1.36% (Bloomberg, 2022), whereas the tactical allocation will be for the iShares 5-10 Year Investment Grade Corporate Bond ETF(IGIB), and the iShares 0-5 Year TIPS Bond ETF(STIP).
2) Portfolio Objectives & Investment Strategy, e.g., Active, Passive, etc.
To match his returns expectations, seven assets are selected to form his portfolio. Given his less risk averse nature and an aim at achieving moderate income from his portfolio, he can take on more equities, which are riskier since they have no guaranteed return, as compared to bonds that have a guaranteed interest.
FTSE 100. This is a share index of 100 companies listed on the LSE. The long-term nature of his investment and ability to tolerate some risk suits this index. For example, one of the highly rated companies in this index, M&G Plc has a Forward Dividend & Yield of 10.1% and a beta of 2.06 (Yahoo Finance, 2022). This will offer him moderate returns but at a considera...