Brian Clarke, Director of Key Trust Company offers some views on investment for family offices and families in business

Brian Clarke, Director of Key Trust Company and recent winner of the STEP independent trust company of the year, gives Citywealth his views during the current difficult times.


The events which lead to one outcome on Monday can lead to a different outcome on Tuesday. There is now simply too much information for any one individual or a computer to fully comprehend. There are just too many moving parts and our minds are trained to select only the information we need and to filter the rest.

Applying this concept to the market suggests that each investment manager or trader will tend to focus on what they personally consider important and ignore the rest. Two old (but none the worse for that) investment philosophies are: The random walk theory, which says that everything that can be known is already factored into the price, therefore the move in tomorrow’s price will be random.

The other theory is that while it pays to follow a trend, when following the herd, accept that you are walking in the droppings.

Because decision makers work with fundamentals, technical signals, and numerous financial variables to meet the supply and demand requirements of their firm, they have to select those elements that are relevant to them. They focus on those elements that are specific to their decision-making, filtering out other variables as either being too small or too fleeting. Result: they do not work with the real market but with a mental model of the market.

In a year when the filtered-out issues suddenly become dominant, this can have a disastrous effect on investment policy. Banks, commodities, oil all have significant valuation changes beyond any average trend line.

At our annual meetings with family clients, we are always talking about the entire global spread of investments and how important it is to ensure a balance.

The elements we strive to include are real estate, art collectables that can be enjoyed, land, cash, equities and holdings for long term income. As an independent company, we are perfectly placed to introduce the best managers for each asset sector.

In these volatile times, I believe, having a secure, broad and inclusive spread of assets gives a good foundation for stress-free living.

www.key-trust.com

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