David Harvey explains TMPI Service
Trustee Managed Portfolio
Indices – A STEP Member Service
I am writing to inform you of a new free
service available to members, the Trustee Managed Portfolio Indices
(TMPI). This service is being launched to support STEP
members and private client practitioners as they work to understand
the levels of risk and return being employed by investment managers
when advising trustees and practitioners on their client investment
strategies and needs.
During a period of research with members and
representatives of private banks and discretionary investment
managers, it was evident that there was some confusion as to the
terms the investment management industry used to describe the level
of risk exhibited by their investment solutions. This has
also been highlighted as an issue by the FSA and is not news to
As a solution this free STEP Member Service is
designed to assist both the practitioner and the investment
professionals in agreeing levels of investment risk by setting
appropriate aims based on two key risk factors; Maximum Annual
Drawdown and Volatility.
As it is essential to understand the integrity
of the data that makes up an index, important information will be
made available to members on the type of performance data that has
been submitted by the investment managers. This will act as an
indicator as to how the data submitted by investment managers to
the Indices compares with actual client returns.
Data submissions will be categorized as
A = Actual client data for all clients and
thus likely to be wholly reliable.
B = Sample client data which can generally be
relied on to reflect actual client returns.
C = Model client data which cannot be relied
on to represent actual client returns.
D = Manager did not confirm type of data.
Importantly for the STEP member and private
client practitioner the service will not make any recommendations
or promote any single investment manager or private bank or
provider of investment services. Independence will be a key
to the service.
Risk and Performance
The Indices will be segregated into the
following categories of Low, Medium and High risk and are to be
represented in the following terms:
Low risk – risk averse or
short-term investors with a 3 year or less investment
horizon. Exhibit a volatility of <6% with a maximum
drawdown no greater than 10% over the investment period.
Medium risk – Where the
Investment horizon is between 3 and 10 years. Volatility of
between 6-10% and drawdown no greater than 20% over the investment
High risk – 10 years plus
investment horizon, volatility in excess of 10% with
potential draw downs greater than 20% which may result
in larger losses over the investment period.
Performance will be assessed and based on the
average annual percentage return of all subscribing managers over a
1, 3 and 5 years annual rolling timeframe in each of the 3
categories. Should a member require historic information, the
Indices are based at 31st December, 2002 and data can be
provided from this date.
Benefits to the Members
- Large range of data
- Levels of data supplied will be ranked for reliability
- Provides simple process for setting investment objectives
- Ability to challenge managers on risk and performance
- Designed to focus on risk adjusted returns
- Peer Group Advisory Board appointed
- Information available on http://www.step.org/ and http://www.trusteempi.com/
- Ability to use the service to protect clients and
- The ability to understand what is acceptable in terms of
- Increased transparency of information from the wider Investment
Access to the Manager
Data and information will be free to STEP
Members through the Website http://www.step.org/ or the http://www.trusteempi.com/
websites. Information will also be distributed regularly by
the STEP Journal and update emails.
Should you have any other questions please
feel free to contact Russell Bussey or Jim Walkinshaw of STEP.
STEP is working with Enhance who produce the
Indices. Enhance already provide manager performance data for
the Annual STEP Private Client Awards.
STEP is also working with Russell Bussey
. He is a long serving STEP Awards Judge and Chairs the
International Panel for the awards. He is a private client
practitioner with over 30 years experience. Russell will
report to STEP on the project to STEP’s Executive Management Group
and Board. He will also undertake a series of presentations
to STEP branches throughout the UK and the Channel Islands to
explain the service, its origins and aims.
STEP believes that the provision of these
indices will give both our members and appointed investment
managers a significantly stronger tool kit for setting and agreeing
appropriate levels of risk when agreeing investment strategy.
Managers will also have access to their own
Manager Reports as well as a Peer Group Report to help them
describe how their own process compares with the industry and
demonstrate the suitability of their investment solution to our
members requirements. It is envisaged that by improving
communication and transparency the Trustee Managed Portfolio
Indices will serve to protect our clients, ourselves and the
I hope that you will find this a valuable STEP
Member Benefit and will support its launch.