Hollingsworth Magazine Article

The versatile portfolio manager

myth often observed by investors is that in order to spread your risk into more sophisticated investments and alternative strategies requires substantial capital. The reality is that you can gain exposure to hedge funds, managed futures and structured notes etc at very low entry levels so long as you have a portfolio manager who is able to pool investors’ capital.

Historically, a typical investment portfolio would consist of overseas and local equities (typically bank shares), bonds (including emerging markets) and possibly equity or bond fund(s) from an overseas company registering their funds in Malta. Whilst the choice in the local market is improving, liquidity issues remain a concern and an investor is not diversifying enough away from the local marketplace. Given the choice, most investors would prefer to invest in global opportunities, if the risks and prospects are properly explained.

A diversified portfolio
Having your capital protected is very popular, especially to the new investor. Some of the local banks offer such products on mass and clients can participate in this ‘plain vanilla approach’. But what if the investor wants to invest in gold or oil or the Brazilian stockmarket as opposed to the traditional standard FTSE or Eurostoxx offerings ? Can his advisor do this for him and protect his capital also ? Typically the response is negative as minimum levels for such structures are often in the region of €1 million. If on the other hand, your advisor or portfolio manager can gain access to international banks then the door is opened to a world full of choice. Whereas the minimum trade may be €1 million, the manager can pool individual trades, often from as little as €10,000 then place the one aggregate trade of €1 million.
The same principle applies to many hedge funds or alternative investments. Often perceived only for the rich and famous, investors can now trade from low levels if their manager has a good relationship with the fund managers. Having a sizable asset base allows the manager to bring in new investors who piggy back onto the fund without having to commit large amounts.

Exchange Traded Funds
If you do elect to invest internationally, a mistake often made by investors is to only consider investment funds from recognised banks and financial institutions. There is however a much cheaper, easily accessible ways of investing into almost any global stockmarket, commodity or currency in the world. Exchange Traded Funds (ETFs) and IShares are used by many portfolio managers to allow them to trade intra day without surrender penalties or lock in periods like many investment funds. Imagine therefore the following hypothetical portfolio :

Commodities Equity Indices Alternatives
Gold Bullion ETF IShares Brazil FTSE100 Autocall 11%
Short Silver ETF IShares Eastern Europe Blue Chip Income Note 8.1%
Leveraged Crude Oil ETF IShares Australia 3 Year Phoenix Note 18%
Grains ETF
Global Nuclear Energy ETF


The above contains a truly global exposure to commodities, equities and income notes, the latter being in the form of structured income notes that pay a fixed income with inbuilt capital protection. To the average investor, the use of ETFs and IShares will be unheard of but they are a fabulous way of investing cheaply and effectively into almost any market you choose. You avoid initial fees that you incur with fund managers and also they also carry a much lower annual management fee.

A portfolio manager’s job is not only about performance but controlling costs also. If he can give the investor a truly international portfolio that includes alternative investments, capital protection and the use of low cost trading tools then the investor is really getting a portfolio that may be perceived to require a very high capital investment. In reality the manager could offer his services and give a diversified approach for in the region of €50,000 upwards – therefore appealing to a lot wider clientele and not just the super rich.



Mark Hollingsworth, Director, Hollingsworth International Financial Services Ltd
Tel: +356 21316298
e-mail: info@hollingsworth-int.com
Website: www.hollingsworth.eu.com

Authorised by the Malta Financial Services Authority to provide investment services, license IS/32457