Our director, Victoria Hicks, recently spoke to the FT Adviser about how to best utilise strategies – and what type – to maximise future planning. So, when is there a case for advisers and clients to consider using them within an investment portfolio? Here’s her critical insight she shared with the national broadsheet…

The more progressive advice firms, which place a real focus on wealth management, are certainly becoming more open to strategies that can provide added value to clients.

However, it is important for advisers to continue to adapt and research different investment strategies in order to ensure those recommended are appropriate for their customers’ objectives, risk profile and capacity for loss.

While long/short strategies were traditionally associated with hedge funds – and perhaps appeared inaccessible for many clients – more traditional asset and fund managers are now also adopting this method within their portfolios. This is to aim to take advantage of profits that can be made by selling short overpriced stocks to outperform the market and reduce volatility.

This also works to further diversify a portfolio and could be of particular value when markets are performing poorly. That said, this strategy can present the opportunity for significant losses, especially where both strategies fail.

Key things to be aware of when examining such funds

It is important to not assume that all long/short strategy funds are the same. Look at the fund objectives as these can vary dramatically, and ensure they are aligned with your client’s investment objectives.

The experience of the fund management team can also significantly influence performance goals. As such, it is important to pay particular attention to the fund managers, their credentials, ethos and past performance.

These funds tend to be significantly more expensive than a more common long-hold strategy fund, due to the associated trading costs. However, MiFID II has strengthened the requirements on disclosing fees and charges, therefore additional costs should be justified in line with the client’s requirements.

When a fund incudes short strategy, this does pose the potential for significant losses. It is therefore important to not only assess the client’s investment priorities, but also their risk profile and ability to withstand fluctuations, without impacting upon their standard of living.

See the full story from FT Adviser’s Jennifer Turton HERE.