PRISM | Redefining Investment

Welcome to the Capital International Group and our approach to redefining investment through the introduction of PRISM

PRISM is a competitive alternative to other discretionary services, passive investment offerings and structured products, combining low cost with the professionalism of highly diversified active institutional asset management together with the service of personal portfolio management

In this article we look at how PRISM can help clients to invest with confidence and control. We will also look at how PRISM return expectations compare with a range of comparable alternatives.

First a quick introduction in case you have not heard of PRISM.

PRISM offers a full range of defined risk/return investment profiles, where the performance characteristics of each are clearly stated with a high degree of confidence. This means that when you select one of the PRISM profiles you know exactly how it is likely to perform over time.

You can simply chose the precise balance of return and volatility (risk) that is right for you, ranging from very low risk to genuinely high growth investment strategies depending on your needs. If you have a mix of requirements you can allocate different amounts to different risk/return profiles.

Furthermore, all the lower risk PRISM profiles enjoy an element of capital protection over their stated time horizons giving greater piece of mind to clients with less risk appetite.

PRISM gives you full control and you can adjust your positions over time to match with precision your requirements as they change or as your confidence in markets changes.

With weekly dealing, no exit fees or initial commission, no dealing charges and free switching between profiles, PRISM really does put you in control.

And as for cost, the PRISM profiles are delivered without any client charges. Furthermore, PRISM’s underlying Master Investment Strategy has a low annual charge of only 0.25% per annum, dramatically lower than most other active investment managers.

Finally, on performance, each profile is designed to deliver a risk-return balance that structurally exceeds all traditional investment strategies. Indeed, we believe PRISM truly redefines investment.

So how can you use PRISM
and how does it really compare?

Firstly, that you should always seek advice from a Financial Adviser or Investment professional to determine the suitability of any financial service to your specific circumstances. Financial Advisers can help you plan for the future, manage your wider financial circumstances and protect against a broad range of financial risks.

But let’s consider two generic types of investor for illustrative purposes – the low risk investor and the high growth investor.

Low Risk Investors
Low risk investors typically keep their savings in cash, but are concerned about very low interest rates and the risk of lending their money to a bank or building society. They are seeking higher returns but are not prepared to take significant amounts of investment risk and are nervous of traditional investments.

The challenge is to find a solution that can deliver real returns without taking undue risk. Investments that might traditionally have been called low risk, such as Gilts, are in fact far more volatile than most investors realise and to compound the issue their expected returns are still very low indeed. Quite simply they have a poor return-to-risk trade off.

Even a short dated 5 year Gilt may fall in value by 5% or 6% over a year or two and a traditional ‘cautious’ investment strategy comprising a mix of predominantly Gilts and bonds, but also with some exposure to equities, may well fall by 8% or 9% over the short term.

The problem with a strategy that focuses on Gilts or indeed with a traditional ‘cautious’ investment strategy is that they are poorly diversified and subject to acute concentration risks, most notably in these examples to inflation and quantitative easing.

By contrast PRISM seeks to optimise diversification at all times, and then allocates exposure to each profile in accordance with the defined risk/return parameters set. In this way the PRISM Horizon 2 profile can achieve an attractive expected return but with very low level of expected volatility. Coupled with 99% capital protection, very low costs and unrestricted access, PRISM Horizon 2 offers a genuine alternative for lower risk investors.

High Growth Investors
The high growth investor faces a similar challenge at the other end of the spectrum. The growth investor who is typically investing for the long term knows that over time the cumulative impact of higher expected returns can dramatically outweigh concerns about short term fluctuations in value. Nevertheless, keeping control of volatility is still extremely important and again the growth investor will primarily be concerned with achieving a high return-to-risk ratio.

In pursuit of higher expected returns the growth investor is driven increasingly toward equities and other high risk investments. The problem is that, beyond a point, this tends to just add risk with very little increase in expected returns.

Again the problem with a strategy focused on equities or other higher risk investments is a fundamental lack of diversification leading to a poor return-to-risk ratio and key risk concentrations to specific aspects of the global economy.

By optimising diversification PRISM is able to deliver true growth strategies not only with significantly higher return expectations, but also with reduced expected volatility, when compared to equities and traditional ‘growth’ strategies. Furthermore, with easy switching in and out of PRISM profiles at no cost, investors can move rapidly up or down the risk spectrum if their risk appetite or view of markets changes.

PRISM is designed to make investing simple, low cost and powerfully effective.

Ask your Financial Adviser about how
PRISM can help you.