Why We Are Refining the Model
Over the past year, along with our investment committee, initially guided by Albion Strategic Consulting and bolstered by 14 years of direct collaboration with Dimensional, we have reviewed markets that have seen notable advances. We believe a small rebalance is now warranted.
Simultaneously, we have been discussing our weightings in specialist sectors such as technology and AI. We have decided to increase our allocation to these areas, aiming to replicate the transformative effects of industrialism in the early 1900s on global dynamics.
What Has Changed
To implement this strategy, we have identified two ARK funds managed by Cathie Wood, whose investment style, whilst different, aligns well with Dimensional principles. These funds have been added to our updated model, offered in three equity risk tiers: 70%, 80%, and 90%, with the remainder held in our two existing Dimensional fixed-income funds.
Importantly, these adjustments do not depart from our established rules or strategy. They refine our approach in line with evolving market conditions.
The Strategic Rationale
Dimensional has been our stalwart for over a decade, following an evidence-based, systematic approach grounded in academic research. They emphasise value-cap, small-cap, profitability, and momentum factors, aiming to capture long-term market premiums.
ARK is known for its high-conviction approach focused on disruptive innovation and growth stocks. Their strategies are thematic and forward-looking, investing in companies expected to have significant technological impact in the future.
We believe a modest ARK allocation alongside Dimensional will provide diversification benefits and uplifted exposure to innovative sectors. Careful monitoring and periodic rebalancing, only when necessary, will be fundamental to managing risk and ensuring the portfolio remains aligned with your investment strategy.
We have also enhanced clarity by further segregating US equities, small caps, and value caps, and by distributing main global equity weights across Dimensional, Fidelity, and UBS.
Cost Neutral
As always, our rebalances and ongoing adjustments are fee-free and commercially neutral. We do not impose common switch charges of 0.5% or 1%, ensuring transparency and alignment with our client-centric approach.
There are no conflicts of interest in any of our operations, and the ARK inclusion has no material impact or commercial benefit to our office. Our relationship is with you and you alone, and it matters not which managers we engage to run the capital.
The new 90 model has a weighted portfolio cost of 0.34% per annum, matching the current Dimensional 90 model. All annual relationship-based fees have now been set at 0.5% per annum, levied on all funds held under our stewardship and taken directly from the investment platform. This brings all relationships into the same fee tier, regardless of capital balances.
Next Steps
The model rebalance will be sent through Transact and will match the existing risk mandate we hold, mirroring the same equity and bond weights. If you agree, please accept the rebalance and we will proceed with implementing the adjustments.
If you would like to revisit your mandate and discuss this directly in advance, please get in touch.
Contact us today or call 0345 200 4041.
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