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Digital Subscriptions > Portfolio Adviser > Portfolio Adviser April 2017 > GAINING MOMENTUM

GAINING MOMENTUM

Parmenion’s valuation and momentum ‘matrix’ provides a robust structure to aid its allocation process. CIO Simon Brett describes the formula

Asset allocator Parmenion Investment Management

With so many competing approaches to fund and asset selection, it can be comforting for investors to meet firms with strict processes in place.

Parmenion Investment Management is one of these. Its investment selection is set out via an equally weighted valuation and momentum ‘matrix’ and then rated in 10 separate risk grades.

Starting with valuation, chief investment officer Simon Brett outlines a primary objective of comparing the relative attractiveness of each asset class. For example, do equities look attractive compared with bonds? Or, within the bond subset are corporate bonds more attractive than gilts?

“When we are assessing equity markets, we are looking at the earnings yield of that market, which is the reciprocal of the price/ earnings ratio. The earnings yield is like putting an interest rate on that particular market,” he says.

“For bonds, it is much easier as we just compare the yields on bonds versus the various equity markets. Within those markets, you can rank the attractiveness on valuation grounds.

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About Portfolio Adviser

In light of the Standard Life/Aberdeen deal, we ask who is the next asset manager in line for M&A, and what this means for investors. We also consider why critics continue to take aim at absolute return, and discuss the best way to invest in property, trusts or open-ended funds.
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