‘Simplicity is the ultimate sophistication’ is motto of Engage Financial Services director Sam Sloma when it comes to investment.
Around 90% of his clients are top level sportspeople and successful entrepreneurs in the accumulation phase. Sloma created a straightforward low-cost proposition to suit their long investment horizons.
The investment portfolios of London-based Engage all comprise six funds from Vanguard and Dimensional, in varying proportions. Allocations are weighted in line with client circumstances and attitude to risk.
The firm, which recently celebrated its first anniversary, currently manages 40 client families, with an average age of 38 for the main earner. The main earners’ average annual income is £450,000; their average investable assets are £900,000; and the average net worth is £4 million.
‘Most of our clients are in the accumulation phase, so they should mainly be in equities,’ he said. ‘They should also have low costs, as extra costs added in over the long term can significantly reduce investment returns. I wanted to blend those two ideas into an investment proposition.’
Sloma initially considered just running Vanguard LifeStrategy funds, but wanted something more sophisticated. So he attended a two-day course with Dimensional, and said he is particularly drawn to its ‘evidence-based investing backed up by data’.
He also likes the back-office systems and other services that accompany Dimensional products. These help streamline other business processes.
The firm meets quarterly with two advisers and Abraham Okusanya, director of FinalytiQ, to review its proposition. Around 95% of assets are in passive or smart beta funds, but Sloma does not view ‘active versus passive’ as a significant debate.
‘I see it in terms of high cost versus low cost,’ he said. ‘Active and passive both have their merits. But the market will do what the market will do over a long period of time, and we want to keep costs under control.’
Regarding equities, Engage uses Dimensional Global Targeted Value. This constitutes 17% of its Engage Portfolio 50, which is split half and half between bonds and equities.
This Dimensional fund has returned 76.2% in five years, lower than the 83.2% from the MSCI World Small Value benchmark. But it has a Citywire ranking of 99 out of 449 comparable global equity funds for the same period. Of the remaining 33% equity allocation, 25.5% is in the Vanguard FTSE Global All Cap Index and 7.5% in the Vanguard emerging market stock index.
The bond allocation is split evenly (16.7% per fund) across three funds. These are Dimensional Global Short Dated Bond, Dimensional Sterling Inflation Linked Intermediate Duration Fixed Income and Vanguard Global Bond Index.
‘Dimensional is a blend of active and passive,’ Sloma said. ‘We overlay its investment philosophy and value tilt with Vanguard’s passive approach.’
The firm has received few requests for ethical investments, but they are on Sloma’s radar. And Dimensional and Vanguard offer socially responsible investing (SRI) funds.
‘We want to be a socially responsible company and I’m happy to utilise those funds,’ said the director. ‘But I don’t know enough about them to advise in that space. So, if I have a client who’s set on that approach, I would seek opinions and give my views after having done more research.’
Engage does not charge on assets. For Sloma, this offers a key advantage to clients. ‘We have the flexibility to go out and find what we think are best in breed as and when we need to,’ he said.