LMM Compass Edition 5 / 4th Quarter 2017

Even if an internal control system (ICS) is mandatory for certain institutions, we recommend our clients to keep in mind the essential aspects of an ICS. This is not only the case for institu­tional investors but also for foundations and private individuals.

An internal control system can reduce the risk, the liability and the costs of the asset management. You can read more about it in our recent topic.

Jürg Meier Jürg Meier

Partner, CEO

Markus Häni Markus Häni

Member of the Management Board

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Most of the asset classes could gain in value during the 3rd quarter of 2017. Despite mutual threats between North Korea and the USA, the S&P 500 Index reached all­-time highs. The Euro appreciated 12.1 % year-­to­-date vs. the USD thanks to improved economic confidence in the European economy. The process of building a new coalition in Germany has become quite difficult, never­theless the DAX reached new highs. Increased demand and hurricanes in the USA pushed oil prices up.

The weaker CHF led to currency gains on investments in foreign currencies and therefore CHF-­strategies were benefitting from this effect. The opposite was the case in EUR­strategies, the stronger Euro led to losses on the foreign currency side. All strategies benefitted in the 3rd quarter from continued positive stock market returns and from stable or slightly falling bond yields.

Please note: Performance figures gross (Custody- and management fees not included)

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What is the key to a sustainable excellent performan­ce? This question cannot be answered easily. There are several factors that in combination turn the balan­ce. The appropriate investment strategy, the right portfolio structure and an efficient implementation are such important factors. In addition, an effective control system can make a difference.

However, the latest point is not always on top of the investor’s agenda. Processes in order to protect wealth effectively do not only reduce risk, but also help to improve investment results. It has been shown in a recent study carried out among Swiss pension funds that a sustainable positive correlation exists between returns and risk management1.

Risk cannot be delegated. Only those who know their risks can reduce them. Where are however those typical risks in asset management? The next points are characteristic dangers that need to be avoided:

  • The investment strategy is not in line with the Investor’s
    risk profile.
  • The asset manager does not comply with his guidelines.
  • The costs of the asset management are not in line with the market.
  • The assets are not enough diversified (cluster risks).
  • The investments are not correctly categorised by the custodian (distortion of risk structure).
  • The valuation of assets is wrong resp. not accurate.
  • Counterparties are not reviewed.
  • There is a latent liquidity risk by illiquid assets.
  • Basic decisions (for example the asset manager selec­tion or the definition of the investment strategy) are not understandable due to missing documentation.
  • From the reporting system, the necessary information for an accurate decision base cannot be derived.

Efficient control systems and seasoned experts recog­nise such risks in an early stage and enable the investor to understand them and take the necessary counter measures. In order to keep one eye on all risks a com­prehensive approach is needed.

The table below shows typical processes that, based on our experience, lead to a reduction of risk:

With our Investment Controlling, we professionally cover the above­mentioned necessary processes and contribute to the protection and investment success of your wealth.

1 Source: http://dievolkswirtschaft.ch/de/2017/09/ammann-10-2017

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Our service requires a relationship based on mutual trust with our clients. Our employees are the key to this. We employ currently a staff of 16 employees at locations in Vaduz, Zurich, Dubai and Vienna. In our “LMM Inside” we want therefore introduce to you employees of our teams on a regular basis.

What is your job at LMM and when did you join the company?
I joined LMM five years ago. Since then, my area of responsibility has developed continously. I see myself as an all­rounder who assists and supports the CEO, as well as our executives, in their daily work.

What did you work before?
I am coming from the banking sector and I completed my apprenticeship at the VP Bank. After my apprenti­ceship I worked as an assistant in the private banking at VP Bank.

What do you enjoy most about your job?
We are an excellent team complementing each other ideally. “One for all and all for one” perhaps sums it up best. My work is diversified and challenging and therefore I enjoy it.

What do you do in your free time?
I love to bake and as a balance I do a lot of sport such as Zumba and Step Aerobic.

What is your job at LMM and when did you join the company?
I have been with LMM since 2009 and as the team head I am responsible for looking after private and institutional clients.

Where did you work before?
To a certain extent I was working before on the “other side” – in other words did I work for almost 20 years in the areas of private banking and asset management.

What are you working on currently?
We are continously working on improving our services. Currently I am working with colleagues on the inte­gration of sustainability criterias in the reporting. An exciting field that is getting more and more important for our institutional clients.

Where do you spend your free time?
As a father of two children I enjoy spending time with my family. Sometimes it may be however, a journey with colleagues to the Piedmont region or to the Burgenland. I am particularly intrigued by these two wine regions.

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LMM Investment Controlling Ltd. is an independent provider of Investment Controlling services and represents the interests of private and institutional clients towards banks and asset managers. Apart from the head office in Vaduz, LMM has branches in Zurich, Dubai and Vienna..

Disclaimer: LMM takes the utmost care in compiling the information. We don’t grant any warranty, including liability towards third parties, with respect to the accuracy, relevance and completeness of the information and opinions published in this newsletter.