Tideway’s Horizon approach allocates capital based on the time horizon, risk appetite and use of funds. Because different assets have different return and risk characteristics it is important to match investments with the expected holding period.
Money earmarked for use in the next five years is allocated to Horizon One assets which are stable, secure, low volatility investments such as short dated corporate bonds and cash. Horizon One assets are selected to target real returns of 2% p.a.
Horizon Two capital is invested for five to ten years across a selection of Absolute Return Funds and bonds (including hybrid capital). Horizon Two assets aim to deliver real returns of 3-5 % p.a.
Assets with the highest volatility and long term expected return are allocated to Horizon Three. Horizon three assets are selected on the basis of being held for at least ten years and include single name equities, long only equity funds and long dated corporate bonds (including hybrid capital) Horizon Three assets are chosen to deliver real returns of 4-6% p.a.
Up to 5 years
|Liquid funds required over the next 5 years
Minimal risk of loss to capital
Target Real Return of 1-2% p.a.
Short dated bonds
|Lowest return and lowest volatility
Clear visibility on return of capital
Liquid, can raise cash instantly
5 to 10 years
|Support income and other withdrawals over 5-10 years
Maintain and increase capital value in real terms
Target Real Return of 3-5% p.a.
|Medium term bonds
Absolute Return funds
Target Return Funds
|Taking some risk in order to generate medium real returns
Allow for some higher volatility
Focus on strategies with downside limits
Over 10 years
|Funds with no call on capital for at least 10 years
Volatility tolerated in exchange for higher long term returns
Target Real Return of 4-6% p.a.
|Long dated bonds
Long only equity funds
|Least constrained portfolio
Investing for the long term with a view to generating high positive real returns
Can withstand most volatility