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The advisory process

Nextam Partners’ advisory process for both private and institutional investors takes place in a number of bespoke steps, each of which can be adapted to the specific needs of the interlocutor. The key feature of our advisory is to offer a highly specialised service built around the needs of each client. The following are the most significant steps in Nextam Partners SIM’s advisory service:

  1. Initial analysis of the current portfolio
  2. Selecting the Asset Allocation Strategy
  3. Selecting each single financial instrument and choosing the asset managers
  4. Monitoring the portfolio and analysing the main macroeconomic variables
  5. Periodical reporting and risk management activities
  6. Support in handling relations with counterparties

1. Initial analysis of the current portfolio

This initial stage consists in an in-depth analysis of the overall asset portfolio as it is very often divided among a number of brokers and, more specifically, into single investments based on the yield, implicit and explicit costs and the real ability to liquidate them. So, basically, this stage consists in assessing the quality of the financial assets and getting an overall picture of the assets.

2. Selecting the Asset Allocation Strategy

The most delicate step in the whole process is to establish what a client’s most efficient risk profile is, based on the set financial targets, because it consists in very carefully assessing whether the various assets in the investment portfolio match the client’s targets. As we all know, the ability to maintain a given level of volatility compared with reaching a realistic goal is, above all, based on the chosen time horizon. In order to select the most suitable Asset Allocation Strategy for the risk/yield profile the client has chosen, we first use a proprietary asset allocation and risk measurement model to carry out efficient portfolio management simulations for the kinds of returns the client is looking for. The main purpose of the model is to diversity the various asset classes and to stabilise current yields, depending on the client’s risk profile, even when markets are particularly volatile by closely monitoring and controlling the risk. One of the main features that sets our proprietary model apart is given by the rigorous process to define the expected yields that lie at the base of the calculation for those expectations; this is achieved by combining both quantitative input, which has been re-processed using multi-factor metrics, and qualitative research results that are not easily accessible. The goal of the model is to keep the chosen investment profile within a tight expectation range over time, in so doing limiting fluctuations and overcoming the limits that exist in traditional models. Indeed, our model provides that the risk preferences are not static (namely above or below a certain yield target) like in the Markowitz case, but dynamic, namely that the investor is more adverse to risk below the yield target and less adverse to risk above this threshold. These innovative features as a whole are what distinguish our asset allocation model, i.e. stabilisation of yields over time and containment of fluctuations along the entire time horizon, and to allow a series of practical applications when analysing a widely diversified portfolio that can be adapted to the most sophisticated of needs.

3. Selecting each single financial instrument and choosing the asset managers

One of Nextam Partners SIM’s strengths lies in being able to select the right financial instrument; this is possible thanks to the SIM’s independence and focus on pure advisory. We put every product the financial community proposes under the critical eye of someone whose only goal is to work in the client’s interest and not to sell proprietary products. In seeking the most efficient investment in order to concretely convert the advised asset allocation into an “implemented” portfolio, Nextam Partners SIM only proposes financial instruments that are highly transparent but not complicated (the letter being useful only for the person that creates them) and chooses the asset managers on quantitative and qualitative grounds, and in the knowledge that it is completely independent. Each investment is assessed with a view to being able to offer a stable return in the long term. The way the Sim helps to choose which asset manager to use is based on the interlocutor’s particular laws and regulations (e.g. pension funds’ selection procedures), in respect of the principle according to which the performance of a fund or assignment is the outcome of the asset manager’s experience, culture and rigorous operating method. Given the lack of legal/contractual restrictions, we can suggest asset managers that are often not known in Italy; we seek top-notch international asset managers through products that are often subject to soft closing and give preference to independent boutiques that share our values: professional skills, integrity and independence.

4. Monitoring the portfolio and analysing the main macroeconomic variables

Monitoring the portfolio is a continuous process: the value of each investment is updated every day so that we can provide an accurate valuation of any asset in the portfolio at any time. Furthermore, we analyse the trend of the client’s portfolio on the set expiry date with the benchmark financial market cycles so that we can see in good time every possible performance anomaly that may have been repeated over a number of cycles. At a macroeconomic level, we analyse the main variables we believe can impact the client’s position. We examine the main data that financial markets are sensitive to and based on the results we analyse the investments that make up the client’s portfolio. We carry out a critical comparison with like and alternative investments and with market indices and benchmarks. In order to understand the macroeconomic outlook we use estimates and valuations on the main macroeconomic trends in each country: GDP, inflation, decisions of central banks, financial flows into global investment funds and invertors’ aversion to risk. Since we are independent we have access to the research produced by the most important European, US and Asian houses and we can choose the ones we believe are the best for our purposes. In order to understand global market risks, we use some innovative stress testing methods that allow us to assess the portfolio risks not only during a normal market cycle but also and above all when there is strong stress, namely the most significant phases in which to evaluate how robust a portfolio is.

5. Periodical reporting and risk management activities

Over the years Nextam Partners has developed strong calculation and reporting skills that can be tailored to clients’ re-processing needs, whether they be private or institutional clients. We prepare a report on the state of the consolidated portfolio every month and, if required, even more often and in any case as and when a specific need may arise. Our reports are clear and transparent, a factor that is not easily found on the market. The experience we have gained over the years has proved that our portfolio analysis is a very useful tool for accounting purposes (our clients often use the data we provide to draft their balance sheets), for monitoring and control purposes and for use by the executive decisional bodies. Furthermore, Nextam Partners SIM can also provide extremely in-depth and flexible bespoke output plans (data on single accounting transactions, on the valuation of the portfolio, reclassified data based on the size of analyses, the overall performance or the contribution margin of each single asset or asset class).

6. Support in handling relations with counterparties

One determining factor in the relationship with clients (depending on the kind of advisory agreement chosen) is, in practice, our help in handling the relations with the various counterparties and financial brokers and our support in every sale and purchase transaction. An investment and divestment schedule is prepared based on a client’s liquidity needs. We guarantee good flexibility when scheduling the periodical meetings with our clients to support investment decisions, both how often the meetings are held and the request for in-depth information on specific matters.

Examples of our reports: transparency and in-depth analyses grafici