Investment Strategies

UK Private Bank Launches Cash Alternative Service

Wendy Spires, Assistant Editor, 7 April 2009


UK private bank Brown Shipley has launched an actively managed discretionary investment service aimed at investors looking for an alternative to large cash holdings amid near-zero interest rates.

Brown Shipley’s Cash Alternative Service, which is open to investors with cash balances over $200,000, has a target gross yield in excess of 3 per cent.

“With interest rates at historic low levels, it has become increasingly difficult for investors to obtain an income from their investments without taking excessive risk. In particular we have identified that a number of professional intermediaries will be holding large sums of client monies in cash and may find our new service interesting,” said Peter Botham, Brown Shipley's chief investment officer.

Not only are interest rates near zero, but as Mr Botham points out, investors are increasingly aware of the risks attached to cash holdings.

“Even though one is tempted to suggest that cash is the safest investment of all in the current environment, the near collapse of many of the world's leading banks, and the difficulty that some investors have experienced in being able to withdraw their savings from leading financial institutions has led us to seek a strategy which could address these difficulties,” he said.

As risk is now top of many clients’ concerns, the investment strategy for the service focuses on a core group of assets which includes government bonds (both UK and overseas), corporate bonds, income-yielding UK equities and cash.

Brown Shipley's asset allocation on a model portfolio at 24 March 2009 would give a gross yield of 4 per cent, based on the proposed investments on its current approved holdings list. The bank emphasises however that the service is bespoke and that asset allocation can be adapted to suit the individual client’s needs.

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