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Insight sets floor with its Stop Think system

Extreme market conditions have led Insight Investment’s multi-asset team to establish Stop Think, an automatic review system for investments which fall or rise beyond expectations.

It works by setting a price floor for each holding in its diversified target return, diversified high income and diversified dynamic return funds.

If this floor is hit, Stop Think will be triggered and the holding will flash up in red on the team’s computer screens.

The team then has to decide whether to keep the holding or sell it. If they keep it, another floor is set and the position will be halved if this second floor is hit.

A final floor is then established and the investment will be sold if it hits this floor.

Reviews are also triggered if investments perform well and hit a target price sooner than Insight expected. In this situation, the team will decide whether to hold the investment or take a profit and reinvest the proceeds elsewhere.

Head of investment selection Steve Waddington says that so far, five investments have hit the floor and two of these were sold. He says: “One was a fund which changed in price and we could not get a satisfactory reason from the fund manager as to why we should stay invested.

“That fund closed shortly afterwards so other investors were effectively locked in for another three months.

“We introduced Stop Think because we felt we needed to have a formal review to protect on the downside in extreme markets. These changes should not impact when markets are performing well. It may be that they do not get triggered for years to come but we still want them to be there.”

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