LONDON, 31 May 2004 — Let us first agree and accept the premise that the ability to identify changes in the investment environment - and act on it - is one of the keys to successful investing.

These changes are especially critical to recognize as they as they drive the markets for long periods and provide exceptional returns.

Dynamic trends in the economy and industry which affect investment portfolios are what triggers managers to constantly alter their investment strategies. Consequently, they should be ready and able to identify, devise and monitor these changes. This, in itself, is an art necessitating sharp focus and consistent appraisals.

There are two approaches to consider: First, a strategic review which would have a long-term broad perspective and, second, a tactical analysis which would drive the market in the short-to-medium term. Both approaches are highly opportunistic and should be well focused.

The advantages, as we will see later, to these approaches are indeed substantial, as they tend to be fully flexible, action-oriented, timely and easily understood. We contend that the identification of, and timely investment in, the market can produce favorable results.

However, the most important aspect of developing a meaningful investment strategy lies in understanding the changes in the marketplace and gaining conviction about the possible outcomes, rather than in the detailed and exhaustive analysis of the particular investment. Very few investment managers, or "strategists," can predict accurately with any consistency, certain important variables that would affect the investors' portfolios.

Therefore, investment managers should always be prepared to respond to drastic and sudden changes in the markets and, in the process, devise strategies based on their experiences and the lessons they learned from those experiences. There is no magic yardstick to measure market trends, but strategists - in all fields - operate with a generalist's perspective, a high degree of flexibility, a tolerance for uncertainty, and a willingness to apply all tools.

The combination will ultimately produce a synthesis of intuitive and creative thinking about investment issues balanced with logical and analytical inputs.

The investment strategist uses these approaches mainly to satisfy the overwhelming need to be market oriented, to be timely and, above all, to outperform. This monitoring is constant and not periodic. The art the strategic investment requires the strategist to anticipate, indeed to welcome, changes even if it means moving rapidly from one approach to another. Therefore, monitoring the progress in the portfolio is ultimately crucial to investment success. In order to meet the challenges in the marketplace, the approach selected by the investment strategist depends to a large extent on change, and on capturing and exploiting the power of change to the fullest. This cannot be accomplished without the need of insightful research necessary to provide a balance to the process.

Consequently, and in this context, the need for an independent and flexible strategy is increasingly critical.

In today's age of knowledge, information increasingly becomes an asset. The need to leverage, share market, and disseminate this information becomes critical in maintaining an edge in a globally competitive marketplace.

The successful strategist is one who moves from establishing the critical investment issues, through monitoring the consensus of finding the major differences, through identifying the market anomalies and the various investment scenarios, and through selecting the best issues to exploit the predetermined approach.

An important part of the investor's role is to determine, and reorganize, the catalysts that could best exploit the power of finding the right investment strategy. His confidence in the prescribed approach to investment should be based on successful experience, and on testing many years of performance money management. In essence, investor's awareness gives way to increasing interest in the management of his investments.

This demonstrates that it is more critical to go beyond the fundamental, technical, and quantitative tools, and to find, and invest in, the focused themes that are driving the market than it is to painstakingly discover the ideal investment. The experienced investor seeks to participate in a number of themes in varying stages of development.

For those investors with the vision and conviction to understand the strategy and invest accordingly, the returns can be exceptional.

Mastering the art of strategic investment is critical, in my view, to long-term investment success. There is a need for a creative and disciplined method of identifying changes and of gaining the necessary conviction to invest through the most promising approaches.

Finally, the dynamic investment strategist should constantly recognize the essential need to remain on top of all developments in the marketplace, and to use creative and analytical skills prudently. This non-scientific technique to accurately measure investment matters will make the approach, in all probability, the domain of an artist, rather than the scientist.

( Habib F. Faris is vice president at Clariden Bank, London)

(The information contained herein is for information only and should not be construed as an offer or a solicitation to purchase, subscribe, sell or redeem any investments. While Clariden Bank uses reasonable efforts to obtain information from sources, which it believes to be reliable, Clariden Bank makes no representation or warranty as to the accuracy, reliability, or completeness of the information.)