Our Investment Philosophy

How we work

Deep consideration goes into researching, analysing, documenting, implementing and reviewing investment capital. Managing client wealth is a privilege and honoured responsibility. As a result, our investment service is conducted in a manner that matches its importance.

Portfolio Construction

Portfolio construction is a necessary part of ensuring you achieve your financial objectives with increased certainty. Risk & reward attributes of every investment exposure are analysed to ensure optimal outcomes and then analysed as a collective before recommendations are made and portfolios implemented.

Portfolio variables such as yield, tax credits, currency, sector weightings, regional weightings, costs, valuations, historical movements, and economic forecasts all go into determining the make-up of a prudent investment portfolio.

Our Investment committee meets regularly with a panel of external advisors to discuss and consider any potential changes required. This could include a reweighting of assets and, sometimes, a change in direction dependent on market conditions. Our regular review process ensures your portfolio remains aligned with our considered model portfolio.

Exchange Traded Funds

We use Exchange Traded Funds (ETF’s) as a means of gaining access to the right asset classes, markets, regions, sectors and stocks, to provide a risk reduced growth allocation. Where research permits, we also consider overlaying these core exposures with individual company or security allocations, to provide additional return or diversification.

Risk reduction is paramount to achieving increased levels of outcome certainty and Exchange Traded Funds help manage and achieve this. A strong level of diversification through ETF’s reduces overall investment risk and increased certainty of return.

We use ETF’s to take a top-down approach to investing, focusing on the big-picture, to simplify portfolios, improve diversification, minimise volatility and ultimately increase your chances of meeting desired or stated financial objectives.

Perhaps most importantly of all, we recommend the use of specific ETF's becuase they are true to badge. Naming protocols for many managed funds can be quite nebulous. Names including "Dividend Imputation" imply dividends with strong tax credits. The opposite is often the case as a result of active trading. Union (Industry) funds are well known for underplaying the amount of risk in a fund. As an example, a "Balanced" Fund would imply a 50/50 spread between income and growth assets. This is often not the case with many "Balanced" Funds holding upwards of 65 - 70% in growth assets (Equities, Property and Unlisted assets)

Risk Profiling

Risk profiling and questioning is undertaken to assess client comfort and suitability to portfolio risk-taking and allocations’ however, investment time frames, the economic cycle, and the environment also play a role in determining the right portfolio for clients at any given stage in their lives.

The expected returns of investments are weighed against their specific risks, to decide whether they are included in client recommended portfolios. From time to time, there are unforeseen events out of our control that influence price valuations beyond our control (for example, geopolitical issues, unexpected monetary/fiscal policies from governments, poor management/operational decisions), and it is these unpredictable risks that are the reason why shares or growth assets, should provide a higher return on investment (compensating you for additional risk taken on).

Investment markets aren’t always rational. Investments move up or down on sentiment (optimism and pessimism) beyond their fundamental attributes. Identifying times of overvaluation or undervaluation allows us to re-weight your investments to exploit and profit from such movements.

Cycles can take some time to play out, and not always in a straight line. The result is there will be periods when patience is needed, and our job is to guide you through the cycles, instilling patience when required, educating you over the journey, and sometimes making you think and act contrary to public opinion. The media has a tendency to hype up/down the facts, and so not being emotional with your investment implementation will be a valuable trait over time.

Our current thinking on investment opportunities

  • An increased bias to international markets – primarily driven by currency gain expectations, but also influenced by regional/sector/shareholding diversification.

  • A reduced concentration to Australian banks – as a result of government regulation changes reducing the profitability of ASX listed banks.

  • A reduced bias to US shares – as a result of an extended period of out performance.

  • Higher weighting to smaller companies – after years of under performance and neglect.

  • Increased allocations to Asia, Japan, Europe – offering (relative) value.

  • An avoidance of listed or unlisted property – As years of cheap debt have inflated prices in this asset class, compounded by most households owning and having residential property as their biggest investment.

  • Avoiding government debt – which devalues in price when long-term bond yields rise. Given these yields are trading at decade lows, there seems to be more downside than upside.

  • A preference for term deposit over cash – for excess liquidity or capital security. Yield’s on term deposits can provide up to 1% additional annual income return (with the only compromise being accessibility).

  • Use of hybrid securities (floating rate convertible securities) to provide a calculated risk-return outcome, that delivers strong (equity-like) yields, with less pricing variation than shares. Their use allows reduced share & term deposit allocations, with arguably a more consistent overall performance (and more certain outcome), compatible with what we try to achieve for clients.