Our Investment philosophy.
Our investment solution is designed around the lifestyle objectives of clients. We strongly believe that a client must know the following.
- The risk the client must take to reach his/her goal(how much risk to achieve his objective)
- The client capacity to take a risk (can he afford to lose money)
- The client attitude to risk. (how will he react if the market drop 20%)
- How much time do we have to reach our goals? (Long-term investment)
Our objective is to achieve predefined, inflation-beating investment returns consistently over predetermined minimum terms. We believe that a client’s current and future cash flow requirements will determine how the investment solution should be structured. As a result of this, every client’s investment solution will be unique to him/her.
Investors have two primary investment objectives :
- Capital growth.
We do not believe that returns should be benchmarked against an index or be positioned relative to other funds.
However, the minimum return required over the medium to long term must be to outperform inflation net of tax and net of cost. It is for this reason that our investment solutions are managed in accordance with targeted benchmarks. (Inflation plus 3% over any 3-year rolling period.)
We believe that, given the volatility of markets, investments cannot be satisfactorily managed if the investment term is shorter than five years. Funds required over periods that are shorter than this should ideally be invested in the money market.
Risk has many definitions. Too often investors fall prey to their own fears and lack of knowledge. We do not define risk in terms of short-term volatility which is driven by people’s emotions but rather in terms of the following two principles.
(The most dangerous person for an investor is the man in the mirror)
- The risk is the probability of losing capital value over a client’s selected investment term.
Depending on the client’s investment term, certain asset classes may be included which could be more volatile in the short term, but which are essential if long-term objectives are to be achieved. Our investment strategy is designed to limit the probability of capital depreciation over the predetermined investment term.
- The risk is not achieving an appropriate real rate of return and could mean having to adjust one’s standard of living.
Achieving a positive rate of return while not simultaneously keeping pace with inflation, is often lost sight of as a risk factor. It results in reducing the purchasing power of one’s capital.
We believe that risk is best managed in the following three ways:
- Time diversification
- Asset class diversification(Growth Assets)
- Fund manager diversification
We believe in long-term investment!
Strategic Asset Allocation
International research has found that the decision regarding which asset classes to opt for is crucial to acceptable long-term investment returns.
Tactical asset allocation
Although strategic asset allocation forms the basis of our investment style, we do expect the underlying asset managers to change their asset allocation from time to time when certain asset classes offer better value at lower risk.
Our investment philosophy is based on the belief that investors can expect historical long-term real rates of return. This means that although an asset class may outperform (or underperform) over the short term, the returns over the long term will revert back to the average. Historically, cash has delivered returns over inflation of +0.5% to 1%; bonds have delivered +3% to 4%; property has delivered +5% to 6% and equities have delivered +7% to 8% over the long term.
Although it cannot be denied that equities produce the best long-term returns, most clients shy away from the volatility that goes with this asset class. There are, however, mix-and-match strategies that can boost clients returns while also reducing risk. We have ways of optimizing these strategies for the benefit of our clients.
Based on qualified assumptions, each client’s real rate of return will depend on the precise and appropriate asset allocation in terms of his/her individual investment plan. This is the return required to achieve the client’s long-term financial objectives and is, once again, client-specific as illustrated by the cash-flow analysis. Our client-specific regular reporting is aligned with this internal target return. We are convinced that one cannot manage what cannot be measured. Therefore our client-specific quarterly reports continuously monitor to what extent the required return as expressed in the financial plan is being achieved. Be aware off short term result .
An investment operation is one which, upon thorough analysis, promises safety of principle and an adequate return. Benjamin Graham
If the client’s objectives are realistic, our investment strategy offers a tailor-made solution.