Are your Investments Performing?
We are portfolio managers, not stock sales people. We seek to allocate your investments globally, in geographies and industries that are growing and defensive. In situations that don’t risk loss of your capital and in instruments that enable you to have liquidity when you need it.
Understanding the families reason for investing
Each family and their family members are unique, their needs and objectives are unique, as are their interests and comfort with different investment classes. Before we can recommend an investment strategy that matches your needs we must understand fully your personal circumstances, experience and interests.
Reasons to invest may vary, an example of common reasons include the below:
Investing in the right structures
Selecting the right investment is important, however investing using the right structures is critical. Within Australia you may invest in your own name, through a company, trust or self managed super fund.
- Each has a different tax treatment around long term capital gains (and losses) and short term trading gains (and losses).
- Each has different direct and indirect tax implications based on the asset class being purchased. For example real estate and securities may have different direct and indirect taxes based on the holding entity being used.
- Each has different asset protection capabilities that should be considered especially in the case of private equity investments where as a vendor of an asset you may need to provider warranties that you can’t limit through insurance.
Cashel House is a tax and capital protection aware investment manager. Net after tax retained gains are more important than headline gross returns.
Documenting the investment strategy
As part of our investment mandate we will document your reason for investments and objectives. We will do this via way of a Statement of Advice and update it regularly through a Record of Advice.
In our annual review as required under the Future of Financial Advice (FOFA) legislation we will review our performance compared to the investment mandate and vary this as needed in order to better meet your investment objectives.
Setting liquidity thresholds
When we invest we are mindful of the liquidity profile of each client.
Liquidity at the portfolio level needs to be mindful of the following:
- Investing in a long term growth opportunity using short term cash reserves can equally cause the investment to fail, just as much as poor management or poor business practices does within the investment itself.
- When we construct your asset allocation we must be mindful of what liquidity your lifestyle needs in the next 6 to 12 months, and what liquidity you may need should the unexpected occur (and you don’t have appropriate insurances to deal with it).
Liquidity within the portfolio needs to also be considered:
- For example we consider the risk of not being able to capture a paper profit. If there is no ability to sell or the position is too large and the trading volumes too low this can lead to a gain not being captured. As such investment position sizing is very important.
Dynamic asset class allocation through changing cycles
With a global custody platform we are not limited in the asset classes or investments we can make. In the same vein we do not create generic investment models that are only updated annually, or are inflexible leading to unnecessary transaction costs when money is contributed or withdrawn from a portfolio.
As a family office we invest across all asset classes. A typical portfolio may look like the following:
Investment selection and sizing within asset class
Within each asset class we strive to select the best opportunities based on a number of metrics, these include (but are not limited to):
- Investing with strong management (and investment managers) that we have known for a long time, and whose actions are predictable
- Understandable business models which create tangible measurable value
- Capital light and high cash conversion
- Sustainable competitive advantage
- Have operational leverage that can be expanded through capital and marketing investment
- Attractive stock valuations metrics
- Into securities that real. No synthetics, repackaged or derivatives that have unnecessary costs or legal risks.
These screens means that we invest through the following:
- internally managed separately managed accounts, and
- external specialist investment managers, and
- direct public and private equity holdings that we would deem to be special situations.
Examples of investment managers that we use include the following:
Ongoing Active Capital Management
Whether you are a Family Office or a Superannuation client (or both) your Cashel House Financial Planner will work with our portfolio managers to maintain daily Capital Management, Asset Allocation and Security Selection within you individual portfolio. These includes reviewing if your capital should be invested or not, what weightings you have per asset class and what investments sit within each asset class.
Both asset allocation and security selection of very important, but it should not be comprised by the larger picture of capital allocation. Capital allocation is the big picture management of your investments in riskless or risky investments, in other words you investment in government guarantees cash deposits, or investments that poss some level of growth and capital loss. Cashel House is forever focused on managing capital by way of withdrawing capital in periods of valuation and direction uncertainty, and applying it in times of opportunity and trend based confidence. Our objective in doing this, is to protect capital ahead of downturns and to grow capital in times of market expansion.
This is best illustrated via the below: