Investment Process – taking full advantage of wealth creation activities and opportunities
Markets are cyclical in nature, so we take an active approach to Asset Allocation and Portfolio Management via analysis, review and rebalancing. By nimbly adjusting portfolios to changing market conditions and client preferences, structures and goals, we proactively manage risk and identify the most suitable investment opportunities. This awareness is an outstanding value creation process in all the asset classes.
Implementation – client needs drive investment instrument selection
We are flexible in the financial instruments utilised to implement a client’s investment strategy. The instrument selection is driven by the client’s portfolio requirements. Typically a combination of direct holdings in Large Cap Equities, Unlisted Property Trusts and Alternatives; utilising external managers for specialised allocations – Early Stage Venture Capital, Domestic & Global Small Cap Equity exposure and Emerging Markets. This may be implemented through managed funds, listed investment companies (LICs) or Exchange Traded funds (ETFs).
Tailored Equity Portfolio
The KPW direct Australian and International equity portfolios are tailored to the individual client risk/return profile, typically consisting of 15-20 companies. We believe our approach on focusing on quality businesses rather than markets, is conservative and repeatable and will deliver superior, long-term outcomes to clients
Contact us to obtain further information about our Direct Australian and International Equity Portfolios and their performances.
Why Direct Large Cap Equities
We believe clients will be rewarded over the long term by having a core direct equity holdings as part of their portfolio construction. This is particularly relevant when considering the large cap allocation in a client’s portfolio.
Flexibility – direct investments allow investors to buy, sell, add or trim to specific investment as needs or opportunities arise, much faster than structures and in smaller or larger units to meet liquidity requirements. It provides client control and management of their financial situation – with respect to franking credits, discounted capital gains and offsetting realised losses and gains.
Risk Management – having direct line of sight of the company you are invested in rather than an opaque structure allows the adviser and investor to assess risk quickly. In times of market volatility, a portfolio risk and return profile can be materially amended to the investment conditions.
Stock Selection Process
The stock selection process is driven by the desire to invest in quality businesses, in good industries, strong management, companies with robust balance sheets at attractive valuations.
We have access to high quality research from a range of providers – domestic and international across all asset classes. This access to research allows us to have a clear understanding of market expectations and where the risks are in company earnings and strategy execution by management.
A high-quality business has an identifiable and understandable ‘moat’ or set of competitive advantages. These competitive strengths can include superior product or service quality; an esteemed brand and reputation; a corporate culture that attracts and retains the best people; scale; distribution strength or proprietary technology.
Valuation method can vary depending on the company industry sector and key attributes. Typically, a starting point based on standard valuation methods such as Discounted Cash Flow (DCF) and Sum of the Parts (SOTP).
Management experience, trustworthiness and competence are key. Management perform critical roles as custodians of the company franchise, culture and capital. We look at the longevity and turnover of key management positions; the track record of clear and transparent communication with the market and ensuring management are driving positive corporate culture.
An anomaly of financial markets and companies is they tend to display momentum, positively and negatively. There are several reasons for this anomaly – but a key one is that humans tend to over extrapolate the current conditions – one year believing the bad times will last forever, and next the bull market will never end!