Investment Philosophy
In our quest to satisfy the wide ranging requirements of different clients, we have constantly refined our investment philosophy. The various bear markets over the last decade have focused our attention greatly on the concept of risk-adjusted returns.
Put simply, it has been our experience that the majority of clients would prefer an investment that offers limited capital loss but with the potential of lesser growth, that an investment that has the potential for greater loss but also greater upside. In other words, we have found that, private clients have a lower tolerance for risk of losses than may be actually expressed. We therefore place heavy emphasis on protection of capital within a clients investment portfolio.
We are also firm believers in diversification by asset class, within asset classes and by currency.
We extend out definition of assets classes to five convenient categories: Cash, Bonds, Property, Equities, Alternative strategies/hedge funds.
Within each of these asset classes, we have worked hard to find funds and specific opportunities which try to extract extra rewards for our clients, without unnecessary increase in risk.
Clearly different profiles are appropriate for different clients. For example, in the case of a retired client with relatively modest means, heavy emphasis on Rand-based assets (cash and bonds) would feature in our recommendations.
On the other hand, a working successful entrepreneur, with a thriving South African business, might expect proportionally greater exposure in Rand-hedge growth type assets (equities, hedge funds and property).
Demand for liquidity should not necessarily be exaggerated. Wealthy clients, who have less need for liquidity, can often tie up monies for longer periods in a given investment opportunity, and generate superior returns.
Finally, tax and liability considerations pertinent to a given client are highly relevant in fashioning asset class mixes and specific choices of investment opportunities.
Investment policy is debated at board level, where in addition to the directors of WellsFaber, we are fortunate to have the input of senior and managing partners of the Cape Town branch of international auditing and accounting firm Mazars.
