Well established liquid securities form the heart of portfolios based on long-term profitability and deliver investors an acceptable return. If properly structured, they also offer the added bonus of being able to be converted into cash quickly
Although historically bonds have offered a lower return than other asset classes, it pays off to include them in a portfolio as they offer protection against the consequences of crises in the financial market or economic deflation. However, only bonds with superior quality and a long term maturity show good performance in times of financial stress. Hence these investments can be treated like an insurance premium offering the portfolio protection in extreme situations
The more research analysts focus on a stock market the more information brokers are able to make available to their clients, and as a result the market will be more efficient with its trade activities. On the flip side it is all the more difficult to find the hidden gems. That is why on the whole, the performance of portfolio managers is lower than the respective index once the costs of the portfolio managers is taken into consideration. However, in our experience it is possible to find pro-active management who have had market beating returns. Hence we apply an active approach when investing in non blue chip stocks and emerging markets and concentrate on businesses which satisfy our fundamental benchmarks and risk criteria
We favour businesses with strong growth and expanding margins, a disciplined investment policy and returns which are greater than capital expenditure. We are looking for shares that are trading below their underlying value and which compared with their competitors are more favourably valued. Although macroeconomic considerations have entered our sector allocation, we still expect the biggest risk/return contribution to come from our choices of individual shares
