What Assets Do You Use?

Australian Shares

Identifying these companies is a result of both quantitative and qualitative research.

Our quantitative screens show us the companies that are both currently and historically financially strong, with a relatively high return on equity, a history and an outlook of sustainable earnings, and are generally above $5 billion in market capitalization.

Our qualitative research includes analysis of brand strength, management capabilities, and how the current and projected macroeconomic environment may affect the business.

To enter a share holding, we follow what is known as a “value investor” philosophy. That is, to only invest in the highest quality assets with a preference to buy them at a price that is close to or less than they are worth (known as their ‘intrinsic value’ or ‘fair value’).

What if the prices of our preferred shares are well above the assessed value?

A key to investment selection is not paying too much for an asset.

In the scenario of overpriced shares, we have a few options to temporarily substitute the share holding allocation with one of the following:

1.     Cash:

Leave that amount of money in cash and earn cash rates until the stock gets back down to the buy price. This requires patience, as stocks can remain overpriced for extended periods of time.

2.     Hybrids:

Hybrids (or convertible preference shares) enables you to receive a higher income return than cash (in many cases with franking credits) however with little movement in the asset price assuming the market is not under significant stress.

3.     Market Exposure:

If we are still bullish on the share market overall, we may simply increase the allocation to a share fund or an exchange traded fund (ETF) to gain broad market exposure.

When the relevant share price gets back in our buy range, then we would switch out of these substitutes and into the stock holding.

Listed Property Trusts

Our allocations to property tend to be focused predominantly on pure property trusts, with mostly (or only) Australian exposure. That is, those deriving stable income predominantly from inflation linked rents, with only a relatively minor (or no) exposure to higher risk development activities.

We are also looking for those with low levels of debt, and are trading below, at, or near their net tangible assets value (NTA). This provides a more conservative aspect to our property investments and similar to equities helps to minimize the risk of paying too much for the asset.

Hybrids and Subordinated Notes

ASX listed hybrids and subordinated notes are floating rate securities that provide regular interest payments.  

They pay a quarterly interest rate at significant margins above the 90 day bank bill rate, and have a maturity date.

In terms of a company wind up, hybrids rank ahead of equities, whilst subordinated notes rank ahead of equity and hybrids. Both rank below senior creditors and bondholders. This is why they pay a higher interest rate than senior bonds.

To ensure the absolute risk of permanent capital loss is minimized, we only invest in notes issued by the top tier Australian banks, and financially healthy blue chip corporate issuers (such as Woolworths), and only in times when the market is not under significant stress.

Bonds &  Fixed Income Funds

To access the full breadth of fixed income markets, we may use direct bonds and/or a mix of highly rated specialist fixed interest fund managers as most investors cannot access wholesale bond markets directly with sufficient diversification.

If using a bond fund, we prefer to use active fund managers in this asset class that are highly rated by the independent research houses, and who posses specific skills in extracting above average net returns whilst maintaining a capital preservation objective.

This active focus on providing absolute positive returns is very important to minimize the effect of future interest rate moves that may be detrimental to the capital value of the fund.  Investing in direct fixed rate bonds will be dependant on where we are in the interest rate cycle.

Term Deposits

Term deposits make up an important part of your portfolio and are the foundation of your secure assets. Term deposits provide a known return for a fixed term.

We generally use 6 month terms to provide good rates and maintaining flexibility by not locking into too long a term if the interest rate environment changes significantly, however it does depend on the prevailing environment.

We only use term deposits that are covered by the Government guarantee of up to $250,000 per entity, per institution.


Your cash account acts as the hub of your portfolio.

It will receive all interest and dividends for the portfolio, and will pay all expenses and pension payments. Cash accounts are Government guaranteed up to $250,000 per entity, per institution.

Note we may also use a high interest Cash ETF in times where we have excess cash in your account due to risk concerns.