Our investment philosophy
Our investment philosophy focuses on long-term capital preservation after inflation and costs. This makes it necessary to analyse the key risks, monitor major trends and developments and compile a bundle of measures developed on the basis of such observations to preserve your capital.
Influence of Elementary Risks
Besides risks that might result from political upheaval such as wars, expropriation or national bankruptcy, inflation and deflation in particular are elementary risks whose impact on the value of assets can be devastating.
Influence of Major Economic Developments
In our experience, major, long-term macro-economic developments with considerable influence on the value of assets cannot be ignored. Major issues such as scarce resources, climate change, demographic changes and the growing economic and political influence of emerging economies can have a decisive impact on the long-term development of assets.
Measures to preserve Capital
Past experience has shown that in spite of every in-depth analysis, forecasts always involve some uncertainty which puts the preservation of capital at risk if the assets are not diversified. Therefore, as part of the basic allocation the assets are structured in such a way that minimal portions of the overall assets are able to counter the elementary risks of inflation and deflation. We allocate the remaining portion tactically. As a result, the majority is invested in line with the expected scenario. At the same time, the principle of minimum allocation takes the uncertainty of forecasts into account.
Additionally, a portion of the assets is invested in such a way that it profits from the development of the key megatrends. This is the only way to prevent the capital from slowly depreciating. Additionally, we adhere to the following four basic requirements for long-term capital retention in all market phases: Diversification, low debt, fungibility and a focus on quality.
By building up efficient, highly diversified portfolios, we are able to forego paying ‘insurance premiums’ which would otherwise accrue on a product level as part of hedging instruments. As a result, the performance of our portfolios is better in the long term despite similar volatility.
Debt is limited to around 20% of the total assets. However, the leverage must remain limited on the level of the overall assets, as the assets would otherwise be at risk of being destroyed. For example, we rely on debt in real estate projects in order to optimise the portfolio structure of our client.
We see fungibility as another key aspect of preserving capital: in order to always be able to react appropriately to changes on the capital markets or personal situations, around 50% of the assets should be invested in fungible forms of investment such as highly liquid government bonds and shares with a high market capitalisation.
The preservation of capital also means a high focus on quality: approximately 80% of the investments should be made with a focus on quality, as in times of crisis a lack of quality in shares, real estate and certain bond segments has a negative impact on the goal of preserving capital.
‘Major losses of capital must be consistently avoided. This is the only way to protect long-term value and wealth, preserve assets over generations and ensure that future generations of your family are sufficiently provided for.’
Dr. Christoph Kind
Chief Investment Officer