Our sole concern is the Preservation of Capital. Always.
When markets rise, everyone’s wealth increases. The upside will always take care of itself. We concern ourselves with preserving capital on the downside, when markets fall. The investment community often uses phrases such as “risk management” and “potential upside”. In reality, many investors’ portfolios will benefit from neither of these.
Whilst financial jargon always sounds impressive, the implementation of a multitude of strategies that desire to both manage risk and create performance returns is, of course, difficult for even seasoned investment professionals to implement in practice across varied market conditions and time horizons. They are often hampered by conflicts of interest, a sales-push mentality and the lure of performance fees.
Einstein is rumoured to have once said that “the greatest invention of the 19th century was compound interest”. In casual passing, many investment professionals will say that 10% per annum is “easily achievable”. Perhaps – for any one given year – but ask them to return 10% per annum, every year, year in, year out and their response will be that it is “highly unlikely in practice because markets always correct” or that “it is nearly unachievable”. You can then worry about inflation (and tax) eroding your capital base further each year. Making a “mere” 10% every year will double your capital base every 7 years (every 7.27 years to be precise). Generating returns annually whilst not eroding your capital base is not as simple as merely diversifying a portfolio. It requires both tactical and strategic asset allocation across every asset class.
It requires downside protection. Without downside protection, the ability to stop the capital base being eroded away (at worst, a return of zero for the year) or the ability to generate positive returns in a falling market, is an intensely daunting proposition. Yet, Yale can do it. Harvard does it. The Ontario Teachers Pension Plan has been doing it for 24 years. All these globally invested, multiple asset class endowment funds have averaged more than 10% per annum across 20 years. But it is not a domain exclusive to the likes of $100 Billion+ endowment funds. It is “simply” a matter of a global portfolio construction and strategic asset allocation. Global asset allocation will result in smoother positive returns, lower risk and lower volatility.
Arminius Capital Advisory provides investment solutions to generate portfolio performance across a range of asset classes whilst providing downside protection to the seemingly increasing frequency of inevitable market corrections.
The wholesale Arminius Capital ALPS Fund returned +8.47% vs ASX200 +7.05% for Calendar Year 2017