Investment Matters

Portfolio construction

Portfolio construction

The perfect investment doesn't exist - the one that has a market value at a steep discount to intrinsic value, no downside risk, earnings growth and a strong dividend.  So it is a matter of balancing these criteria at a portfolio level.  Investments are selected in the context of the characteristics of the overall portfolio.

If we consider two cases that are at the extreme ends of our portfolio characteristics: we do not expect strong earnings growth from property investments, such as the 360 Capital Industrial Fund, in the coming 3 years.  It has been trading at a limited discount to intrinsic value (but a discount nevertheless).  It will pay us meaningful distributions over this time frame, though.  By contrast, Ausenco is expected to grow its earnings meaningfully in the coming years, and it is trading at what we consider to be a substantial discount to its intrinsic value.  However, it is not paying a dividend now (but may do in coming years).  Rather than separately looking at each investment, it is what they add up to as a portfolio that matters.

The exception is downside risk - this isn't applied on an average basis, but is a specific consideration for each of our equity investments (as well as other investments you own).