Asset Allocation – Solidarity

Why we are reluctant to take cash calls at present

We have had a few conversations with partners on why we are reluctant to take a 20% cash call at present despite the current uncertainty to re-enter when prices are more favourable. I thought it may be appropriate to share our thought process with all our partners.

I want to separate the question into 2 parts

a) The cash call on “Asset Allocation” – which is for partners to make

b) The cash call on “portfolio construct”- which is for Solidarity to make

Observations on Asset Allocation

Events of the last month provide significant lessons. We have been introspecting on what we could have done differently – and there will be a time to share that with you.

However, I want to share a few other observations with you today which are topical before the event passes and memories fade.

1. The only way to protect yourself from “tail risks” is through Asset Allocation.

Invest in some Gold in your portfolios

The starting point for Investors must always be Asset Allocation. In some earlier letters, we have written to you recommending you should hold some Gold/Gold Equivalents in one’s portfolio – as Insurance to guard against the “unknown unknowns” of excessive money printing and even as diversification into another Asset Class that is not correlated with Equities.

Is this a good time to add to Equity Allocations ?

Over the past few week, we have been asked by many partners whether “It is a good time give you more money?”

Are you aware of the risk in your Debt Investments?

The money one does not want to risk Capital loss on is typically invested in Debt instruments. However, Debt Mutual funds have schemes that invest across varied risk spectrums.

“I can think. I can wait. I can fast”
Siddhartha, Herman Hesse

The strategic importance of holding cash and equivalents

Solidarity is a multi-family investment office. We are often asked (by clients with high ability and willingness to take risk) why we recommend they should hold at least 10 -15% of their Investible Assets in Bonds/Liquid funds and not be fully invested in Equities; especially if clients don’t need the capital for at least 3 years.

Is This 2008 Once Again?

Global markets have started the year with perhaps the worst performance in over two decades. The sell-off has prompted commentary in the media “hinting of parallels with the 2008 like crisis”

The three questions clients should ask Investment Advisors

Appropriate Asset Allocation is the principal determinant of long term investment returns. We hence inquire about the client’s existing Asset Allocation as a first step in our engagement process.