Affluence Investment Fund

Affluence Fund Portfolio – 30 June 2016

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Affluence aims to invest only with the top 1% of fund managers through the Affluence Fund portfolio. We cast the net very wide. We look across both listed and unlisted funds, those available to everybody and those available only to a select few. Our process reduces over 15,000 investment opportunities available in Australia to a shortlist of less than 200. From this, we construct a portfolio of 20-30 investments. You can invest alongside us in this portfolio through the Affluence Investment Fund.

How we do it.

Step 1: We regularly screen information from many different sources. This helps make sure we’re identifying all the best possibilities for the Affluence Fund portfolio. We search publicly available databases, subscription-only fund research services, “best of” lists, media and internet searches. We also regularly talk to our many contacts in the industry to discover what is exciting to them.

Step 2: We screen out those funds and managers that do not perform above a fair benchmark over a reasonable period, after fees. We eliminate nearly 90% of all funds using this method. Because we focus on outperforming in difficult markets – we focus on the performance of each fund in down markets. We eliminate many which have delivered good results but have proven to be very volatile. Or those who have underperformed significantly when markets also perform poorly. The last thing you need is a fund manager who does their worst work in a bad market.

Step 3: We exclude funds and managers who invest in asset classes or use strategies we do not believe can meet our long term return hurdle of inflation plus 5%. A great manager investing in a poor asset class is still likely to deliver poor results.

Step 4: Once we find a fund and a manager we like, we review them in detail. We examine factors such as the Fund’s structure, minimum investment, fees, cost of entry/exit, underlying investments, asset allocation, withdrawal provisions and liquidity. We look at the manager, their ownership, stability of the investment team, level of funds under management and the capacity for the types of investment being undertaken. This allows us to prioritise approximately 200 funds at any one time for ongoing monitoring.

Step 5: Our final, and most important hurdle is talking to one or more representatives from each fund or manager we’re interested in or invested with. Many of these people we already knew well and have followed for many years. We favour managers who exhibit as many of our preferred traits as possible. Factors such as significant personal investment in their fund, humility, capacity constraints and conservatism are most important.

We would be the first to admit that this part of the exercise is much more art than science. But after more than 15 years of visiting with fund managers and working in the industry, we feel qualified to make this value judgment. In the end it comes down to a gut feel – whether we are confident enough to invest ours, and your hard-earned capital with a particular manager on a long-term basis.

Who makes the grade?

In reality, almost all of the 200+ funds and managers we regularly monitor could make our Affluence Fund portfolio of 20-30 funds. The decision as to which funds get included comes down to our portfolio construction goals – particularly having sensible diversification. For example, there are many great funds out there that specialise in small companies. But it makes no sense to have half the portfolio made up of these. Because if one falls in value, it is likely many others will as well. So sometimes funds miss the cut for the simple reason that there were too many other great managers in that space.

Being an Affluence Member entitles you to view the Affluence Fund portfolio and receive regular information on the funds and managers we invest with. This allows our members and investors to better understand our strategy and investment philosophy.

In addition, Eligible Investors can invest in the Affluence Fund with as little as $20,000 and own a share of all the investments in the Affluence Fund portfolio.

At 30 June 2016, the Affluence Fund portfolio included investments in 19 unlisted funds, which represented 60% of the total portfolio. It also held 17 ASX listed investments, representing 20% of the portfolio. The balance of 20% was held in cash.

Find out more

Would you like to know who we think are the best investment managers in Australia? If you’re an Affluence Member, you can view details of the portfolio and why we like each fund, here.

Not yet an Affluence Member? Go here to register and get access to our premium content. Take charge of your financial future!

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