Investment strategy

CFM Investment Strategy

Our Investment strategy informs all of our portfolio’s and investment decisions. Our process is overseen by our Investment committee which meets once a month to discuss the prospects for the economy and financial markets and how we view that these prospects will affect client portfolio’s and what investments we will buy on your behalf.

Broadly our Investment Strategy informs two key areas, top down analysis which looks at global economic trends and bottom up analysis which is where we analyse individual companies.

Top Down analysis and managing risk

Economic growth forecasts

For example which countries do we think will growth the fastest or may be slowing and do we need to reduce exposure to those countries.

Global trends

What are the major structural trends in the economy. This could be very broad. For example population structures and trends, or sectors that are causing disruption such as cloud hosting, internet shopping.

Politics

For a time in the early 2000 period many commentators believed we were in Goldilocks scenario. Communist Russia was opening up, globalisation was taking hold and meant to be bringing great benefits. Some of that came true. However fast forward and we can see how relations between countries, wars, trade, Oil can all have significant effect on capital flows and investments. Such analysis allows us to look at what areas we can avoid and also how to get exposure to those areas that are going to perform well.

Asset classes

Shares are probably the most well known asset class and history shows usually give the best performance in terms of capital growth over time. However there are several other asset classes which can be used for different objectives. All of these are inter connected. So we also consider the outlook for Government Bonds, Infrastructure, renewable energy and property.

Bottom up analysis

The top down analysis informs how much of a portfolio we want to invest in different countries and different asset classes. We then need to look at the actual investments we will make to get exposure to those areas.

Shares

We conduct rigorous research on the companies whose shares we invest in. This can include meeting the directors of these companies and attending their investor presentations. Due to our base in the city of London we are invited to many such seminars and presentations or often these firms will visit our offices. They are invaluable in understanding what a company actually does and really importantly in seeing the whites of their eyes.

We also spend a lot of time researching the balance sheets of companies making sure they are strong and have good cash flows and the operating margins they make. One key metric we look at is to avoid companies who have too much debt.

Bonds

Bonds. Our top down analysis greatly informs our decisions as to which bonds to hold. Key factor are political stability and the outlook for interest rates. When buying a bond we will look at the duration i.e. when will it be paid back and ensure we are exposed to different bonds that are paid back at different times. Usually a long dated bond will have a higher interest rate but it can be more volatile.

Infrastructure

A great many infrastructure funds have been listed on the London stock exchange over the last 5 years. They have exposure to road, rail, hospitals for example. These investments tend to be very long term and stable dividend payers. Investment trusts are a good way to get exposure. We analise these funds and choose what we think are the best ones. This is decided by looking at performance, the underlying portfolio, the dividend and very often actually meeting the investment trust manager. Capital Financial Markets have long experience of analysing investment trusts and truly understand this niche sector.

Property

Our exposure to commercial property is through listed REITs. Real Estate Investment companies. These are companies are listed on the stock exchange. REITs have to pay out a high proportion of their profits as dividends and as such can be a good source of income. There are several well know REITs such as British Land or Land Securities but there are also many that are less well known. Again due to our City of London presence we attend many seminars and meet manage of these listed companies to make sure we understand the sector and which are the best REITs to buy.

 

Individual portfolio’s

Our investment strategy is a great resource for our investment managers to use in order to inform opinion. However we are still committed to the individual so each of our portfolio’s may be different based on your own objectives or need.

 

 

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