According to our client’s stage in life we develop an investment portfolio to cover short, medium and long term needs.
We keep a close knit relationship with each one of our investors, satisfying their needs framed by their vital stage.
2 Year Investments:
Short term
It’s not advisable to assume large fluctuations in the value of the investment
3-5 Year Investments:
Medium term
Advisable to assume average risks that exceed inflation and interest rates.
5+ Years:
Long term
Assume risks with certain volatility in the investment.
Increase of family components.
Short-term nominal preservation portfolios:
Ke = 1%-2%
Apply those resources that will be needed short term.
Must tolerate negative effects of inflation.
The priority is to maintain the nominal value of the investment.
Medium-term real preservation portfolios:
Ke = 3%-5%
Must maintain purchasing power.
Obtains an expected return, similar to the sum of inflation plus tax and interest cost.
>5 years long-term:
Ke > 5%
Short and medium term needs covered.
Assume more risk and volatility with higher profitability.
Strategic Distribution of Assets
PRESERVATION PORTFOLIOS
Monetary Assets
(Short-term financial instruments in the form of third-party debt and expirations up to 18 months: deposits, promissory notes, treasury bills and repos)
Low volatility (2%- 4%).
High liquidity and availability.
Reduced sensitivity to long-term interest rates.
Low management and administration costs if invested via mutual funds.
Low correlation with fixed income.
Low profitability, inflation rate or less.
Elevated sensitivity to short-term interest rates, marked by intervention rates.
Credit risk.
Fixed Income
(Debt instruments, varies in inverse proportion to interest rates. Annual return according to coupons paid)
High liquidity in sovereign income and large investment issuances.
Low volatility for investment grade and high volatility for high yield issuance.
Average management costs if invested via mutual funds.
High predictability of cash flows.
Low liquidity in high yield.
Difficulty to cover inflation losses in analyzed periods.
Sensitivity to interest rates.
Medium-low credit risk.
Coupon recovery may pose a problem for withholding taxes.
Variable Income
(Aliquot participations in the capital stock of a company)
Great source of wealth generation long-term.
If invested in a diversified manner, beats inflation long-term.
High management and administration costs.
High liquidity.
High annual volatility.
Not reliable returns in the short to medium term.
Excess of speculative and disturbing information in the media.
Very sensitive to market corrections and high degree of contagion from other assets.
Hedge Funds
(Alternative investments, low correlation with the rest of the assets)
Improves diversification.
Access to niche strategies.
Good profitability data per unit of risk.
Low correlation.
Focus on capital preservation.
Allows alignment of interests.
Opaque, changing strategies.
Manager holds priority influence over the strategy.
High amounts needed to invest.
Difficulty monitoring and tracking.
Operational and illiquidity risk.
High management costs.
Private Equity –Risk Capital
(Investment in unlisted private company)
Great source of profitability long-term.
Beats inflation long-term.
Wide range of entities, vehicles and alternatives in which to invest.
Investment Phases:
- Concept.
- Seed.
- Validation.
- Growth.
- Estabilished.
Risks of illiquidity increased by capital commitments.
Opacity in the process of monitoring and management.
High amounts needed to invest.
Manager’s influence over the strategy.
Operational risks.
High costs of management and administration.
Real Estate
(Operation and purchase/sale of real estate)
Performance depends on the supply and demand of real estate assets.
Different submarkets exist that provide portfolio diversification.
Hedging against inflation in case the contracts are indexed to inflation.
Risk of illiquidity and portfolio rebalancing.
Leverage risk when there are illiquidity problems.
High amounts needed to invest.
Operational risk.
High costs of management and administration, and due diligence.
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