How many funds do you have too many in your portfolio?
Tacit Investment Management has one of the most concentrated portfolios in its database from a fund holding perspective.
At the very least, Tacit acquires at least 5% interest in each fund held by each fund. This will actually convict each mission and keep the bar high for new products to enter the portfolio.
This corresponds to a total of 16 funds and a balanced portfolio cash position. Of these, 10 are equity-based.
“I think the industry appears to be focusing on managing volatility and using diversification as a catchphrase,” says Kypros Charalambous, director of investment at Tacit.
“How many managers do you need? How many growth managers do you need?”
He added that while they are interested in diversification and make sense when managing stock-specific risks, using funds “meaning that people are already diversifying in their rights.”
Tacit’s equity allocation includes a 5% weighting to the Artemis Smartgarp Emerging Markets, A Nasdaq 100 ETF, and Scottish Mortgage Investment Trust.
In fact, their broader investment philosophy is rooted in the principles of client wealth conservation and modest growth, using Benjamin Raham’s idea of 50:50 equity bond splits.
They see the world of two asset classes. Predefined cash flows and growth assets, or equities, that act as “stabilizers.”
Side note: Last year we discussed whether modern portfolio theory still holds water. Follow this link and decide for yourself.
In bonds, Charalambous believes in achieving post-inflation achievement, clients’ after-tax returns.
The tip consists of a 20% balanced portfolio and a 7.5% holding of high yield bonds. This was actually reduced from the 15% weighting early last year.
By focusing on capital preservation, we keep them out of things that are too complicated in an alternative world.
“From our experience, it’s extremely difficult to try and find the right product at the right time when a tail event occurs,” he said.
“We are managers focusing on liquid assets, the secondary markets, and we are very focused on capital return rather than return on capital.”
“So, in certain extreme market conditions, we are very cautious about liquidity having a big impact on whether or not our clients will get their money back.”
A recent chat with Alts House AQR has brought claims to this “challenging” asset class. For more information, see here.
