Our Objective for Hard Asset/Real Asset Investment
We provide a professionally-managed product that seeks long-term capital appreciation and income. We do so by investing predominately in hard/real asset securities to maximize total real returns with below-market volatility. We define hard assets as investments that have physical properties and intrinsic asset value. To varying degrees, portfolio yield will be a principal factor in structuring investment portfolios. Multiplier, Accumulator, and Protector will each have targeted allocations based on particular investment objectives and client risk preferences.
Our Hard Asset Investment Thesis
Hard assets/real assets have physical, intrinsic value. They provide inflation protection and a hedge against myriad risks, including: easy monetary policy, unsound money and credit, market uncertainty, and global political instability.
Investing in hard assets provides diversification. They have a lower correlation to broader indexes and are an alternative strategy. They also offer total return potential.
A long downcycle in commodities has created attractive valuations as well as the opportunity for future sector outperformance. We believe we are on the cusp of the next multi-year upcycle.
How We Define Hard Assets/Real Assets
Hard assets are any tangible assets that have intrinsic value. Under our definition, they include:
- Global Precious Metals/Precious Metals Stocks.
- Global Natural Resources – base/industrial metals, energy and related services, agriculture, timber, rare earth minerals.
- Global Infrastructure – pipelines, toll roads, data storage, tank farms, electricity, distribution, railways, water infrastructure, airports, marine ports, cell towers, etc. Assets that tend to be income-producing and return cash to shareholders.
- Global Real Estate – specialty, niche commercial property with tight supply/demand characteristics. These also tend to generate portfolio income.
Portfolio Construction/Risk Management
When we construct a hard asset/real asset portfolio, we look to optimize total return with a combination of growth and income investments.
A typical portfolio will hold between 25-40 positions as it is built out. We seek companies that can compound returns over a cycle.
Our risk management focus: we strive to hedge/manage risk as market environment dictates.
We take a disciplined approach to position sizing and diversification. Maximum 5% at original cost and 8% at appreciated value.
Typical is 2-3% and starter is 1%. Dividends are typically reinvested unless there is a client preference otherwise.
Typical Asset Allocations
Multiplier: Precious Metals Dominant, No Short Exposure
- 0-60% Gold and Precious Metals (A quarter to a half of this component may be allocated to small-cap, earlier stage precious metals companies as opportunities may present)
- 0-30% Global Natural Resources
- 0-30% Global Infrastructure
- 0-30% Specialty Real Estate/REITs
Accumulator: Highest Allocation to Hard Assets, No Leverage, No Short Exposure
- 0-20% Gold and Precious Metals (A quarter of this may be allocated to smaller-cap,
earlier stage precious metals companies) - 0-30% Global Natural Resources (more yield focused/defensive/mature companies)
- 0-40% Global Infrastructure
- 0-30% Specialty Real Estate/REITs
Protector – Diversified, No Leverage
- 0-20% Gold and Precious Metals (no junior company exposure)
- 0-30% Global Natural Resources (more yield focused/defensive/mature companies)
- 0-30% Global Infrastructure
- 0-30% Specialty Real Estate/REITs
- 0-20% Special Situations
- Allocation 0 to 10% short positions similar to Tactical Short to hedge over all market exposure as well as specific portfolio risk.
Allocation ranges will be determined by the macro and financial markets environments, industry fundamentals, individual company valuations, and operating fundamentals. On occasion, portfolios in any of the strategies may hold a 10-20% cash component to mitigate risk and to ensure ample liquidity to benefit from future opportunities.
