GMI Investment Philosophy
Protecting your wealth is our top priority. You work hard to accumulate your wealth; managing it is about ensuring its real purchasing power is at least maintained.
Two key considerations in pursuing this priority are:
Diversification – investing your funds across a large number of assets so that if any one of them fails you lose a button not your shirt.
Liquidity – being able to sell an asset quickly and at as close to reported prices as possible; your funds are available to you when you ask for them.
Funds allocated to shares are invested in global companies on world share markets. We do this because New Zealand and Australia’s share markets account for only a small percentage of the world’s capital markets (around 4%). This contrasts with many local fund managers who have a relatively high exposure (typically around 25%) to Australasian companies. Funds allocated to fixed interest securities are invested in a mix of local and foreign bonds.
Given that New Zealand investors commonly have a lot of their wealth tied in local property and their other key asset, their job, is also in New Zealand, investing their financial wealth in global markets helps spread their investment risks. We hold currency hedges appropriate to individual portfolios and investment mandates to reduce the impact on portfolio returns from variations in the value of the New Zealand dollar.
Our view is that asset allocation – the portion of funds allocated to shares, fixed interest and cash – is the single biggest determinant of investment returns over the medium term. So our investment decisions place most emphasis on determining where the economic and investment cycle is likely to head and adjust exposure to shares, fixed interest and cash accordingly.
GMI has a strong background in macro-economic analysis and forecasting, which underpins our top down approach – our asset allocation decisions. We look at the threats to, and drivers of, growth in the major economies and identify likely growth themes. We then look for appropriate companies or specialist fund managers to achieve exposure to these themes – the bottom up part of our investment strategy. Our macro-economic views also guide the appropriate maturity and risk profile for fixed interest investments.
Our investment objective is to deliver returns, after all fees, costs and taxes, greater than the relevant benchmarks for each portfolio but only after we are satisfied that risk is managed. The benchmarks are clearly defined for each of the main portfolios and provide an appropriate base for determining the value we add as an investment manager.