We put investors first

When we puts clients interest first. As a privately owned business, our long term success is dependant on long term happy clients.

WHY IT MATTERS: Financial services companies have been guilty promoting in house own funds or SMA solutions that better suit their needs, not their investors. This remains common, where an in-house SMA simplifies that admin time of the adviser, as opposed to maximising the outcome of the investor.

We do not have in-house funds or a restrictive 'approved products list'. We can do this as a privately owned business.

Accordingly, we prefer external fund managers who also have material ownership interests in their own investment decisions and clear, consistent and repeatable investment philosophy at a low or fair cost structure.

We are independent-minded

As Howard Marks said "to get a different outcome to the market, you must must do something different to the market".

"Diversification protects wealth, concentration grows it" - Warren Buffet.

Our belief is many adviser led portfolios are over-diversified to manage the adviser's agency risk, not maximise an investors return. Many of our clients success has stemmed from a narrow business interest. Investing success can be similar.

Whilst we still employ a risk management framework, we do so in a flexible enough manner to target differentiated outcomes over the long term. In particular, we allow positions to concentrate meaningfully should time and performance result in this outcome organically. This includes in direct international equity positions, something we do not see much of in Australian wealth management.

We were early to incorporate private equity and alternate assets into our client portfolios, where liquidity profiles afford.

WHY IT MATTERS: Herding is commonplace in investing. It delivers average results for investors in normal times, as well as being destructive during booms and bust cycles.

Meeting your investment goals may often mean acting independently from the herd, which can means tolerating agency risk, something we can do as an independantly owned business.

We invest for the long term

Taking a patient, long-term view helps people ride out the market’s ups and downs and take advantage of opportunities when they arise.

WHY IT MATTERS: Investors overemphasize the importance of recent events. Focusing on long term and long-term performance helps mitigage short-term errors. Analysis also shows higher levels of turnover leading to lower returns. A long term focus seeks to limit this.

From a risk management perspective, we seek to limit investment risk where clients have shorter term funding needs.

We are value and investment thematic investors

Anchoring decisions to an investment’s fair value — or what it’s really worth — can lead to greater potential for returns. Doing this within industries that have positive macro-drivers further enhances investment outcomes.

WHY IT MATTERS: We prefer to take overweight positions in long term opportunistic industries. Investors underestimate the power of compounding into the future. Material structural themes are rarely priced accurately. Themes we have backed directly in the past are the rise of A.I., cloud computing, the convergence of technology and health sciences. Emerging themes of interest, with which we have not invested as yet are Quantum computing and fusion.

Fundamentals matter

Independant research sits behind each decisions we make. We understand the drivers of investment strategies we select.

WHY IT MATTERS: We want to understand the fundamental characteristics of each company, including its cash flow, balance sheet, competitive advantage (like pricing power) and industry opportunity into the future.

Or when reviewing an external investment strategy, we want to identify the unique value proposition that provides persistance of alpha generation. Good judgement or excellent people is not enough, we want more tangible and repeatable attributes. Where none are found, index or index-like allocations are preferred.

We pay for external independant research to support our assessments and engage suitable asset managers to abide by these principles.

We minimise costs

Controlling costs is one of the few known knowns of investing.

WHY IT MATTERS: While returns can be volatile and uncertain, costs aren’t: they are one of the few factors we can control with certainty.

We partner with investment managers who have appropriately aligned incentives, as well as structuring our own costs to incentivise aligned outcomes and actions. We access wholesale versions of funds and cut out management costs entirely where we take direct large cap positions. Our service costs, when reviewed agains NMG industry data, place clients in the lowest quartile of advice service costs (reflecting our sliding FUM scale and skew to larger asset clients.

We build portfolios holistically

To help manage risk and deliver better returns, we combine investments with differing underlying drivers. In particular, we think private market opportunities and alternative assets provide material improvements in risk and return outcomes for clients.

WHY IT MATTERS: Diversify what you cannot see. Nobody reliably predicts short term market movements. Diversification, or the careful selection of a range of investments that aim to minimize unpallitable volatilty, helps manage company specific risk and when diversifying amongst asset classes, market noise. With a diminishing universe of public market options, investors must explore private markets and alternative assets to target better risk adjusted returns.

Snowgum Financial Services embraces targetted concentrated exposures where opportunities are uniquely attractive. We don't diversify for the sake of it.

Establishment

You will need to engage a suitable philanthropic legal service (or we can do this on your behalf) to draft a legal deed that broadly governs the charitable actions of your private ancillary fund (PAF). A private ancillary fund is the specific not-for-profit vehicle that can house philanthropic proceeds in a tax free manner. You will also need to establish a corporate trustee which is responsible for controlling and managing the PAF. You and other family/related parties can be directors of this company, but you are required to nominate an independent director of suitable standing to act as a responsible entity. This independent director cannot be a related party or family member and generally needs to be someone of good standing within the community.

Investment policy statement

You will need to begin formulating a robust investment policy statement that provides clear guidelines on governance, roles and responsibilities with clear articulation on investment expectations, reporting obligations, allowable distributions, allowable investments and investment selection process (among much more). This is critically important, especially when significant assets are to be managed or the philanthropic vehicle is of public significance.

This can be done in conjunction with an experienced asset manager or financial adviser. A draft example of what this document covers is available here (credit: The CFA Institute).

Implement investment structures

Prior to receipt of any proceeds, the investment policy statement will guide the establishment of cash management account and investment administration service structures required to administer charitable capital. Typically, you would expect a clearing account (like a cash management account) to act as the central point for reconciling all investment sales, contributions, distributions and new donations.

Founding donation

A donation to a PAF is not revocable. Once contributed, the only way for capital to exit the PAF is via a charitable donation to a suitably aligned philanthropic endevour. All contributions to a PAF are tax deductible donations. This provides significant scope to time future contributions with significant capital gains tax events. A donation offsetting an assessable capital gain essentially doubles the capital base available for philanthropic pursuits for most natural persons running PAFs in Australia. The tax deductibility of your donation can be carried forward over the following five years.

Ongoing investment returns from asset management within the PAF are tax exempt.

Ongoing reporting

There are two primary ongoing reporting obligations;

• Lodgement of returns to the ATO (although no tax is payable), tax refunds will be payable on tax paid income like franking credits. The philanthropic vehicle will receive a payment from the ATO on any tax-paid income.
• Maintaining compliance with the Australian Charities and Not-For-Profits Commission (ACNC) governance requirements.

Director and community education

It is important to regularly report investment management, charitable activity and community impact back to director's, donor's and the community broadly. Depending on the stakeholders involved this may be an opportunity to engage with external consultants to convey financial data in a meaningful way or further educate potential recipients on best practice activites to make your charitable activities more meaningful.