OUR PHILOSOPHY
We believe that there is a place for Alternatives when they are incorporated into a well diversified portfolio, alongside the diversified portfolio, alongside the traditional asset classes. Cash, bonds, fixed interest, diversified portfolio, alongside the traditional assets classes. Cash, bonds, fixed interest, investment funds, ETFs, equities and property make up the base ingredients of the traditional portfolio. Most alternatives are structured to deliver a regular income for a set number of years or a lesser income and ultimately a share in the profits of the company, or specific project into which they invest.
THE ANNUAL YIELDS ON OFFER WILL VARY DEPENDENT ON THE TENURE OF THE INVESTMENT AND TYPICALLY RANGE FROM 6-12% PER ANNUM.
The product manufacturers essentially encourage investors by offering these premium rates to those who are happy to tie their money up for longer. The anticipated returns on Investment (ROIs) for a 5 year product are extremely attractive to some and it is those higher rates of return which can sometimes cloud people’s judgement. This is especially true today, as interest rates have been so low over the last 10 years, with corresponding bank deposit rates down at all time lows of 0-2% per annum.
Chasing previously lost returns, or allowing greed to get in the way of judgement, can lead to an over commitment and an overall dependency weighted too heavily towards one investment. What we know is that there is risk attributed to every type of investment, but by over allocating or over committing, the investor further increases that risk. Committing too much to a single investment which then doesn’t deliver, or worse still fails altogether, can come back to haunt everybody a few years down the line.
OUR PHILOSOPHY IS THAT ALTERNATIVES SHOULD BE CONSIDERED FOR UP TO A MAXIMUM ALLOCATION OF 20% OF AN INVESTOR’S OVERALL PORTFOLIO, SUBJECT TO THEM BEING COMFORTABLE WITH THE ACCOMPANYING LIQUIDITY AND ASSET RISKS DISCLOSED.
Part of this rationale is born out of the old principles of “don’t put all your eggs in one basket” and “if it looks too good to be true, it probably is”. Applying these simple but effective guidelines against any modern day asset allocation which includes Alternatives, tends to remove greed from any decision to purchase an asset.
Whilst many of the Alternatives might look too good to be true, there have been many past schemes that have achieved their objectives and much more which have resulted in thousands of very happy participants enjoying excellent returns. Such first hand experiences led many to successfully reinvest and to do well time after time. It is those experiences when coupled with our maximum allocation theory that sets us off down a path of Due Diligence (DD).
WE LEAVE
NO STONE
UNTURNED
We firmly believe that our findings, resulting report and recommendations, allow our clients to make rational, well informed decisions, which won’t create too much hardship or financially ruin people’s lives if the investment does encounter problems.
We will endeavor to leave no stone unturned and give a much deeper and broader representation of the product than is normally made available. However, there still might be occasions when unforeseen events have a detrimental effect on an investment that may have been performing in line with expectations until that point.
WE LOOK MORE CLOSELY AT THE EVERY PRODUCT AND ANALYSE ITS SUSTAINABILITY THROUGH STRESS TESTING. WE QUESTION THOSE BEHIND EACH PRODUCT TO FIND OUT WHAT CONTINGENCIES ARE IN PLACE IN THE EVENT OF DETRIMENTAL OCCURRENCES.
This allows BCGA to give its own unbiased opinions and recommendations around the suitability of the product to individual clients.
We place great importance on the level of DD conducted at outset and go to the lengths we do because we believe that it is in the best interest of all parties. From a reputational stand point, it is vitally important that we look way beyond the glossy brochures and the attractive projected returns on offer and only bring to market high quality products that have been rigorously filtered and screened.
If an opportunity comes through the DD process satisfactorily, it will be awarded an overall BCGA Rating. The rating it carries is dependent on an overall risk analysis, taking into consideration the Company and Investment Due Diligence information collected, as well as its Operational and Technical Due Diligence, once it is deemed to have an acceptable liquidity factor and a high probability of weathering any potential severe tests it may be subject to during its operations.
We intend to package and disclose full due diligence facts about each opportunity and believe that publishing such information will clearly show ‘the good, the bad and the ugly’ in advance of any purchase. Having that information to hand can only help to remove any emotion and greed that the investor may unwittingly have and allow them to make rational, commercial decisions.
Wherever possible we will apply a certain levels of stress testing to see just what each product can withstand. We will question those behind its design and manufacture. We will expect to see contingencies in place, as well as anything else that we feel is necessary to safeguard our clients’ interests.
THERE IS NO SUCH THING AS A PERFECT INVESTMENT AND SO OUR JOB IS TO FIND THE IMPERFECTIONS AND PREDICT THE EXTENT OF ANY DAMAGE THEY MAY CREATE.
There will of course always be unforeseen events, which are outside the control of anybody.
Having taken everything into consideration our mindset is one of ‘Proceed with Caution,’ to be aware that investments can go down as well as up, and that you may get back less than you paid in. If any of those statements don’t sit comfortably with you then Alternatives may not be the right investment direction.