Adviser milking big returns for clients

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Financial adviser Alistair Bean has rejected suggestions his clients’ investments are too focused on one stock – and says the personalised DIMS set-up allows more flexibility of decision-making to maximise their returns.

Wednesday, August 22nd 2018, 6:00AM 13 Comments

by Susan Edmunds

The Christchurch-based adviser has produced very strong results for clients in recent years, due in large part to a heavy weighting to A2 Milk.

Across his portfolio, more than 75% of client assets is in the stock.

In the quarter to March 31, the top 10 holdings in his portfolios delivered a combined return of 11.45% for the quarter or the equivalent of 45.8% a year. Bean said he had turned some clients into millionaires.

He said the interest from others in his strategies was “understandable”. Some advisers and other market commentators have questioned whether it is too risky because clients had too much riding on the fortunes of one company. The stock has lost about $4 since mid-March.

“My belief is that A2 Milk is currently at about 10% of its journey and the price of the stock is doing what stocks do, they go up and down and constantly try to find their equilibrium relative to the market at any given point in time,” Bean said.

He said it appealed because it had no debt, significant cash on hand and could be the rescue tube for Fonterra. The market was growing daily and consumer demand was “insatiable” he said.

“The science also keeps growing in in what appears to be their favour and the A2 Milk brand name is protected similar to how Coca-Cola is protected, Nestle and many others are jumping on the bandwagon but it hasn’t seemed to have affected A2's first-to-the-market market share, even with some of their patents expiring.

“With proper due-diligence, there comes a time when it is prudent to rebalance clients individual portfolios and others may have done this a long time before I.”

Each client’s portfolio was managed individually, he said, and was appropriate to their needs. Not every client would have more than 70% in A2, he said. Newer clients would have less than 15%.

For clients who had been invested for some time, the significance of A2 in their portfolios would be driven by the value of the stock rising from an initial smaller holding.

“Class DIMS would have likely dictated a rebalance of the asset quite some time ago (dependent upon mandates and benchmarks) and this then may have been far less beneficial to the investor, although still very healthy considering the original entry purchase price for the great majority of my reserve funds-type client base - while constantly also allowing for the short, medium and longer-term needs as required by the individual clients when making decisions on their behalf,” Bean said.

“I do have benchmarks and price targets for my individual clients and these will kick in when triggered, then the disposal of the equity may be over a pre-prescribed, also strategic time-frame if it is appropriate to do so. This would also apply to any other holding that I have for any other asset that I hold on my clients’ behalf, other than A2 Milk. “

He said it was important to research as much as possible and observe the market, as well as continue communication with clients.

“My view is that most portfolio management is generalised and while this may be in some people’s point of view the safer way to go, it risks treating groups as all the same  within those groups and perhaps - it limits and restrains possible potentials, whereas we are all individuals and I specifically created my business to handle clients purposefully in this way.”

Tags: DIMS

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