Investment Objectives and Solutions

Everyone has a unique story and circumstances. We work closely with clients to construct an investment portfolio that addresses their specific needs. Below are three varying degrees of requirements, and at times, we find a number of our clients have a combination of all three:

Capital Preservation

Clients who have made wealth selling their businesses, for example, or who have saved significant funds during their employment years hire CGOV Asset Management to protect that wealth. Depending on the unique objectives and risk tolerance of each client, high quality bonds may be utilized to lower the volatility of the overall portfolio, as well as to produce consistent cash flows from bond interest. Augmenting the bond portfolio, we invest in equities of well-established companies with sustainable competitive advantages. The overall objective is to preserve clients’ funds in real terms.

Funding Lifestyle through Cash Flow

Many of our clients have a need to draw income from their portfolios to fund their lifestyle. CGOV Asset Management approaches this objective by investing for cash flow purposes today, and into the future. Bonds are a natural choice in meeting today’s cash flow needs through consistent payments of interest. However bond interest does not rise with inflation. We compliment the bond portfolio with dividend-paying equities of mature companies. We focus on the types of companies that have high prospects of increasing their dividends over time as the companies grow. The projected outcome is consistent bond interest from the fixed income portion, and a growing dividend payment stream from the equity portfolio.

TD Bank is an example of such a growing dividend-paying equity investment. In the chart below, assuming an initial investment of $100,000 at the end of 1999, an investor’s dividend has grown from $2,375 per year, to $6,814 per year over an 11 year period.

Capital Appreciation

A common attribute of all the companies we purchase is there must be a thesis for growth. Key growth drivers for a business may be increasing market share, geographic expansion, or it’s operating in a growing industry. We are looking for businesses that are growing more quickly than the average in its industry. As well, many of our businesses have the ability to pass on price increases to their customers. This latter feature greatly helps protect clients against inflation which over time has the effect of eroding purchasing power.

Approach to Risk Management

A common thread in all of our clients’ objectives is the need to manage risk. Risk is managed through investing in the highest quality bonds, and assessing the downside price of each of the equities we invest in. We attempt to purchase the shares of these businesses where the upside price appreciation potential outweighs its downside.

We also believe that focusing our research on fewer companies enables us to know our holdings exceedingly well. The more we know about all aspects of a business, the more confident we are in management’s abilities to achieve their goals. We adhere to the proposition that knowing companies well greatly reduces the risk in investing in them.