Burke Britton were early in understanding the benefits of direct ownership of securities. 
This also brings a unique set of challenges when constructing portfolios, hence Burke Britton also saw the need to partner with somebody that specialised in this area which is why they approached me originally and we have been working together for over 10 years now.
As a significant user of our advisory services, Burke Britton have been able to use their scale to negotiate favourable pricing which means that clients enjoy the benefits of a professionally managed, direct listed security portfolio for a very low effective cost.
Some of the major advantages of using direct listed securities within a portfolio include:
- The ability to forecast the cashflow of the portfolio using dividend estimates
- Removing a level of fees to third party fund managers
- Greater transparency in knowing precisely what you own
The ability to forecast cashflows from a portfolio of direct listed securities becomes incredibly important when a client needs to use the earnings from their investments to fund their living. By understanding what the future income stream looks like, Burke Britton are able to use this information to build out a more comprehensive financial plan. In periods of market volatility, owners of direct listed securities enjoy a greater sense of security knowing that the businesses they own will continue to pay attractive dividends which helps clients avoid selling assets at the bottom of a sell off in the market by focussing on the long term income stream that the portfolio will deliver.
Our investment strategy adopts a value approach to investment. Our investment approach targets long-term, risk-adjusted returns by investing in companies that prioritise the generation of high-quality earnings, and operate in industries that display favourable long-term growth prospects. For portfolios focussed on income, there may be a bias towards certain thematics or industry sectors. Stocks that pay fully franked dividends and companies paying annuity style distributions will typically feature prominently.
Attributes that we look for in companies include:
- The ability to grow capital and income over the long term
- Focus on the quality of company earnings
- Identify quality assets at an attractive valuation
- Generate a suitable return on capital employed
- Invest in companies operating in robust industry structures
- Balance sheet strength
In addition to this, we also use Listed Investment Companies (LIC’s) to build out the overall diversification in a portfolio and/or where it is more difficult for us to construct this exposure using a direct portfolio of securities.
Attributes that we look for in LIC’s include:
- Proven track record of performance relative to benchmarks
- Exposures to Asset Classes that the portfolio does not already have
- Attractive fee structures relative to other alternatives
- Proven track record of shareholder friendly behaviour including dividends, buybacks and shareholder communication
- The ability to acquire the security at an attractive discount relative to its Net Asset Value (NAV)
An example of a unique LIC that many clients own is Future Generation Company (FGX). FGX is a Fund of Fund LIC which means that it gives you exposure to some of the best fund managers in the country. In addition to this, each of the funds waive all fees and FGX charges a fee of 1% with the proceeds of this donated to charities. For investors, this means that with one security, you get exposure to a broad portfolio of quality funds for a lower underlying cost than if you were to invest directly with the fund. FGX rewards investors with a growing stream of fully franked dividends which gives Burke Britton great transparency when constructing a financial plan for their clients. Finally, FGX has delivered significantly better performance than the respective benchmark being the All Ordinaries Accumulation Index.
For any relationship to thrive over the long term it must be mutually beneficial. I have been fortunate to be able to work with a team that is as professional as Burke Britton. The strength of this relationship has meant that we can extend a favourable pricing structure to Burke Britton which ultimately means a great outcome for clients. I believe this is a win, win, win situation.
Hamish Foletta – CEO – Sarto Advisory
This blog contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information.
If you decide to purchase or vary a financial product, your financial adviser, AMP and other companies within the AMP Group may receive fees and other benefits. The fees will be a dollar amount and/or a percentage of either the premium you pay or the value of your investment. Please contact us if you want more information
