We put investors first

When a firm puts investors first, they win in the long term because their investors win.

WHY IT MATTERS: Financial services companies that promote their own high-cost funds over cheaper alternatives or allow conflicts of interest to hijack their actions, do not have investors’ best interests in mind.

Snowgum Financial Services doesn’t have in-house funds filter investment manager decision based on a robust framework, of which a jey determanent is long-term manager performance alignment.

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. An independant minded adviser might question why many portfolios are over-diversified. Balancing concentrated positions, where businesses are attractive, within a risk managed framework can deliver differentiated outcomes. Further, we are also happy to allow positions to concentrate over time should performance deliver this outcome.

We incorporate private equity and alternate assets where liquidity profile affords.

WHY IT MATTERS: Herding is commonplace in investing. It generally delivers average results in normal times and be destructive during booms and busts. Meeting your investment goals may often mean acting independently from the herd.

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 often overemphasize the importance of recent events, rushing into hot stocks when they’re overpriced and fleeing from market downturns. Investors can fight this common error by focusing on long term lessons and long-term performance. Our investment decisions concentrate on fundamental, long-term value drivers, selecting investments or asset managers we believe we can and should hold for the long haul, then measuring how long we hold them in practice.

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 makes this even more meaningful.

WHY IT MATTERS: Our minds are hard-wired to find patterns in everything, but much of the market’s daily volatility is just meaningless noise. Researchers have found that in the long term, the underlying value of a company, relative to its price, drives performance.

Snowgum Financial Services uses an assessesment of an investments relationship between current price and intrinsic value, to help minimize the cognitive impact of short-term fads and noise. We will often use concentrated, active management that emloys a value investment philosophy within our portfolio construction process. We rely on external, independant research houses to provide this service.

Finally, we prefer to take overweight positions in long term opportunistic industries. Key themes of note are the rise of A.I., the convergence of technology and health sciences, healthier living, an ageing population and renewable energy.

We take a fundamental approach

Powerful research is behind each decision we make, and we understand what drives each investment we select.

WHY IT MATTERS: Researchers find that investors base decisions on dangerous shortcuts: from the spelling of fund managers’ names, to whether friends have mentioned a particular company before. Investors use these meaningless characteristics to judge whether an investment is worthy and then concoct convincing stories about why these investments are good, and subtly seek out data that confirms those conclusions.

Snowgum Financial Services structures analysis around fundamental characteristics of each company, including its cash flow, balance sheet, and potential for a sustainable competitive advantage—to keep our focus on facts that really matter.

We leverage research houses to provide this capacity and will employ suitable asset managers that abide by these principles.

We strive to minimise costs

Controlling costs helps investors build wealth by keeping more of what they earn.

WHY IT MATTERS: Investors face a barrage of information, and our minds tend to focus on one or two narrow characteristics. So, investment companies rarely highlight their fees to avoid investor scrutiny. But, while returns are volatile and uncertain, fees aren’t: they will eat away at an investor’s money.

Snowgum Financial Services targets funds for investments that have fees in the least-expensive quartile of their respective categories, and purchases wholesale lower-cost versions of funds where possible. Where portfolio scale allows, we will recommend high conviction positions in direct international and domestic equities as well as facilitating direct bond and property exposures, stripping out funds management fees.

We build portfolios holistically

To help manage risk and deliver better returns, we combine investments with different underlying drivers into truly diversified portfolios. In particular, we think private market opportunities provide material improvements in risk and return outcomes for clients.

WHY IT MATTERS: Diversify what you cannot see. Nobody has reliably predicted 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 amongst asset classes, market noise. Although our minds like compelling stories—stories about companies, strategies, and managers. Stories often only serve to make us more comfortable without addressing risk. Managing risk effectively, with realistic expectations, is the only way to ensure you achieve your goals. In particular, when you manage volatility well, you can also mitigate human induced portfolio turnover, which can deliver meaningful performance improvements associated with damaging human behaviour.

Snowgum Financial Services embraces balanced diversification with targetted concentrated exposures to attractive opportunities. By taking the story out of the equation, we can create portfolios designed to lower risk for individual investors.

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.