Be the ball
Investors should be more like golfers, Bedford Row Capital suggests.
Caddyshack, an absolute classic movie with an interesting parallel for investors and advisers: investors should be like good golfers — they do not necessarily make a lot of great investments(golf shots) they just avoid the bad ones.
Investing should be like a good round of golf on your favourite course. All you must do is stay on the fairway, avoiding the rough, sandpits and the occasional gophers and you will have a great time. Play it safe and you will most likely not have your best round, but at least not your worst. The same holds for investing in bonds. Benchmark deals, household lead arrangers and ratings pull you on the safe side. You will not have the best returns (let’s do not even start about inflation), but you sway yourself in the illusion of avoiding risks. What possibly can go wrong in this case? In golf, a great shot is generally down to years of hard practice, just ask Tiger Woods. But the best golfers will tell you that they take (measured) risks.
So how to avoid bad shots? Change how you play the game. Stop hiding behind plain-vanilla benchmark deals and highly correlated funds. For example, it is palpable that if Nestle issues a green bond it could be seen as greenwashing. Nevertheless, investors are still rushing to buy into it. Greenwashing is like hitting the golf ball, not quite in the sweet spot. It takes off fairly good but moves either to the right or left, leaving you in the rough. That possesses one of the most significant challenges getting the ball in the hole.
Bedford Row Capital PLC (BRC) is like an open for all golf clubs (why shouldn’t more people have the opportunity to play?). Set-up to disrupt capital markets as it seeks to democratise international capital raising, giving investors access to yield and liquidity but without the ridiculous membership fee to participate in the market. There are plenty of good companies looking for funding by using the debt capital market. Companies like Orestes, SMARTkas, Altech Chemicals and Deshabndhu, have a strong impact focus and are changing the way business is conducted. Why should their tee-off (issuance size) be any disadvantage? These companies make a real impact and advisers who want to make a difference should look at these opportunities.
We all know that too much money is chasing the same assets, leading to yield compression. Trying a hole in one (going long duration) is not the way to aim as it exposes you to too many risks. Shorter, measured shots increase the chance of success (lower credit quality andshorter duration). It allows you to generate income in a risk-adjusted manner with less market movement exposure (inflation here we are again). There are plenty of real companies with real assets out there looking for investments providing you with strong, asset-backed alternatives.
A good golfer adapts to its surrounding. The weather, the temperature, the fairway are all important factors to the game. They can influence the outcome of the game. The same is true for investors. Be agile, look beyond the standard deals and be adaptable to the investment environment. Your clients need to generate income in a low yielding world. Change your game.
For further information contact:
Christoph Kruecken — chris@bedfordrowcapital.com
This article was first published in the FEIFA Members’ Magazine, July 2021
