Booster Client Update - Adding yield and resilience through unlisted investments
Adding yield and resilience through unlisted investments
For most investors, lower interest rates have been a key feature of the past 10 years, thanks to the extraordinary policies adopted by the world’s central banks. This has particularly reduced income returns on fixed interest investments, raising the question of how best to deliver the “income” part of Farming portfolio returns in the years ahead. Fixed interest investments (like bonds) still have a very valid part to play in providing a promised rate of return and supporting performance when shares are weaker. However, today’s environment calls for a wider approach to broaden portfolios’ source of returns, while also increasing their resilience to the fluctuations in share markets.
Compared to traditional portfolios focused on “listed” investments, the best opportunity to achieve this comes from adding investments that are not traded on share markets (i.e., “unlisted” investments). History shows that these benefit from an extra return “premium” in exchange for less ability to sell on short notice. This adds to the benefit of having a wider range of investments to choose from – particularly relative to NZ’s share market. A more unique feature of unlisted investments is the ability to have greater input into their management (try influencing Google’s policies!) The key factors to manage are the appropriate allocation, given unlisted investments’ lower saleability (so still only a minority part of overall portfolios) and ensuring the right “due diligence” processes are in place for each investment.
However, a key strength of this approach is the ability to improve investments’ overall income yield. While residential property yields remain stubbornly low, carefully targeted investments in direct rural and commercial property, higher-yielding shares in unlisted NZ companies, and infrastructure investments all provide potential ways to achieve this. Importantly, these areas combine the best features of income yield with some protection against higher inflation down the track. Not least, it gives us as investors the ability to do well by doing good – to improve portfolio returns while supporting kiwi businesses taking on the world.
The Summer Reset
Summer has a way of easing the pressure. The days feel longer, the calendar softens, and life slows just enough to remind us that not everything needs to be urgent, solved, or optimised right now. It’s a subtle shift, but a powerful one. And it’s what we like to think of as the summer reset.
Lifetime Book Club: Ikigai by Héctor García & Francesc Miralles
“The happiest people are not the ones who achieve the most. They are the ones who spend their lives doing what they love, with purpose.”
That is the central idea of Ikigai.
This is not a hustle manual or a step-by-step guide to success. It is a gentle, thoughtful exploration of what gives life meaning, and how small, intentional choices can lead to a longer, happier, more fulfilled life.