Asset Allocation – MORAM Portfolio

 

MORAM Asset Allocation

In this section, we detail the standard Asset Allocation of MORAM. Although as we have explained in several parts of the website, each managed portfolio has a different distribution depending on the specific characteristic of the owner, we take this portfolio as a reference. Nevertheless, because of the current macroeconomic enviroment, we have more exposition to commodities and cash than the model portfolio 

Equities

Currently, 60% (without taking in account companies included in the commodities section)

  • Equities portfolio is subsequently split between active and passive management (85% managed vs 15% Index funds).
  • We tend to have in our portfolio both value and growth companies
  • Passive management is focused on large-cap, growth and emerging markets (complementary of the type of companies we hold in the managed portfolio).
  • Active management focused on small caps, mainly in the US.
  • By geography, GBP (20-40%), Dollars (40-60%), Euro (0-10%), Rest (0-20%).

Details about the companies which are part of the actively managed portfolio can be found in the analysis of companies section.

Fixed Income

Between 0% and 20%

Currently, due to the macroeconomic environment, the exposition to fixed income is very limited. In any case, it would be through short-term bonds of corporate companies. We try to avoid junk bonds as the most aggressive part in the risk-return balance of the portfolio is easier to get through equity for us.

We also are looking at some small companies that we know well. And where we believe that the bonds are trading at a significant discount compared to the stability of cash flows the company has. It usually happens in industries like energy and with small caps.

Cash

Target 0-10%.

Our aim is to have around 95% of the portfolio invested. However, in 2022 that figure has been much more elevated. At the end of 3Q22 we had more than 20% cash due to macroeconomic uncertainty. We do not try to time the market, but we aim to protect our capital when we do not see any clear investment opportunity (in terms of risk-reward). Currently, the % in cash is back to normal levels.

Alternative Investments

Target 0-10%

In this category, we find Private Equity Funds, Ventura Capital investments, Hedge Funds, Art and Antiques,… we exclude from this category commodities and Real Estate as we allocate an entire section to talk about them.


The main characteristic of this type of investment is diversification as they are not usually correlated to the stock market. Also, they tend to be very illiquid. Private equity funds tend to be closed funds and last around 10 years. Venture Capital refers to investing in companies at a very early stage. This type of investment is extremely risky, but the returns can be astonishing.


We have a small position in 2 early-stage companies that could be considered VC investments. We continue developing our network in this area and learning about the ecosystem.

Real Estate

Currently, the only exposure that we have to this sector is via the Real Estate Index Fund from Vanguard. This fund has exposure to several REITs segments such as Residential, Retail and Warehouses. Mainly in the US, but it also has exposure to Europe and Asia. We feel that the REIT prices have been hugely impacted by the Covid-19. However, we believe that REITs is a good asset to invest having a 5 years horizon because of both inflation perspective and good Value player.

Alternative Investment tend to exhibit low correlation with traditional stock and fixed income investment.

Cryptocurrency

We have some exposition to cryptos (>95% Bitcoin)  due to the concern about the massive amount of money printed by central governments. We believe that we are still in the learning phase and we see this type of investment as both learning & diversification. We see a high potential for both Bitcoin and Ethereum. In fact, we are very interested in web 3 and all the applications that Ethereum have. 

Our investment in Crypto is tied to the money-printing cycle. Consequently, we think we will maintain our exposition through 2023 and if things play out as we expect, we will continue buying at the end of 2023.

Commodities

Target: 10-20% (However, as you can see in the analysis of companies section and because of the numerous reason we have discussed our exposition is much larger than this)

  • It includes stocks from upstream companies in the oil and gas industry.
  • We have written several articles related to oil. Our point of view is that because of the adjustment made by the OPEC+ and the weakness of the dollar, commodities are going to take advantage of this environment.

Note: Strategy described here do not suppose any investment advice. Each person needs to understand the risk they want to take and the financial targets they are pursuing

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