SINGAPORE - The spectre of rising inflation looming large over the world economy is a powerful signal for Mr Adam Reynolds to tread carefully and ensure his portfolio is resistant to future price shocks.
Mr Reynolds, the Asia-Pacific chief executive of trading and investment firm Saxo Markets, notes that the excessive debt that global economies have racked up can be resolved only by inflation, so his generation needs to be prepared for that eventuality.
He believes that the widely adopted 60/40 rule - where 60 per cent of one's portfolio is invested in higher-risk and return assets and the other 40 per cent is in lower-risk assets such as government bonds - is not sufficient to protect investors against a significant inflation hike.
"Thinking about portfolios with higher allocations to inflation-linked bonds and to commodities and commodity producers is only a start," adds Mr Reynolds, a 55-year-old employment pass holder here with dual Australian and British nationality.
He says money is about providing for his children's education and setting them up for their future, as well as for sharing experiences with his family.
Mr Reynolds has set up his four children, aged between 14 and 31, and his grandchildren with portfolios consisting largely of MSCI global-linked exchange-traded funds (ETFs), with a small allocation to bitcoin.
"I am not at all into watches or cars, but I do like to spend money on excellent holidays with my family. Covid-19 has saved us a lot of money on that front over the last 12 months," he says.
Q: What's in your personal portfolio?
A: I have four distinct buckets in my personal portfolio: real estate, private equity, pensions and a personally managed trading portfolio. I am probably 35 per cent in property, 10 per cent in private equity, 40 per cent in listed equity and 15 per cent in commodities, cryptocurrency and cash.
Real estate is split between a farm property in New Zealand and a house in Malaysia where I live and, in normal times, commute to Singapore from.
Private equity comes through my interest in my employer Saxo.
For pensions, I have money in Australia in superannuation (a company pension plan) and in British pension linked to my time working in the United Kingdom, as well as a Supplementary Retirement Scheme account with robo-investment platform StashAway in Singapore.
These are all managed by professional advisers.
My personal trading portfolio is in general focused on holding assets that will benefit from the current debasement that is ongoing among most major central banks.
This means investments in gold, silver, bitcoin, ethereum and several exchange-traded funds.
I rarely buy individual names as I do not feel I have any better insight into companies that can compete with active asset managers, so I would rather leave that to those who have the resources to do that well, and invest through the asset managers that I do research on.
I use ETFs a lot to long and short different sectors of the market.
I also use my Saxo Markets account to short the market as a hedge for the rest of my portfolio when necessary, especially during the first quarter of last year.
Then, I shorted the markets with puts on S&P 500, Nasdaq, Australian dollar/Japanese yen, and calls on US dollar/Mexican pesos, all of which were very successful.
Additionally, I have invested in the new LionGlobal Dynamic Growth: Asian Perspective portfolio on the Saxo platform, which is a portfolio created by the curated portfolios team at Lion Global targeting global growth opportunities with an Asia bias.
Q: What are your immediate investment plans?
A: I am looking to increase the exposure I have to commodities and commodity-producing companies, and expand my crypto exposure to include some selected DeFi (decentralised finance) tokens as I see the unfolding value proposition.
I am seriously concerned about a global pension crisis as inflation takes hold and erodes the value of pensions around the world.
While there has been no consistent rise in inflation since the 1970s, the extent of governments' quantitative easing and fiscal response to Covid-19 makes it inevitable in my mind.
Otherwise, governments have a free pass to spend as much as they want with no consequences.
Q: How did you get interested in investing?
A: I started working in a bank in the early 1980s straight out of school, and a friend of mine told me about this party he had been to, to celebrate the one-year anniversary of the float of the Australian dollar.
I pressed him further and found out that banks had a foreign exchange division, which sounded interesting, so I got a transfer there within the National Australia Bank and have been in that market ever since.
Q: Describe your investing strategy.
A: My investing strategy revolves around having a professionally managed core portfolio and a satellite portfolio that I manage myself.
The core portfolio will be a longer-term portfolio that needs an asset allocation that can weather different parts of the economic cycle, so maintaining a close relationship with my financial advisers around that core portfolio asset allocation is important.
Having a good understanding of the different inputs into the economy helps in those discussions.
For the satellite portfolio, it is all about generating absolute returns, much as a macro hedge fund would. However, instead of paying a hedge fund manager "2 and 20" - in management and performance fees - I pay myself 0 and 100.
My satellite portfolio strategy is also shorter term, so my time horizon for trades can be as low as one week.
Typically, within this portfolio, I use risk management techniques like trailing stop losses to ensure I do not have significant drawdowns, and I look at my monthly absolute returns and Sharpe/Sortino ratios to assess my performance.
Sharpe ratio refers to the excess return of a portfolio above the risk-free rate relative to its standard deviation, while Sortino ratio is the excess return of a portfolio above the risk-free rate relative to its downside deviation.
Q: How are you planning for retirement?
A: I will work until my youngest child finishes high school at least, which is in five years' time, but potentially for much longer.
Work gives me a lot of inspiration for investing and I really like the environment of continuous learning. I am concerned I may lose that if I retire.
It is exciting to be on this journey which my employer is on and so retirement will come when I feel that I am no longer learning, excited or getting inspired by my work.
Q: Home is now ...
A: I own a 7,000 sq ft house in Malaysia, five minutes away from the Second Link. The house was built with Malaysian architect Ken Yeang, who designed the National Library building in Singapore.
We moved out here to be close to Marlborough College Malaysia, which my two younger children attend.
Now with Covid-19, the house is a great place to work from, with a lot of space, so both my wife, who is a lawyer, and I can do our jobs comfortably.
Although my usual commute to Singapore has been interrupted, I currently rely on the Reciprocal Green Lane between Singapore and Malaysia to go to the office every two out of five weeks.
Q: I drive ...
A: I am not into cars. I have a highly practical Volvo XC90, a seven-seater sport utility vehicle. It is my third car of the same model.
Q: What has been your biggest investing mistake?
A: Holding on to my house in London for too long prior to the global financial crisis in 2008. It was a typical terraced house in Islington, which is in north London.
I was working at Merrill Lynch at the time and could see what was unfolding in the mortgage business very early on, and considered selling my London house at the market peak in 2007. But I held on to it and ended up selling only when my family left Britain in 2009 at an opportunity cost of a few hundred thousand pounds.
Q: And your best investment?
A: These have all been in my trading account and mostly in the last year. I was concerned about the impact of Covid-19 in early February last year and bought put options on Nasdaq, S&P 500, AUD/JPY and calls on USD/MXN.
I also called my advisers and liquidated all my pension portfolios to cash.
I had the view then that there would be an exponential rise in cases that the market was not pricing in yet. So, by the time the market turned down, I had no exposures in my core portfolio and short positions in my trading portfolio.
I managed to take profits on those shorts in April last year, and then scaled back into my core portfolio from May last year. As the market rallied, I used some leverage in my trading account to enhance returns.
Overall, that set of trades generated a 125 per cent return on my trading portfolio for last year and protected my core portfolio when it needed it, while getting my exposure back up as the market recovered.
SINGAPORE - The spectre of rising inflation looming large over the world economy is a powerful signal for Mr Adam Reynolds to tread carefully and ensure his portfolio is resistant to future price shocks.
Mr Reynolds, the Asia-Pacific chief executive of trading and investment firm Saxo Markets, notes that the excessive debt that global economies have racked up can be resolved only by inflation, so his generation needs to be prepared for that eventuality.
He believes that the widely adopted 60/40 rule - where 60 per cent of one's portfolio is invested in higher-risk and return assets and the other 40 per cent is in lower-risk assets such as government bonds - is not sufficient to protect investors against a significant inflation hike.
"Thinking about portfolios with higher allocations to inflation-linked bonds and to commodities and commodity producers is only a start," adds Mr Reynolds, a 55-year-old employment pass holder here with dual Australian and British nationality.
He says money is about providing for his children's education and setting them up for their future, as well as for sharing experiences with his family.
Mr Reynolds has set up his four children, aged between 14 and 31, and his grandchildren with portfolios consisting largely of MSCI global-linked exchange-traded funds (ETFs), with a small allocation to bitcoin.
"I am not at all into watches or cars, but I do like to spend money on excellent holidays with my family. Covid-19 has saved us a lot of money on that front over the last 12 months," he says.
Q: What's in your personal portfolio?
A: I have four distinct buckets in my personal portfolio: real estate, private equity, pensions and a personally managed trading portfolio. I am probably 35 per cent in property, 10 per cent in private equity, 40 per cent in listed equity and 15 per cent in commodities, cryptocurrency and cash.
Real estate is split between a farm property in New Zealand and a house in Malaysia where I live and, in normal times, commute to Singapore from.
Private equity comes through my interest in my employer Saxo.
For pensions, I have money in Australia in superannuation (a company pension plan) and in British pension linked to my time working in the United Kingdom, as well as a Supplementary Retirement Scheme account with robo-investment platform StashAway in Singapore.
These are all managed by professional advisers.
My personal trading portfolio is in general focused on holding assets that will benefit from the current debasement that is ongoing among most major central banks.
This means investments in gold, silver, bitcoin, ethereum and several exchange-traded funds.
I rarely buy individual names as I do not feel I have any better insight into companies that can compete with active asset managers, so I would rather leave that to those who have the resources to do that well, and invest through the asset managers that I do research on.
I use ETFs a lot to long and short different sectors of the market.
I also use my Saxo Markets account to short the market as a hedge for the rest of my portfolio when necessary, especially during the first quarter of last year.
Then, I shorted the markets with puts on S&P 500, Nasdaq, Australian dollar/Japanese yen, and calls on US dollar/Mexican pesos, all of which were very successful.
Additionally, I have invested in the new LionGlobal Dynamic Growth: Asian Perspective portfolio on the Saxo platform, which is a portfolio created by the curated portfolios team at Lion Global targeting global growth opportunities with an Asia bias.
Q: What are your immediate investment plans?
A: I am looking to increase the exposure I have to commodities and commodity-producing companies, and expand my crypto exposure to include some selected DeFi (decentralised finance) tokens as I see the unfolding value proposition.
I am seriously concerned about a global pension crisis as inflation takes hold and erodes the value of pensions around the world.
While there has been no consistent rise in inflation since the 1970s, the extent of governments' quantitative easing and fiscal response to Covid-19 makes it inevitable in my mind.
Otherwise, governments have a free pass to spend as much as they want with no consequences.
Q: How did you get interested in investing?
A: I started working in a bank in the early 1980s straight out of school, and a friend of mine told me about this party he had been to, to celebrate the one-year anniversary of the float of the Australian dollar.
I pressed him further and found out that banks had a foreign exchange division, which sounded interesting, so I got a transfer there within the National Australia Bank and have been in that market ever since.
Q: Describe your investing strategy.
A: My investing strategy revolves around having a professionally managed core portfolio and a satellite portfolio that I manage myself.
The core portfolio will be a longer-term portfolio that needs an asset allocation that can weather different parts of the economic cycle, so maintaining a close relationship with my financial advisers around that core portfolio asset allocation is important.
Having a good understanding of the different inputs into the economy helps in those discussions.
For the satellite portfolio, it is all about generating absolute returns, much as a macro hedge fund would. However, instead of paying a hedge fund manager "2 and 20" - in management and performance fees - I pay myself 0 and 100.
My satellite portfolio strategy is also shorter term, so my time horizon for trades can be as low as one week.
Typically, within this portfolio, I use risk management techniques like trailing stop losses to ensure I do not have significant drawdowns, and I look at my monthly absolute returns and Sharpe/Sortino ratios to assess my performance.
Sharpe ratio refers to the excess return of a portfolio above the risk-free rate relative to its standard deviation, while Sortino ratio is the excess return of a portfolio above the risk-free rate relative to its downside deviation.
Q: How are you planning for retirement?
A: I will work until my youngest child finishes high school at least, which is in five years' time, but potentially for much longer.
Work gives me a lot of inspiration for investing and I really like the environment of continuous learning. I am concerned I may lose that if I retire.
It is exciting to be on this journey which my employer is on and so retirement will come when I feel that I am no longer learning, excited or getting inspired by my work.
Q: Home is now ...
A: I own a 7,000 sq ft house in Malaysia, five minutes away from the Second Link. The house was built with Malaysian architect Ken Yeang, who designed the National Library building in Singapore.
We moved out here to be close to Marlborough College Malaysia, which my two younger children attend.
Now with Covid-19, the house is a great place to work from, with a lot of space, so both my wife, who is a lawyer, and I can do our jobs comfortably.
Although my usual commute to Singapore has been interrupted, I currently rely on the Reciprocal Green Lane between Singapore and Malaysia to go to the office every two out of five weeks.
Q: I drive ...
A: I am not into cars. I have a highly practical Volvo XC90, a seven-seater sport utility vehicle. It is my third car of the same model.
Q: What has been your biggest investing mistake?
A: Holding on to my house in London for too long prior to the global financial crisis in 2008. It was a typical terraced house in Islington, which is in north London.
I was working at Merrill Lynch at the time and could see what was unfolding in the mortgage business very early on, and considered selling my London house at the market peak in 2007. But I held on to it and ended up selling only when my family left Britain in 2009 at an opportunity cost of a few hundred thousand pounds.
Q: And your best investment?
A: These have all been in my trading account and mostly in the last year. I was concerned about the impact of Covid-19 in early February last year and bought put options on Nasdaq, S&P 500, AUD/JPY and calls on USD/MXN.
I also called my advisers and liquidated all my pension portfolios to cash.
I had the view then that there would be an exponential rise in cases that the market was not pricing in yet. So, by the time the market turned down, I had no exposures in my core portfolio and short positions in my trading portfolio.
I managed to take profits on those shorts in April last year, and then scaled back into my core portfolio from May last year. As the market rallied, I used some leverage in my trading account to enhance returns.
Overall, that set of trades generated a 125 per cent return on my trading portfolio for last year and protected my core portfolio when it needed it, while getting my exposure back up as the market recovered.