Consumer letter
1) On which investment beliefs does the investment firm base it services?
B.A. van Doorn adheres to the following investment beliefs which form the basis for the investment policy and the design of the investment process:
- B.A. van Doorn assumes that taking investment risks is necessary to achieve investment objectives.
- B.A. van Doorn invests for the long term. The firm aims to realize the client’s objectives by positioning the portfolio so that the desired return will be achieved over the long term.
- B.A. van Doorn recognizes that Strategic Asset Allocation determines 80% to 90% of the final investment results.
- B.A. van Doorn believes in simple and transparently constructed portfolios. This makes the portfolio risks manageable and gives the client clear insight into the drivers of the portfolio.
- B.A. van Doorn uses passive investment forms where possible. However, active choices are not excluded.
- B.A. van Doorn is aware of the impact of costs on investment returns and limits these as much as possible.
2) What approach, investment strategy, or investment style does the investment firm use?
B.A. van Doorn employs two different strategies. The first involves portfolios composed solely of index funds (or Exchange Traded Funds) and government bonds. The second approach involves portfolios composed of individual stocks, a limited number of index funds, and government bonds.
In the first approach, a qualitative method is used with an emphasis on themes that will shape prospects in the coming period. Additionally, quantitative models are used to identify attractive sectors or regions.
In the second approach, which uses individual stocks, the so-called “Indivual Stocks Model” is the starting point to determine the attractiveness of companies. Attractiveness is measured in terms of quality and growth. This ultimately results in a portfolio with high-quality stocks. Additionally, a qualitative approach is used to determine the attractiveness of added index funds and government bonds.
The transparent portfolio setup and the associated risks allow for continuous risk measurement. The outlook for the overall portfolio and individual positions is discussed continuously in the investment committee.
3) In which investment categories, sectors, regions, and (types of) financial instruments is investment made?
For reasons of transparency and cost considerations, B.A. van Doorn prefers simple and transparent investment products. The portfolio benchmark consists of global equities and Dutch government bonds. These are therefore the core investments of the portfolio. For equity investments where there is a sector, style, or regional preference, index funds (or ETFs) are used. This is an efficient way to obtain the desired exposure at low cost.
B.A. van Doorn avoids investments in non-transparent, expensive, and illiquid alternative funds. Generally, these add little value to the portfolio and have (too) high cost levels. Exceptions are made only in consultation with the client.
4) Regarding advice of management of the entire portfolio:
How is the portfolio constructed?
The core of the portfolio is filled with investments that are also part of the benchmark. This core is supplemented with “satellites.” These are investments, usually through index funds or ETFs, that invest in a certain investment category, region, sector, or style. In this way, further diversification is achieved and/or a higher return for the portfolio is pursued.
The combination of global equities and Dutch government bonds has resulted in low volatility of the portfolio in recent years. This combination of core investments delivers an attractive risk/return ratio for the portfolio.
B.A. van Doorn uses a tactical bandwidth of 15% above or below the strategic allocation. This ensures that over the long term the returns associated with the strategic allocation are actually achieved and that large deviations from the strategic benchmark are avoided.
Currency risk in the portfolio is not hedged. No borrowed money is used for investing.
5) Regarding statements about expected returns and risks:
How does the investment firm arrive at these expectations?
For the expected returns of the portfolio benchmark, figures from the commission “Parameters for the Pension Sector,” which are provided every five years, are used. For the risk figures, data from VBA/CFA (Association of Investment Analysts/Certified Financial Analysts), determined annually, are used. B.A. van Doorn considers it important that expectations regarding achievable returns are determined objectively and are not driven by promises potentially motivated by commercial considerations.
Based on expected returns, expected risks, and expected costs, B.A. van Doorn compiles the most optimal portfolio given the risk profile.
6) How can you, as a (potential) cliënt, assess the investment policy of the investment firm?
B.A. van Doorn uses a combination of global equities (via the MSCI World equity index) and Dutch government bonds (via the JP Morgan Dutch government bond index) as the “benchmark” for the portfolio. As a client, you can compare the return of your portfolio against the return of the “benchmark.” This comparison is included with the quarterly report. After a period of three years, it is useful to analyze the actual portfolio result relative to the benchmark result.
