Hands-Off Investments

Hands-Off Investments

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Roland Sassoon established Sasfin Bank from the remnants of his father’s textile business in an import industry dying due to changes in regulation in the 70s.

Maverick

Having been founded by an entrepreneur, Sasfin has always been a bank for entrepreneurs and Sassoon himself is something of a business maverick, daring to diversify Sasfin’s product range when all about him said “focus.” His philosophy at the outset and still today is that a monoline bank may be a focused and efficient organisation, but would be of no use to the average entrepreneur who needs broad-based services to capitalise and fund his business.

Growth

Sasfin listed in 1987 and remains one of the few independent second-tier banks in South Africa. The business is flourishing today as Basel 3 requirements encourage the larger banks to favour their corporate clients.

Creating value

Despite working in the financial services industry, even with a stockbroking firm within the group, Roland Sassoon does not recommend the hands-on approach to investing for someone in his own circumstances.

“I have a very simple philosophy towards investing: if you’re in business then you’re busy with your career and cannot devote the necessary time to study up all the stocks on the market. In fact, even institutional investors struggle to do so,” he says.

His approach to investment is of the homespun variety, acquired from his investment-savvy grandmother. However, being unschooled does not make it any less pragmatic because his (and his grandmother’s) investment philosophy is identical to that of Warren Buffet. Buffet recommends becoming highly familiar with a manageable number of companies (no more than a dozen and perhaps as few as six) and making a study of them, thereafter steadily accumulating shares in the companies as and when they show value.

Roland Sassoon’s core-satellite investment philosophy

“Half my portfolio is in passive index-tracking funds — as a half-dozen stocks will not give the necessary diversification — and with a smaller percentage for active investing. It’s good to play the market for superior performance, but you cannot play with everything.”

Sassoon advises that the bulk of his wealth is in Sasfin, a mid-sized listed financial services group in the southern-most tip of Africa. That factor defines the rest of the portfolio construction.

“My wealth is highly concentrated, and I have an above-average need for diversification, and cannot invest in companies, geographies or sectors with too much correlation to Sasfin,” says Sassoon.

Currencies, then asset classes

The first step in his portfolio construction is to select a spread of currencies. He has opted for the US dollar, the euro, Japanese yen, Chinese renminbi and Canadian dollar.

The next step is to select asset classes within those jurisdictions, and it becomes a choice between equities or fixed interest products.

As head of a listed financial services group, Sassoon is reluctant to divulge the exact contents of his portfolio, but says that like Buffet he refuses to invest in any company he does not understand, or to make high-risk gambles in derivative products. Leveraged derivatives he describes as a casino, as do many people who lost their shirts.

Put hard-earned capital to work

His investment philosophy is to put his hard-earned capital to work, without risking that capital. Hence the core-satellite approach. “I prefer a value style of investing, but realise one can lose from that, which is why I have a large proportion of my portfolio in passive investments to offset the level of risk.

“I have about half my capital in various funds, ETFs and fixed interest funds across various currencies, with the other half directly in equities I feel I understand. I do recognise the importance of property in a portfolio, but have a relatively small amount in property at the moment, given the difficulties of that sector.

“Investing is a dynamic activity, and one has to tweak the portfolio in line with changing fundamentals. However, if one were to take it more seriously than that it would really become a full-time job. I may consider doing that only once I have retired.”

Eamonn Ryan
Before becoming a financial writer and freelance journalist in 1997, Eamonn Ryan was a legal adviser, company secretary and alternate director at listed company Cashbuild Limited from 1988 to 1997. Since becoming a financial writer, he has focused on the business and financial sectors, as well as personal finance, writing for Finweek, The Star Business Report, Sunday Times Business Times, Business Day, Mail & Guardian, Entrepreneur, Corporate Research Foundation (which brings out a series of books each year ranking SA’s best employers and best managers), as well as a host of once-off and annual publications such as ‘Enterprising Women’ and ‘Portfolio of Black Business’. He also writes media releases, inhouse magazines and sustainability or annual financial reports for various South African corporates and financial services groups, including the Ernst & Young annual M&A book.