The Investment Advisor will be chosen from a small group under consideration based on personal references. The selection will include a review of materials provided as well as a meeting in person with B-CT. With a beneficiary life expectancy of greater than 40 years, B-CT’s wealth will be preserved and grow through what has the potential to be one of the most volatile times in history. This time calls for an Investment Advisor of powerful intellect, instinct, integrity and culture—a firm with the ability to navigate risk and to identify and realize opportunities that preserve and create financial wealth and the human and living wealth from which it flows. The purpose of this document is to communicate the criteria used by B-CT to identify and assess potential Investment Advisors:
Criteria #1: Alignment with B-CT Investment Objectives The Trust assets are irreplaceable, representing B-CT’s primary assets and expected source of income. Therefore, principle investment objectives are:
B-CT is keenly interested in the Trust’s ability to generate income and capital gains over the long term and in a variety of future scenarios. This requires an understanding of the global economy at the deepest systemic levels, including: The Distinctions and Interplay between Political and Fundamental Economies. Globalization has evolved within the traditional central banking-warfare economic model that has dominated the First World for centuries. As a result, we have reached a high degree of centralized management of economies through the financial system– particularly the central banking and insurance mechanisms. This degree of management has resulted in politically managed markets that are not in sync with the fundamental and more sustainable economics that would prevail if government spending was transparent, markets were more free and the rule of law prevailed. So, for example, values in the stock market or gold market are increasingly set by G8 and central bank policy and intervention as opposed to simply fundamental economics. The Instability of the US Government and Federal Credit, and the Attendant Risks to the Global Economy and Global Financial Assets. As the primary financial mechanism behind global centralization, the US federal credit has assumed significant direct and indirect debt as well as on and off balance sheet contingent liabilities. Understanding the political and economic governance of these liabilities is part of appreciating the possibility of catastrophic warfare and failures ("Armageddon Scenario") or loss over time (“Slow Burn Scenario”). Managing investment risk in this environment necessitates an awareness and monitoring of trends which could cause economic disruptions and may indicate niche opportunities for wealth creation, including:
In that “wealth [not to be confused with money and paper securities]… is… a command over real resources and over the means to a continued income to be derived from these resources,” a shift in value from abstract (paper) to concrete (hard) assets is to be understood. This includes the role of human capital (great management and learning culture) and intellectual capital (knowledge tools, technology and practical application) in the management of hard assets to create real wealth. Openness to the notion of value lying outside of the world of finance is to be encouraged, i.e., land, a healthy environment and the ability to produce food may at some point be of more value than owning large-cap stocks. For example, when paper currencies are seen as uncertain, gold and silver are not only commodities, but resume historical roles as forms of monetary exchange without a government, and therefore can be used interchangeably with cash instruments, as a fixed-income allocation and, in the event of a currency crisis, as the ultimate insurance. As precious metals are in the early stages of a secular bull market in hard assets, gold and silver are real money and represent a sound holding as fiat currencies deteriorate. Therefore, B-CT would want a significant portion of assets in bullion and/or stocks associated with precious metals and related management and technology, with the understanding that more assets may be shifted into precious metals if future scenarios warrant it. The asset allocation model used to manage the Trust’s assets need not be formulaic. B-CT is not comfortable with the academic models based on market efficiency during times such as these. Fundamental and technical analyses can’t provide a complete picture and shouldn’t be the only beacons followed. Whether we are in an Armageddon or Slow Burn Scenario—or a more positive scenario in which we transform to a sustainable global economy in a more civilized manner— flexibility, adaptability and the ability to move in and out of markets, sectors and securities will be seen as positives. A diversified global perspective, as opposed to a US-centric model, is encouraged, as well as an emphasis on value and entrepreneurial small- and mid-cap companies with sales not dependent on government contracts or credit, and positions sensitive to trends in the politics of inflation and deflation. The short sale of securities and sectors is acceptable. This environment calls for an understanding of the total economic return of investments for purposes of identifying opportunities and further mitigating risk. This means weighing the impact of investments on natural planetary ecosystems and human society as part of the investment analytics, and looking for the opportunity to lean toward a Solari-like investment model which will contribute to—rather than deplete—community life whether natural or human. Indeed, good will is a proven strategy for attracting and generating capital gains and sustainable income. A long-term goal is that the future good will not be sacrificed for present gain. In summary, B-CT's investment principles are:
The Investment Advisor is aware of wealth preservation options and has the capacity to:
This includes experience and a sufficiently “deep bench” in the Investment Advisor team, network and custodial/clearing partners to ensure safety and soundness in a worst-case scenario. Therefore, a team and network with experience of down markets and an ability to anticipate and successfully navigate and identify opportunities within the deeper trends in the politics and economics of the globe are essential. Historical portfolio plans, performance and references will be requested and reviewed.
Because wealth is a personal matter – a tool for having a joyous life and achieving goals – an Investment Advisor/client relationship can entail discussions of personal feelings (hopes, fears, dreams, values) more often than in other professional relationships. As a co-trustee, it is particularly important to B-CT to be able to integrate her day-to-day understanding of what is happening in our world and the risks implied, with her understanding of the strategies being used to manage Trust assets. A successful working relationship will help B-CT manage her fiduciary responsibilities as co-trustee and head of household with ease, elegance and speed.
Excellence in reporting and communication are the basis of a successful and economic relationship. This includes:
In this regard, a sound portfolio plan and the flow of regularly scheduled reporting and communication from the Investment Advisor team should go far in supporting a mutually energizing relationship for both parties.
This includes compliance with accredited investor issues.
The Trust will be moving to a new trust company at or about the time that the new Investment Advisor is retained. Hence, a smooth three-way working relationship—Trust Company, Investment Advisor and B-CT—is desired. The combined Trustee and Investment Advisor fees are to be no more than 1% per annum.
Thank you for taking the time to review the selection criteria for an Investment Advisor for the Nightingale Investment Trust. Thoughts and input on these criteria are welcome. |
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