How would you invest x amount of capital today?

hopeful123's picture
Rank: Orangutan | 310

Got blindsided by a surprise superday in 2 days with a fixed income fund...feel like this is a very important question thats bound to be asked, was hoping you guys could critique my initial thoughts and/or offer potential insight...really just want to make sure im even on the right path with this one.

Thanks in advance, to be honest i dont know a whole lot about the global economy right now as an undergrad and was just looking for something that's defensible as the superday is with only senior employees who i think tend to care more about my general interest in the markets than nitty gritty finance details.

25% in private equity industry - with a lot of uncertainty about the short and longer term direction of the markets, industry offers favorable risk/return profile as a long term investment a downturn, they still have the dry powder to invest in virtually any opportunity which over the long haul should result in solid profitability. in a continued bull rally, can monetize investments at favorable valuations. Also tend to offer solid 5-6% dividends which i think is greatly overlooked. also shouldered the '08 crisis relatively easily and my ultimate outlook is to proceed in this economy with caution.

15% in AS&D stocks - think what we saw with the Chinese trade war was at its core a proxy war in which the US wanted to assert itself as a global dominator...recently reported budget deficit will not drastically impact future as&d budget as I think the lower tax revenues will draw more attention as the villain in this case. Also the suppression of ISIS is a clear and sound justification for maintaining cutting edge military...just dont really see any threats other than AS&D budget.

15% in data security industry - think as major companies like facebook, equifax, etc. come under increased criticism for data privacy breaches, companies will be pressured to maintain high levels of data security as a necessary PR move. This also piggybacks off the recent trade war with China which brought privacy even further into public eye.

10-15% cash - both to serve as dry powder in case new opportunities arise and to deploy into aforementioned positions if the prices become cheaper without any fundamentals changing, emphasize importance on having conviction and confidence in poisitions unless something unanticipated changes.

I dont even know what to do with the rest...any ideas?

Yes, i fully acknowledge that i probably sound like I dont know a whole lot about what asset allocation should look like in this environment (because i don't).

Comments (6)

Oct 16, 2018

PE firms dont give 5-6% dividends on the holdings from my experience.

i glanced through this, but the most important thing is that have a reason for everything you say.

PE firm gives 5-6% div? great, back that up with a fact or rationale for why thats so.

make sure they can't poke holes in your pitch. be prepared. and please be humble. personality goes a long way.

Oct 18, 2018

thanks a lot for your help - the humility piece could not have been more accurate. PM liked my equity pitch and then asked for an investment i undertook that didnt go as planned.

Talked about how I invested in both companies of a recent divestiture and overlooked that there was an obvious reason why the most important execs all went to the spin-off company. and he loved it.

Oct 18, 2018

If its a fixed income fund I would include some fixed income in your imaginary portfolio

Most Helpful
Oct 18, 2018

Like Leon said, I'd make sure to touch pretty heavily on the fixed income space. A lot of fixed income asset managers are slamming the gas on raising short/ultra-short funds because the general consensus (in my small world) is that an increase in rates throughout 2018 and 1Q-3Q'19 are going to flatten out the yield curve. I'd speak about how you think it's prudent to structure the fixed income aspect of a diversified portfolio with a skew toward the short end of the duration curve to de-risk core bond allocations. If you feel like getting fancy you could speak about a slowdown/reversal in the Feds quantitative easing policy and how that affects capital flows in the CMBS/RMBS space.

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Jan 3, 2019

Youre the man. Thank you. Helped me land my dream job.

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Jan 3, 2019