Investing strategy….where next?

An economic slow down in China. The Syrian crisis. Sabre rattling from Putin. Will the UK stay in the EU, or retrench to an independent – but uncertain – future?

These macro issues and many other concerns have driven down the FTSE 100 from a peak of 7,097 in April this year to the current 6,400 level, via a drop as far as 5,899 in August.

(chart courtesy of ADVFN)

Of course there will always be volatility in stock markets, but the scale and speed of current movements seems out of the ordinary. And frankly nail-biting and stomach-churning if your life savings are fully invested in shares and funds that move largely in direct correlation with the broader market indices.

I wrote a while ago – when Gill and I stopped full-time work – about our pension position. We’ve missed out on the golden generation of final salary/defined benefit schemes. Annuities are so low that the income you can derive from them is not a viable option for us. So our pension pots – saved from our own earnings, employer contributions  and tax relief – and our other savings & investments have been at the mercy of markets and factors way outside our control.

Up until recently, all our investable assets and pension pots were placed with Hargreaves Lansdown. I’m very comfortable with HL, but I thought we needed to protect against the risk of stock markets collapsing further and for longer. We don’t have an income at present, so we need to preserve our capital.

Thanks to a friend of my brother, I was introduced to Connection Capital.  They “help clients build a portfolio of self selected,  direct investments in private equity, commercial property and alternative asset funds, as part of an organised syndicate“.

I’ve taken some funds out of HL and made some small investments in 6 separate opportunities through Connection Capital, 4 in private equity deals and 2 in commercial property.

The property investments are in long leases on assets let to a Virgin Active gym, and to a Travelodge hotel. The private equity investments are businesses in very different sectors, but they are historically profitable and have raised growth capital through CC.

These are all high risk investments, particularly the private equity businesses. But CC have a good track record and I’ve made what I hope is a balanced decision. My aspiration is that – on average – we’ll get back 2x the original investment in a time scale of 4-5 years. But with no guarantees at all on the amount or timing of any return.

More risky again are the opportunities on crowd funding platform CrowdCube. These are invariably early-stage start-up businesses looking for seed capital. Some have been trading for short periods, some are even at the pre-revenue stage, still testing products or developing technology. Few are already profitable.

I’ve made a couple of very small investments in different businesses showcased on CrowdCube. Each will have gone through some due diligence hoops before going live on the crowd funding platform, but I’m under no illusion how risky most of these opportunities are. Conversely, if they’re ultimately successful, the returns should be proportionately greater.

And then there’s the fun investment in BrewDog, the craft beer business that is taking the world by storm. I bought my shares for £950, at an already frothy valuation. I’m not expecting to make much, but with a 20% shareholder discount I’ll be able to drink myself into oblivion when all our capital has disappeared and we’re looking for the next hot meal…..

So that’s where we are, as they say on Dragon’s Den. Flying by the seat of our semi-retired pants. A decent amount of capital saved over a lifetime of hard work. But needing a reasonable income – or capital growth – to finance a standard of living that we don’t want to be forced into diminishing.

Welcome to the brave new world of pension freedoms, investment opportunities and fluctuating global stock markets.

Fasten your seat belts, it could be a bumpy ride…..

 

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