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Investment model
Objectives
- Generate total returns that outperform inflation by 3% – 6% over the medium and longer term
- Generate total returns that outperform the FTSE All-Share index over ten years
- Pay annual dividends increasing by inflation or more over the longer term
- Manage investment risk effectively for long-term wealth generation
Aims
Grow
Caledonia has grown 8.33% per year since 1987.
Grow capital value and income over the long term, measured in inflation-adjusted terms.
Pay
The dividend has been increased each year for 58 years.
Pay an increasing annual dividend, which grows at or in excess of inflation over the long term.
Manage risk
We hold a diverse portfolio of investments.
Manage risk commensurate with shareholders’ requirements and our investment horizon.
Asset classes
We primarily invest in equities, on a global basis, to achieve our target returns.
Investments are managed across three core competencies:
Public Companies
Split into two portfolios: Capital and Income. Global businesses with brand, IP and strong market positions that have long-term value, a good record of ROCE and a strong asset base.
Targets
Capital strategy
10% total return
no yield target
—
Income strategy
7% total return
3.5% yield on cost
Strategic allocation
30-40% across both portfolios
Private Capital
Established UK mid-market businesses with robust operating margins, led by strong management teams targeting meaningful growth.
Targets
14% total return
2.5% yield on cost
Strategic allocation
25-35%
Targets
12.5% total return
Strategic allocation
25-35%
Caledonia differentiation – investing our balance sheet
Gearing
Corporate banking facilities support short-term liquidity requirements. Gearing only in investee companies
Self-managed
Not managing for fees
Long-term outlook
Looking beyond the next 10 years
No arbitrary time constraints
Time is our ally, not our impediment. Unlike most others, we are not hostage to fund cycles. We have the flexibility to hold our investments for as long as necessary, which means we sell only when the time is right for our shareholders
Less volatility
Volatility is less of an issue as long as our investment selection is good (i.e. temporary loss of market value, not permanent loss of value within company) – although it is still pertinent, especially for Quoted Equity