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Investment model

Objectives

  • Deliver FTSE All-Share outperformance over ten years and shorter term returns between RPI+3% and RPI+6%
  • Pay an increasing annual dividend
  • Manage investment risk consistent with long-term wealth generation

Aims

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Grow

Caledonia has grown 8.7% per year since 1987.

Grow capital value and income over the long term, measured in inflation-adjusted terms.

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Pay

The dividend has been increased each year for 53 years.

Pay an increasing annual dividend, which grows at or in excess of inflation over the long term.

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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:

Quoted Equity

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

Strategic allocation

35-50% 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
5% yield

Strategic allocation

35-45%

Funds

Indirect investment through Asian and US based private equity funds.

Targets

12.5% total return

Strategic allocation

20-25%

as at 31 March 2020

Caledonia differentiation – investing our balance sheet

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Gearing

Corporate banking facilities support short-term liquidity requirements. Gearing only in investee companies

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Self-managed

Not managing for fees

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Long-term outlook

Looking beyond the next 10 years

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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

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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