Stable and rising absolute returns with regular income
The gap in today’s market for conservative investors is a fund offering protection always in place with absolute returns through the investment cycle (capital growth in trending and more volatile markets including large market falls). We buy and hold ASX20 blue chip high yielding shares and at all times protect downside at the stock specific level with lowest cost alternatives on the ASX.
Our distinctive risk management approach always has minimal capital at risk at the stock specific level and upside return potential.
Blending traditional ‘income’ and ‘growth’ assets has produced a painful dilemma for conservative investors - “income” assets such as cash, term deposits and short term bonds provide insufficient income with no prospect for any capital growth. “Growth” assets, investing directly in blue chip shares, or equity funds, leave investors exposed to fluctuations in the value of invested capital.
Our track record has no quarterly NAV draw-downs exceeding 2% since our inception in December 2010.
Our clients include pre or post retirees (sequencing risk), industry associations and individual/family offices (intergenerational wealth transfer.)
Returns have more impact at some points in your superannuation investment lifecycle than at others. Sequencing risk is the risk that markets fall near or early in retirement. The wrong sequence of returns can have a big impact on your retirement portfolio. Negative investment returns early in retirement can be particularly damaging.
Stock market corrections historically occur every 4 ½ to 5 ½ years. Since 1929, the range of falls has been 25% to 90%, and duration of decline 22 to 160 weeks. The last correction occurred over 7 1/2 years ago. Our investment objective is capital growth in trending and more volatile markets, including large market falls.
Investment objectives
- Returns: 6% - 8% pa in trending markets, greater than 8% pa in volatile markets, short term bond returns in stable markets
- Income: Minimum cash rate + 3% paid semi-annually (currently 4.7% p.a.) from dividends and franking credits
- Protection: No quarterly NAV draw-downs exceeding 2%
We have a track record of achieving these investment objectives every year since our inception in 2010.
Progression of investment risk management
There have been significant advances in risk management approaches for conservative investors. Each level reduces the downside variability of investment capital with complementary return characteristics.
By combining these three levels conservative investors can protect and grow capital with reliable income through the complete investment cycle.
The variety of risk management approaches have complementary risk and return characteristics through the investment cycle.
- Level 1: Asset allocation: Income and growth assets
- Level 2: Protection sometimes in place using predictive risk management overlay - additional growth asset benchmark equity index
- Level 3: Protection always in place, the Gyrostat approach - stable and rising absolute returns with regular income. Benchmark BBSW90 + 3% pa
By adding our fund to a conservative portfolio we complement level 1 and level 2 approaches. In particular:-
i) Volatile markets provide more profit opportunities to participate in share price upside and protect on share price falls
ii) Gyrostat always has additional downside protection in place in case of large market falls
Our solution – protection always in place with upside return potential
With protection always in place we complement short term bonds and bench-marked against the absolute return bank bill swap rate BBSW90. Our expected returns vary with the stage of the investment cycle with capital growth in trending and volatile markets, as this provides the opportunity to re-set protection levels and lowers the costs.
Traditionally protecting your portfolio was expensive. Gyrostat has overcome this issue by actively managing ASX options, utilising proprietary software and taking advantage of reduced broker costs due to deregulation. We are always fully invested in blue chip high yielding shares and insure downside with lowest cost alternatives on the ASX.
Gyrostat three step investment approach
Super impose a 'hockey stick' pay off at all times on a share price chart, moving the protection level on market moves.
- Buy and hold blue chip shares with protection on the Australian Stock Exchange
- Set the amount of protectionto always participate in the upside with minimal capital at risk
- Re-set the protection level on market moves - if the share price rises increasing protection level, on falls reduce protection level
Business Model "How we invest"
Unit Trust
Investors purchase units in “Gyrostat Capital Stability Income Fund”.
The fund net income is dividends and franking credits less expenses and the cost of protection.
Stock Market ASX
The fund simultaneously buys stock and enters ASX options market
Stocks are “buy and hold” to generate dividends and franking credits
Options Market ASX
For hedging risk only we use calls and put options to grow your investment when markets rise, and protect your investment when markets fall.
Daily management to restore risk-return profile from market movements
Technology & Deregulation
Software continuously monitors price movements to identify “least cost” alternatives to restore risk-return pay-off from market moves.
Deregulation enables low cost transactions
Investors deposit funds with the One Investment Group, Australia’s largest independent custodian, and receive units in Gyrostat Capital Stability Income Fund.
Systematic approach to risk-return
Our first criteria is to ensure maximum capital at risk is always within pre-defined limit which we review and report daily as part of our internal process.
We participate in the upside if markets rise, and protect the downside when markets fall. On market rises, we lock-in the gains with more protection – on falls we are able to sell some protection which is no longer required.
We re-balance our portfolio daily with the market movements to restore our risk-return profile.
see diagram for an example of risk-return profile with downside protection always in place, vs. stock / cash.
We are conscious that some investors may require assistance in completing the form. Please contact our team on 03 9041 0970 who can assist
Application forms in fillable PDF format are available below. If you require any assistance please do not hesitate to contact us.