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OUR INVESTMENT APPROACH

Understand the investment.
Consider the commitment.

Value, risk, liquidity and ownership are connected. Each helps put the investment case in context.

THE STARTING POINT

An investment is a commitment of capital under conditions that can change. Understanding the proposition is the foundation; understanding its implications is just as necessary.

The considerations below describe the perspective behind our approach. They are related questions, rather than a formula that removes uncertainty or guarantees an outcome.

01

VALUE & PRICE

Price is only
the starting point.

A price tells us what an investment costs. It does not, on its own, explain what makes that investment valuable.

The investment case needs to identify the economic drivers beneath the price. What supports the value? Which assumptions are doing the most work? What needs to happen for the expected outcome to be achieved?

It also helps to distinguish evidence from expectations. Information about the investment can be assessed; future conditions remain uncertain. A clear view of that distinction makes the rationale easier to explain and revisit.

Questions that matter

  • What creates and sustains the investment’s value?
  • Which assumptions have the greatest influence on the outcome?
  • How does the case change if those assumptions prove too optimistic?

Price, terms and underlying value belong in the same discussion. An attractive proposition still needs to make sense on the terms actually available.

02

RISK & UNCERTAINTY

Consider what
could go differently.

The expected outcome is only one possible outcome. A considered decision also gives attention to the ways capital could be lost or tied up.

Risk may arise from the investment itself, its structure, its counterparties or the conditions around it. The important question is how these uncertainties could affect the company’s exposure.

Thinking about an unfavourable outcome helps put the initial commitment in perspective. The size of an investment, its relationship to other commitments and the resources remaining afterwards all influence that assessment.

Questions that matter

  • Where could a permanent loss of capital arise?
  • What obligations or additional demands could accompany ownership?
  • Could several commitments be affected by the same change?

Recognising uncertainty is part of the decision. It provides a basis for judging whether the potential investment is an appropriate use of the company’s capital.

Ocean waves along the Queensland coast

Value. Risk. Time.
Considered together.

03

TIME & LIQUIDITY

Capital has
a time dimension.

The amount committed is not the only measure of an investment. How long capital may be committed, and when it can be accessed, also matter.

Some investments can be realised more readily than others. The terms of ownership, market conditions and any restrictions can affect the time and cost involved in accessing funds.

That makes liquidity a company-level consideration as well as an investment-level one. A commitment needs to be viewed alongside other capital needs, possible obligations and the flexibility required to respond to change.

Questions that matter

  • When might capital be needed, and when could it become available?
  • What restrictions or practical limits apply to an exit?
  • What happens if the investment needs to be held for longer?

An investment period is an assumption to examine, not simply a date to assign. The ability to remain an owner can be as important as the intention to become one.

04

ONGOING OWNERSHIP

A reason to
keep holding.

The original investment case provides a reference point. Continued ownership calls for a current view.

New information may change the understanding of value, the assessment of risk or the capital required. Some changes are temporary; others can alter the reason for owning an investment.

Revisiting the rationale means asking whether the assumptions that supported the decision still hold. It also means considering the investment in the context of the company’s circumstances today.

Questions that matter

  • What has changed since the initial decision?
  • Does the investment still meet the reasons for ownership?
  • Have the risks, obligations or available alternatives changed?

Review is an extension of the original decision. It keeps ownership connected to the information available and to the company’s wider capital position.

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