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A position is bought on the assumption it will be held for ten years or longer. It is reviewed at least annually against the thesis recorded at purchase.
Price movement between reviews is not a trigger to act. Earnings results, macro data and sector rotation are read, but they do not change a position unless they change the facts the thesis depended on.
Cash and short-duration instruments are sized against twelve months of operating costs, commitments and known obligations. The reserve is measured monthly and is held in short-dated government and bank paper with an independent custodian.
Capital stays in cash when no asset meets the valuation threshold. The office has held cash for two years at a time.
Turnover is kept low because realising a gain brings tax forward. Fewer realisations leave a larger base invested.
There is no redemption date, so no position has to be sold at quarter end.
Three conditions: the thesis no longer holds; the price has moved above the office's estimate of value and the capital can be deployed elsewhere; or a better-understood opportunity requires the position.
The annual review compares each holding with the alternative uses of the same capital, not with its purchase price.
Capital held in cash does not participate in markets while it waits. The amount is recorded in the quarterly family document.
Questions received on this note.
Each holding has a written thesis and the office has a valuation threshold. Capital stays in cash when no asset meets the threshold, and the thesis is tested annually against the facts it depended on.
Every position carries a written thesis reviewed at least annually, so the reason for holding is tested rather than assumed. Capital is compared with its alternative uses, which prevents a long-held position being defended on the basis of its purchase price.
Capital sits in cash instead of in assets that may rise. The amount is recorded in the quarterly family document.
The office reads widely and tests headlines against the thesis recorded for each holding. News changes price; it changes the office's action only where it changes the cash flows underwritten.
These notes describe how one family office manages its own capital. They are general information only and are not personal financial advice.
Notes cover holding periods, turnover and the arithmetic of compounding.
