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The majority of the book is Australian. Franking credits apply to the family's tax position, and the office can inspect the assets it owns.
The Australian market contains large, established companies across banking, mining, healthcare and telecommunications, with a long record of dividends through the cycle.
It is smaller than the US market and is weighted towards financials and materials.
The major banks operate under APRA capital and liquidity requirements. They did not require government recapitalisation during the global financial crisis or the pandemic.
Australia has an independent judiciary, a two-party parliamentary system and a financial services regulator. The office plans against a stable policy setting and tests positions against changes in tax treatment, regulation and resource policy at the annual review.
The domestic weighting exposes the book to the Australian economy, the terms of trade and the housing market.
The international sleeve provides partial currency offset. Property and infrastructure holdings provide contracted cash flow.
Questions received on this note.
Partly. The justification is after-tax income and the ability to inspect what the office owns. The cost is sector concentration and single-currency exposure, which the international sleeve addresses.
A small number of companies and a handful of banks dominate the index, and positions are sized accordingly. The 3% position cap and the cash flow screen both work against owning the largest index weights because they are large.
No. Stable institutions lower the probability of abrupt change without eliminating it. Positions are tested against changes in tax treatment, regulation and resource policy at the annual review.
For cash flows that do not exist on the ASX, for currency diversification, and to avoid concentrating the family's capital in a single economy, currency and regulatory regime.
These notes describe how one family office manages its own capital. They are general information only and are not personal financial advice.
Occasional writing on geographic allocation, franking, currency and the cost of concentrating in one economy.
