Business News 8.3.2018 07:40 am

The advisor who sold his Ferrari

Let the race begin!

Throughout the course of a life many things can happen to a person. Sometimes good, sometimes bad. Some things you can control and others you can’t.

Sometimes great things happen that you didn’t think were possible even in your wildest dreams: a hole-in-one, a great job offer, a business that takes off and even that blind date with the prettiest girl in town that leads to a great marriage and wonderful children.

And then there was the Ferrari. The Ferrari California Turbo, to be exact. Let me tell you the story…

Some two years ago, I attended the launch of the Polo Village development, part of the greater residential development at Val de Vie, just outside of Paarl on the road to Franschhoek. For many years before that I had considered buying or building a house in Val de Vie. Twice I was tempted enough to buy a stand only for me to sell it sometime later as my personal plans had changed.

A rapidly growing business, children happy at school in Johannesburg and other factors were the main reasons for me not making the leap and joining the great trek back to the Western Cape. But it also did not escape my attention that property prices in the Western Cape were galloping ahead while prices up north were languishing, as most of us up-country folk will know all too well.

I was looking for a property investment that was (a) not too expensive, (b) could generate an income, (c) I could use from time to time and (d) a lock-up-and-go.

The Polo Village at Val de Vie ticked all these boxes. The 60 units, designed by Stefan Antoni, are all one- or two-bedroomed upmarket apartments situated next to the pavilion on the Val de Vie estate.

Read: Residential property: A 10-year bear market

After a slight hesitation, I put my name down for one of these units. And oh, did I mention that one purchaser was to win a Ferrari California Turbo by means of a lucky draw, valued at around R3 million at the time, depending on the exchange rate?

And so it came to be, that on that fateful early summer evening sometime in October 2016 my name was the only one left standing after the 59 other owners were eliminated from the lucky draw.

I cannot tell a lie, as Abraham Lincoln once famously said, but I, together with my better half, were more than blown away. Imagine winning a Ferrari. A real Ferrari. It only happens to other people. It was an evening of champagne, joyous laughter and all-round merriment. I still get gooseflesh thinking about it.

And for a year we enjoyed driving around the Western Cape in our blood-red Ferrari. The petrol-heads among you will appreciate this joy better than most. The sheer power, acceleration and best of all: that unmistakable sound of a Ferrari in full roar. There is nothing on earth that sounds like a Ferrari at full throttle. That sound itself might explain why Ferrari has never spent a cent ever on direct advertising.

Holding costs

But then the financial advisor in me took over, calculating the opportunity, insurance and services costs and comparing that to the estimated costs of two students, one with three years to go at school and the other beginning a four-year university career this year, maybe more.

In the end it was a no-brainer: the Ferrari had to go, much as my ego was enjoying the ride…

The market for Ferraris, I found, is also affected by the economic cycles and it took four months before an acceptable new home was found: in this instance, the car went to a member of the victorious Rugby World Cup team of 1995.

And so I was left with the pleasant but equally daunting choice to make: how to invest the windfall-proceeds of R2.5 million after some small debts were settled.

Here was an opportunity to create a higher-than-normal-risk investment portfolio, enabling me to choose from any asset class anywhere in the world, and at the same time to track the value of this portfolio against the value of the Ferrari California over time.

Conceptually, the portfolio was chosen and forwarded to the editor of Moneyweb Ryk van Niekerk some two months ago, but I have been waiting for a suitable entry point as far as markets and more importantly, the currency, was concerned. So far the delay in executing this portfolio has been prudent as the US dollar has weakened sharply against the SA rand. Or as some commentators like to say, “The rand has strengthened…”

Read: Good grief, look what the rand is doing…

Dollar weakness coming to end

I think, however, that the bout of US dollar weakness/rand strength is coming to an end and have therefore decided to proceed with the launch of what I will be calling my Ferrari portfolio.

Here are a couple of ground rules that will be followed as far as the portfolio is concerned:

  1. All the funds chosen will be available to any investor in SA, on one or more local investment platforms. I have selected the Investec platform.
  2. All investments will be done at normal retail rates, with an advisory fee included, so as not to distort the returns.
  3. It will be aggressively managed by myself and any changes will attract capital gains tax, if applicable.
  4. I hope to report back on the performance of the portfolio every six months. The investment portfolio has a five-year investment horizon. It is an aggressive portfolio and will have a high degree of volatility.
  5. It will, in a sense, represent my best investment views for all to see – a daunting prospect, I will be the first to admit.
  6. This exercise is not meant to represent investment advice in any shape, form or manner. Any investor following this portfolio him/herself will do so at their own risk.

I spent a considerable time over the December break reading and contemplating views and forecasts from a wide range of investment commentators, locally and abroad. I have tweaked the portfolio somewhat since first presented to Moneyweb, but here we go:

Sygnia 4th Industrial Revolution fund: 15%

Coronation Emerging Market: 30%

Prescient China Fund: 15%

Sanlam India Fund: 15%

MI Plan Global Macro Fund: 25% 

I have done a full Morningstar analysis on this portfolio, which is too voluminous and technical to reproduce here, but interested readers are welcome to request one from me, if you are having trouble sleeping at night. I will also track this portfolio against the values of similar Ferrari Californias over time, to determine which is best: portfolio investments or hard assets.

So as they say in the classics: let the race begin and may the best man (or car) win!

Brought to you by Moneyweb 

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