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8 March 2024 CFA Institute Enterprising Investor

Know Your Prospect (KYP): What’s in Their Portfolio and Why?

  1. Barbara Stewart, CFA

I interviewed 50 amazing people — 25 women and 25 men — from different professions and industries for my 14th annual research paper released on International Women’s Day, 8 March 2024. To celebrate the occasion, I wanted to share some examples of how women around the world are investing. Below are 10 responses to the question: What’s in your investment portfolio?

While I was conducting my interviews, I realized that a prospective client’s existing investment portfolio is a potential diagnostic tool for investment advisers. We often look at their portfolio as something that needs to be “fixed,” but what’s in it may reveal useful information about what is important to the prospect and how they may have worked with their previous adviser. This strikes me as very similar to how medical clinicians use diagnostic tests to establish whether a patient has a particular condition. 

When working on a prospect’s investment policy statement (IPS), we normally think about whether they want to exclude oil or tobacco stocks, but maybe they have other unique preferences that have led them to invest in a certain way. Using their existing portfolio to diagnose their investing habits and persona just might lead to a higher conversion rate.

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Valentina Díaz Estévez, Finance Professional, Dublin

“I’ve lived in several different cities: Río Gallegos in the south of Argentina during my childhood, Paraná, Buenos Aires, and now Dublin. I love new experiences: Learning how to start again makes me a stronger person. I try to learn from every step in my life. Currently, I am in Ireland, where I have embarked on a master’s of science program in fintech at the National College of Ireland (NCI) in Dublin. I am honored to have received the Government of Ireland International Education Scholarship (GOI-IES) for the 2023 to 2024 academic year, a prestigious award granted to only 60 recipients out of over 5,000 applicants.

“In terms of my investment portfolio, it is diversified with 70% in US dollars and 30% in Argentine pesos when I was living in my country. Half of my dollar holdings are invested in Latin American funds, while the other half is allocated to S&P exchange-traded funds (ETFs) and more conservative stocks, such as Proctor & Gamble, McDonald’s, Walmart, and Coca Cola. My pesos are invested in funds that are linked to inflation, and I keep about 10% liquid in money market funds to pay for my day-to-day expenses. Additionally, I always maintain a small allocation to gold as a hedge for quality during periods of volatility.”

Umulinga Karangwa, CFA, Founder, Equity Investment Adviser, Africa Nziza Investment, Cape Town

“I started my career as a tax advisor, but I found the hours to be grueling so decided to shift to finance. In the last 20 years, I’ve worked and lived in Belgium, the UK, and Africa. I now do business in both Cape Town, South Africa, and Mauritius, and for convenience, I own an apartment in each city. My firm Africa Nziza provides investment advisory services for institutional investors and investment appraisal services for private equity investors, and we conduct independent investment research on investment opportunities in the region.

“My personal investment portfolio consists of 30% real estate and 70% equities and ETFs. Living in Africa, you have to buy real estate to hedge against inflation (currently 7%), and this issue is compounded by the depreciation of the currency. Mauritius and South Africa are not very investable stock markets. My pension fund is still housed in Europe, and it is invested mostly in ETFs. Otherwise, I’ve held onto the S&P 500 for 20 years now, and it has appreciated so much more than anything else. I didn’t mean to have so much of my money in the US market; it just happened. Ten years ago, I decided not to rebalance — why argue with success?”

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Sabrina Amélia de Lima, Portfolio Specialist, Itaú Unibanco, Belo Horizonte, Brazil

“My investment portfolio is focused on global diversification. I believe this is the cornerstone of risk management, portfolio construction, and achieving long-term consistent stable returns. Here is the breakdown of my portfolio: 

  • “20% in inflation-linked assets, such as national treasury bonds earning about IPCA [the official Brazilian inflation index] plus 6% in debentures of good companies 
  • “20% in international ETFs, such as IVV, QQQ, and VNQ, and equities, including Coca-Cola, Meta, Alphabet, PayPal, and Ferguson PLC
  • “5% in alternative assets, such as cryptocurrency funds via ETFs
  • “5% in mature companies in the Brazilian stock market, such as Itaú, Vale, and Weg
  • “50% in fixed-income funds and multimarket funds managed by Itaú Asset, Kinea, Kapitalo, Vinland, and others 

“My profile is more aggressive in that I accept taking risk in order to seek greater returns. My main concerns are inflation protection and geographical diversification.”

Sloane Ortel, Founder and Chief Investment Officer, Invest Vegan, Provo, UT 

“I formed a long-term view of how I wanted to shape this industry, and I started Invest Vegan in 2021.

“We currently have 19 holdings in the Invest Vegan portfolio including:

  • “Farmer Mac: This mission-driven lender was chartered by Congress to create a secondary market for agricultural credit and reduce the cost of borrowing for American farmers; 99% of its business is recurring fees and net effective spread.
  • “Welltower: a REIT that is one of the largest investors in senior assisted living. Staff turnover is destructive in that business, and I love that they are focused on meaningfully higher staff retention, which also drives meaningfully higher results.
  • “Duolingo: an app that helps anyone learn languages, music, and math for free. These universal skills are among the most meaningful drivers of economic mobility and personal fulfilment for individuals.

“To me, veganism is a coherent ethical system that focuses on avoiding harm to living things and seeks a regenerative relationship with the world. It’s not a diet. It’s 1,000 tiny steps that touch on everything from your toothpaste to choosing trains over planes. I named the firm Invest Vegan because, to me, that kind of holistic thinking is a precondition for a long-term strategy that deserves a client’s trust.”

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Ann-Christina Lykke Motzfeldt, Art Director, A Fair Agency, and Co-Founder, Moneypenny and More, Rønde, Denmark 

“Seven years ago, Linnéa Schmidt and I co-founded Moneypenny and More, which is Denmark’s and Norway’s largest online investment community for women. We facilitate discussions, host lectures and events, and publish books on investment. I was a full-time art director for 16 years, and I still do a bit of art direction to earn extra money, but most of my time these days is spent working on Moneypenny and More. I work really hard — many, many hours a day. This has been such a wild ride. I love to inspire and help women strengthen their relationship with their finances.

“Being self-employed I don’t have a pension, so I created my own retirement investment portfolio. I’ve been trading since 2008, and I currently hold 18 individual stocks. I prefer stocks to ETFs because I like to buy companies I know that have products and services I use in my daily life. I should probably be more globally diversified with my company selection: 11 are Danish, five are American, one is Swedish, and one is German. On the other hand, my sector selection is extremely well diversified: banks, pharmaceuticals, tankers, tech, electric cars, travel, software, and nanosatellites. Overall, my portfolio is doing very well — I’ve enjoyed an average annual return of 10.88%. 

“Outside of my core portfolio I own four different alternative asset classes: classic cars — I enjoy driving my Porsche 911; real estate — an apartment that I rent out; start-ups — two that are ‘doing good’ for the world, one fighting for diversity in Denmark and the other helping Ugandan women start their own small businesses. And, of course, my investment in Moneypenny and More.”

Molly Howlett, DO, Internal Medicine Specialist, Kootenai Health, Spokane, WA 

“In terms of how I make financial decisions or choose a financial adviser, I am a hyper-logical person, but my mom was very intuitive. I think there is incredible value to following intuition in making final decisions, after properly analyzing and narrowing choices. Intuition is something I have to practice, but following that ‘gut feeling’ has rarely been wrong.

“What is in my investment portfolio?

  • “60% equity mutual funds
  • “10% gold and silver
  • “25% real estate
  • “5% crypto

“I outsource my portfolio to a wonderful financial guy who some of my bosses at work recommended to me. He is a Mormon, has a huge heart, and is committed to service. Admittedly, I don’t pay much attention to my investments. Since I can’t see them or touch them, I always have this feeling that it all might somehow disappear. But I trust my adviser. He is a beekeeper, and we spend most of our time talking about bees! He makes me honey, and I’ll make him cakes.”

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Therese Nyren, Founder, Lucy Global Fund, Stockholm 

“One day, a female friend said to me, ‘You should start a fund.’ At first, I thought, ‘No I can’t.’ But then I said to myself, ‘Well, why not?’ In my 10 years as a private banker, I met so many entrepreneurs, and I thought if they can do it, then I can do it! I put all my money and all my passion into Lucy Global Fund, so this is my entire investment portfolio. Lucy Global Fund is a global equity fund with a main focus on companies in lifestyle, health, and beauty as well as companies with well-known and attractive brands. The name Lucy was inspired by the character of the same name on the 1980s TV show Dallas

“My top 10 holdings are Apple, Movado Group, Musti Group Oyj, Nike, Coursera, Microsoft, Hugo Boss AG, Burberry Group PLC, Matas, and Kering SA.

“I am very proud that we are now on nine different platforms in Sweden. So many people told me not to start a fund, but when people say no, it triggers me. I’m really stubborn, and I want to show them. I don’t listen; I just do it — I solve the problem. Look where we are now! Lucy Global Fund was up 17.15% in 2023.”

Elisa Chiu, Founder and CEO, Anchor Taiwan, Taipei City, Taiwan 

“I am someone who can creatively connect the dots and naturally bring people with different disciplines together — tech to art, semiconductors to cars. I started Anchor Taiwan in 2017 as a platform for world-class entrepreneurs, investors, and professionals to succeed in Asia through Taiwan.

“Although I spent a good portion of my career as a professional investor, a buy-side hedge fund trader, my investment portfolio is far from typical, and it goes against all the principles I learned from finance textbooks. My investing approach reflects my choice related to fulfilling certain psychological needs in order to maximize my entrepreneurial endeavors. I have two extreme opposite investment buckets: the first is 100% cash, and the second is a portfolio of early stage start-ups and VC funds. In order to take crazy risks, I need that cash buffer to allow myself to pursue my calling and go all in to build something I truly want.”

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Shaima Bin Hussain, Entrepreneur, Hawalli Governorate, Kuwait 

“I have more than two decades of experience in banking, entrepreneurship, business development, and financial services. I play an active role in empowering individuals, especially women, upscale their place in the corporate world and social setting. I have a supportive web of local and international public figures who help me advocate for positive socioeconomic changes focused on women of different generations.

“I used to have a highly diversified investment portfolio during my banking career; however, now as an entrepreneur, I don’t have the time to make this a priority. I am stuck with a real estate fund focused on student housing in the UK that I’m unable to exit — I am waiting for the fund to be liquidated. In the beginning, this was a great investment, but it hasn’t paid out anything for the past six years. Otherwise, I have a concentrated bet in one stock ااستهلاكية, a Kuwaiti services company that produces consumer items such as plastics and bags. They recently restructured as a holding company and acquired entertainment services for kids. I am actively looking for more real estate funds that generate monthly income.”

Lisa Melchior, Founder and Managing Partner, VERTU Capital, Toronto 

“I am not the person who talks the most in most rooms, and I’ve been told that being a good listener is a genuinely unique skillset in my industry. In retrospect, I feel grateful for having grown up in a loud Italian family: My dad was a big talker. I learned how to be strategic and say things that would pierce through the noise and get everyone’s attention. This served me well starting out in the business as a junior — I learned to ‘wait for the pause’ and speak strategically. My skills learned at the dining room table have translated well into business!

“What is in my investment portfolio? My largest holding is my interest in VERTU Capital, so I am very long private equity. As a family, we have real estate holdings — my husband is a real estate builder and developer, so we have lots of exposure there. In terms of my stock portfolio, it probably isn’t surprising that as a private equity investor, I would be very comfortable with risk: Being invested 80% in equities has served me well over the last 25 years. In the last five years, I’ve added some uncorrelated investments, such as hedge funds and private credit. Aside from my equity book that is managed on a discretionary basis, I have a personal equity portfolio of 10 to 12 very high-quality businesses that I am happy to hold forever, such as Berkshire Hathaway, Microsoft, Apple, Pfizer, and Nike. I also love to collect art, but this is more of a passion than an investment. I like to support living contemporary artists — primarily Canadian.”

Conclusion

This sort of context is a great way to begin the KYP process. After that, there’s Next Level KYP, or Know Your Prospect Better! After you understand what’s in their portfolio, focus in and discuss how they came up with their existing investment strategy, why they built their portfolio the way they did, and ask about their unique preferences and what inspired them.

For more on this topic, read the full report “What’s in Your Investment Portfolio?” by Barbara Stewart, CFA. 

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All posts are the opinion of the author. As such, they should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Institute or the author’s employer.

Image credit: ©Getty Images / KatarzynaBialasiewicz


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