Aorere invests primarily in mining and mineral exploration companies. Most investments are held for the longer term although part of the portfolio is committed to shorter-term share-trading activity.
Risk is minimised to the extent that it can be by the following strategies:
Due to the very narrow spread of investments and the minerals sector focus, the Aorere investment approach is likely to provide returns either better or worse than market averages. The Company is structured and operated to achieve growth in shareholders' funds and more particularly in the net tangible asset value of each share. The objective is not to make trading profits on a regular annual basis by selling our successful investments. A year in which net tangible assets per share increases by 20% or more is a good year for the Company, regardless of the accounting profit or loss that may have been incurred.
However, the directors cannot make any forecasts or predictions as to future profits. The business of the Company involves (as is discussed further below) investment in equities, most of these being junior mining companies in development mode. While these investments have in the past, on balance, been successful, the directors are unable to predict the success, or otherwise, of present or proposed investments and are similarly unable to predict when such successes, or otherwise, might occur.
Currency Risk
Because some of Aorere's investments are held overseas their value in New Zealand dollars is affected by exchange rate fluctuations. A strong New Zealand dollar has an adverse impact on the value of the portfolio. Conversely, a weak New Zealand dollar enhances the local value of our overseas investments.
Portfolio Risk
Often four or five investments represent 90% of the portfolio value. This occurs because further funds may be directed toward an investment opportunity once it starts to appreciate in value. This approach is contrary to classic portfolio management theory; it increases the investment exposure at the same time as the potential downside increases. The outcome of such an approach is increased volatility in the investment returns achieved by Aorere.
