INVESTMENT MANAGEMENT

At Unio, we regard investment management as the concrete application of our investment philosophy.

“Two legal entities”
Structurally, we house this philosophy in two legally separate investment management entities.

• One is a subsidiary that invests on behalf of Unio’s shareholders. Its source of funds is a portion of the free cash generated by Unio’s acquired or home-grown operating companies and allocated by Unio to investment management in publicly-traded securities.

• The other is a fiduciary investment management subsidiary that invests capital on behalf of outside client-partners.

Both entities look similar in terms of asset allocation and securities holdings. This similarity extends to investment vehicles within the second entity – the fiduciary investment manager. For instance, a vehicle for US-based clients has similar asset allocation and securities to a vehicle for non-US clients.

“Cash-flow-driven asset allocation”
The application of our investment philosophy begins with asset allocation which at Unio consists of a spectrum of six asset classes: equities, cash & fixed income, short-positions, unique investment opportunities, real estate, and real assets.

Asset allocation is not an activity that takes place in isolation. It is the product of a continuous, back-and-forth “macro-to-micro” sweep between the big picture (our macroview of global financial, economic and political realities) and the up-close picture (our uniform evaluation of individual securities that generate cash flows).

Because Unio’s six main asset classes and the sub-classes within them are constructed out of cash-flow-generating securities and weighted to reflect the cash-flow characteristics of groupings of these securities, we describe what we do as “cash-flow-driven asset allocation”.

“Cash-flow-driven-portfolios”
Each of our six main asset classes has one or more sub-classes. For example, equities have six such sub-classes, cash & fixed income have four, and so on. In our terminology, a sub-class is equivalent to a portfolio. Each sub-class or portfolio is made up of a grouping of securities that share a common and distinct identity and form a “cash-flow-driven-portfolio”. Our six main asset classes are therefore each comprised of one or more “cash-flow-driven portfolios”.

“Cash-flow-generators”
Each “cash-flow-driven-portfolio” contains up to ten individual securities. Each of these securities is the ultimate source of cash flow generation. We think of an individual security as a “cash-flow-generator”. It may be a company, a fixed obligation or any other producer of cash flows.

“Cash-flow-generators within a security or entity”
There may be instances when we own a security or have an interest in an entity that itself is made up of individual securities. An ETF, or Exchange Traded Fund, is an example. If that is the case, we think of ourselves as owning and having to understand the constituent “cash-flow generators”.

“Selecting securities”
Selection of individual securities for portfolios follows a process described in our investment philosophy:

• Understand the “cash-flow production power” of an individual security and the risks
associated with it.

• Develop a “value-to-price discovery” estimate of the gap between the economic value of its cash flows and the security’s price.

• Determine investability by comparing one security with other securities or cash.

• Use “macro-to-micro vision” to arrive at these conclusions.

This selection process occurs whether the security is viewed for purchase or for sale.

“Total view”
When Unio says it manages publicly-traded securities, it is referring to its structure of six major asset classes each comprised of one or more portfolios (“cash-flow-driven-portfolios”) which in turn are comprised of up to ten securities (“cash-flow-generators”).

The determination of asset class weightings, portfolios, and securities all flow from one, cash-flow-based investment philosophy that involves a “macro-to-micro” sweep between big picture and close-up view. While we pay close attention to each security and each portfolio, our ultimate objective at Unio is to construct and manage the totality of our portfolios, and securities within them, as one unified whole.