William John strikes the balance between risk and return delivered through its strategies and operational activities, which are designed to manage risk whilst generating stable cash flows from day one. This all begins with our business approach.
Business Approach
With capabilities and connections in private equity and debt, foreign exchange proprietary trading and special opportunities, William John can offer qualified investors access to high yield returns in current market conditions, through its bond offering at a rate far higher than publicly traded securities.
Such a competitive offering can be justified as it reflects two key responsibilities of William John’s business approach.
First, diversification of operations. Specifically, this involves acquiring different assets offering contrasting payoff schedules for cash flows. For example, traditional private equity strategies offer a ‘J-curve’ profit schedule where investors will not realise their returns (derived from positive cash flows) until years into their investment project, whilst short-termist operations must deal with day-to-day volatility and the demands of investors for quick returns, constraining their net present value capability. At William John, we marry intra-day, medium term, and long-term projects together to create versatile but bullish cash flows that allow us to give investors a consistent, fixed coupon return quarterly so that they do not have to deal with the constraints of differing temporal business activities and the limits which come with them.
Second, access to deal flow. With over 100 years of combined experience in the leadership team, William John has unparalleled connections within industry to deliver exclusive transactional opportunities not available in the capital markets. Private deal flow is beneficial to all parties – the sell side of the deal is looking for private placement of capital from a trusted source. This is because tapping the capital markets for capital involves sharing information that could compromise their strategy or “trade secrets” and, more often than not, such partners only want to work with people they know and trust. Meanwhile, the buy side gains the benefit of proprietary access to world-class returns on exclusive deals. Overall, William John, its partners and most importantly, the investors, gain tremendously.
Business Strategies
William John to date has involved itself in a number of business activities and strategies that satisfy our approach to generating positive Alpha. Business activity is fundamentally split between discretionary and systematic opportunities. Discretionary opportunities are based upon profit opportunities that are identified within William John, principally relying on the knowledge, experience, and relationships that the company has built over the years to judge net present value projects accurately.
Strategies that exist under this category include the following:
Capital Markets
In the public capital markets, William John engages with several partners to help them raise capital through equity listings, including Initial Public Offerings, or private placements and capital sourcing.
Private Equity
William John has access to premium deal flow from seed and beyond, with companies looking for trusted partners at multiple stages of the company lifecycle ranging from start-ups to mid-size limited companies in multiple markets. Meanwhile, one of William John’s core businesses is systematic, relying on proprietary computational, statistical, and quantitative methods that seek profit opportunities in the markets which they are deployed into after years of refinement and proven, consistent execution.
Proprietary Quantitative Strategies
For a number of years, William John has worked with some of the finest quantitative trading strategists operating in the foreign exchange markets. The company engages with a number of Prime Brokers and utilises a specialist technology partner who provide the algorithmic based trading platform the company profits from.
Risk Management
Every business must deal with risks. Risk management is a fundamental component of business success. In a financial context, it is important investors understand our appreciation of, and attitude towards risk.
Risk, in a financial context, is the probability that something will differ from its expected outcome. Sometimes not everything goes according to plan. William John measures risk alongside its analysts and partners using a variety of methods:
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1. Statistical Analysis
Concerns accurate interpretation of the variance and standard deviation of underlying concepts such as returns, prices and other data, as well as observations of market and asset specific data to produce an objective picture of market and financial conditions.
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2. Fundamental Analysis
What do the fundamentals of the business, or the proposal look like? This involves our experienced team making discretionary decisions about market timing and opportunities, and who to work with and at what time. Alongside our data analysis, we rely on our team to make informed qualitative decisions about the business we engage in.
3. Performance Measures
In our external reporting to investors and internally inside the business, we are constantly making assessments about our risk-adjusted performance, and that of our partners, involving typical traditional ratio analysis (Sharpe, Treynor, Jensen’s Alpha etc.) as well as other discrete methods to measure risk-adjusted performance of the business and its projects.
“Two sides of a coin”
We often like to describe risk and return to our investors as representative of two sides of a coin. On one side of the coin, William John offers its investors a rate of return that the company feels compensates its investors exceptionally well for the debenture. On the other side of the coin, the creditor has an opportunity cost of capital of lending the money to the company instead of lending it elsewhere, for example in the public capital markets.
So, there is a risk (the cost of capital) that the creditor lends the money and loses out on other opportunities and must be compensated by William John offering an attractive return that compensates them for this risk, hence our return offerings are so ambitious, and justifiably so. In this way, risk and return are inherently linked concepts.
This is an important note, as risk can often be perceived as a draconian measure that an investor ought to avoid. On the contrary, higher risk investments are correlated with higher returns and vice versa. Sometimes the project with the lowest risk is far from the most attractive, and it is the money gained given money risked, or risk-adjusted return, that is central to our philosophy.