Planning

Mind Over Matter

Balentine utilizes traunching in an effort to ease the transition between liquid and illiquid assets

“The test of a first-rate intelligence is the ability to hold two opposing ideas in mind at the same time and still retain the ability to function.” -F. Scott Fitzgerald

By the time you read this, hopefully you are the lucky person who won the $168M Mega Millions lottery (a mere $95.4M after tax and cash option choice) — although if you’re a Balentine client, it’s more likely that you’ve built and sold a business as a successful entrepreneur. In either case, now that you have a liquid pool of capital, the next question invariably becomes: what’s the best way to invest those assets in the currently volatile market environment?

Traunching

At Balentine, we utilize a systematic, scheduled traunching discipline for new clients.

The word “traunch,” derived from the French tranche or “slice,” refers to one of a series of payments to be paid out over a specified period. You may have heard this terminology before in reference to venture capital investing, where investors may pledge a certain amount of money to a start-up but allocate it periodically in chunks contingent upon meeting pre-established performance metrics.[1]

Specifically, we divide client capital into three equal traunches invested in equal sections of time over a six-month timeframe.

We believe traunching is the best approach for new clients because it integrates their short-term need for a gradual transition into a new method of wealth management and their long-term need to put their money to work so that it can grow.

Short Term – Facilitating a Gradual Transition

Many of our clients are entrepreneurs who have experienced a liquidity event, like selling their business. Up until that point, they have had most, if not all, of their money tied up in their operating company. Most entrepreneurs are used to full control over their operating company – so watching their assets move with the daily gyrations of the market is often uncharted territory. The daily, instantaneous mark to market of portfolios from 9:30am to 4:00pm, Monday through Friday, can cause quite the consternation as the constant refresh on your phone keeps the dopamine flowing. Excess dopamine is sometimes linked to being more competitive and aggressive with less impulse control.  Thus, our approach seeks to instill a calm temperament by helping with transaction planning before and after the sale of the company.

Traunching helps to mitigate the “illiquid but now liquid” aspect of entering the market by allowing our clients to gradually wade into the market rather than doing a headfirst dive.

Long Term – Putting Money to Work

One of the most common questions I hear from new clients is: “Is now a good time to invest?”

The very hard truth is we don’t know if now is the single best time to invest – and neither does anyone else. However, we believe that over the long run the market will deliver investment success – and that it is necessary to take on some short-term risk to achieve these long-term results. Further, we believe our systematic traunching approach helps to mitigate risk in the short-term by breaking up a large pool of liquid capital into chunks to be invested with an agreed-upon schedule.

It can be hard to connect with this long-term approach because we live in the short-term. In fact, the long run is simply a collection of short runs. How can we remember to stay focused on the long-term when we’re dealing with the challenges of the short-term? For example, investors know that 2018, 2020’s COVID drop, and recently 2022 have thus far been bumpy rides.

I encourage you to find some parallels between your work as a business owner and investing. As a business owner, do you remember facing difficult decisions from personnel issues to supply chain issues (hello last 3 years)? During those few tough years, you were probably forced to “run lean” and make sacrifices knowing you would come out on the other side. Likewise, even if markets look choppy in the short-term, long-term, the decisions you make now could help you pull through and lead to greater success long-term.

Conclusion

Looking back on their lives, clients often echo a universal piece of wisdom regarding their entrepreneurial journey… “I wish I would have started sooner and not wasted so much time.” “Beginning was the hardest part.”

Every journey from owning a company to investing in the market is fraught with perilous times, but we believe you see it through knowing the pain is temporary and the reward worth the squeeze.

Let us help you begin.

[1] Investopedia, Traunch

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