A holding company is a company whose primary business is holding a controlling interest in  other companies. A holding company usually does not produce goods or services itself. As opposed to ETF's the holding company will usually support the subsidaries in which it invests.

In our opinion next to ETF's, Investment Funds holdings can be a valid part of your core portfolio as by buying one holding you diversify your investment over a number of companies. You also hope that the holding company will look after your interests and will select well performing business to invest in and make adjustments to its portfolio in order to maximalize its return. The management costs of holding companies are usually inferior to the fees you would pay to an investment fund but  superior to the costs of an ETF. Usually the management of a holding or thrus tfund will be very familiar with the business of their subsidaries and should tke decisions  that are in the interest of the holding and its investors. Should! In the past we have seen that this is not a law set in stone as the ego of top managers can also play a detrimental influence (D'ieteren buying Moleskine, what was Axel Miller thinking?) Also holdings, just like individual investors, can make investments that did realise the potential hoped for and have to support losses. (think Softbank or Sofina in recent years)

When counting on regular dividends, it is crucial to avoid double dividend taxes, which cost you an important part of your revenue. European unification has not yet advanced that far that any European investor can buy any financial product in the European Union and only be taxed once. This is a pity because it obstructs a unified capital market but no way is this going to be remedied any time soon. So we just have to live with it.

As most of our readers are based in Belgium, we also put somewhat the emphasis on Belgian and UK holdings and this for tax reasons. Please note that most UK Trust funds usually pay a small dividend but this is not necessarily a disadvantage as the amount you will pay in taxes on these dividends will also be limited and more value will remain in the trust of which you can always sell some parts when needing cash.

Also, besides avoiding double taxation, it must be said that the Belgian market has a large number of interesting holdings, which often invest their capital worldwide and are certainly worth examining, also for non-Belgian investors.

In Belgium you will also find socalled mono-holdings such as Solvac, Tubize or KBC Ancora. These holdings are invested in one singel company. In the case of our examples Solvay, UCB and KBC bank) Of course then there is no diversification but they mostly do allow to buy the underlying business at a discount and benefit froma somewhat higher dividend. 

We did not build a model portfolio because, as mentioned above, every investor should decide which holdings appear apprpriate to them given his or hers own particular situation and how much risk he or she would like to take on board. A holding investing in infrastructure projects covered by long-term contracts with public instances (think TINC) should be much less volatile than a holding that invest primarily in private-equity.

An opposite example is Prosus, a considerably undervalued holding with, amongst other tech investments, a large interest in Tencent. Many analysts were of the opinion that the combination of investing in the fast growing, solid internet giant Tencent, in the booming Chinese market, combined with a considerable under-valuation, largely reduced the risk of the holding. It did, until the Chinese communist party decided to clamp down on private owned tech companies and the solid, can-not-go-wrong giant Prosus came crashing down. (It largly recovered since)

Whomever wants some ideas of holdings/trusts and how they have been performing well over last years can always consult our page "Performance of some products" where one can note that some holdings/trusts have been performing excellently.

If your portfolio is smaller and you want to limit the number of positions, you could also envisage including some holdings that invest themselves in other holding companies and investment trusts. One example is AVI Global trust that had Oakley Capital investments, Pershing Square, and Exor amongst its investments. Buying a share of AVI Global Trust thus also means you are investing in these underlying holdings. An interesting option in our view. 

Our advice on holdings is the same as for other categories of investment products; whatever past returns, please diversify. Do not let one position take up a too large share of your portfolio. Holdings, as funds can have an investment policy that works for years and then the tide may turn. Think Sofina. Some funds favor investing in a market niche such as growth shares, private equity and tech shares. The return of different investment categories can vary drastically over time so diversification is a must in order to limit your risks.