Quarterly Report for Private Clients: An Analytical Overview

Good Morning Ladies and Gentlemen

”It is time for a new generation of leadership to cope with new problems and new opportunities.”

John F. Kennedy

We prepare a comprehensive report for our private clients every quarter. As we transition into the fourth quarter and continue our established practice, I am pleased to share the latest quarterly report, which was sent to our clients.

„Dear Customers

The third quarter of 2025 was once again very positive for us all. Our private clients‘ portfolios continue to perform well and show resilience, enabling us to reduce risk in some areas and build up cash positions.

As always, please read this quarterly report carefully. It contains important information about the current situation and the outlook.

September Event Recap.

In September, we enjoyed a wonderful late summer’s day with our clients on an exciting city tour that explored the history of money in Zurich. The tour focused on historical facts about money, the history of money lenders in Zurich, and the question of what the silk industry has to do with banks.

After the tour, we had the opportunity to discuss what we had heard and seen over drinks and snacks at the historic James Joyce Pub before moving on to the traditional Kaufleuten restaurant for dinner and to round off the evening.

The Path to Higher Inflation

In developed economies, the near future will be increasingly shaped by demographic change, increased defence spending, changes in global supply chains, the construction and expansion of ever larger data centres, and the question of generating affordable and, if possible, sustainable energy. Expected increases in government deficits are likely to play a role in this. The changes in these areas will lead to increased capital requirements and, as a result, higher costs for borrowers. The combination of higher capital requirements, higher borrowing costs and government deficits will lead to higher tax burdens and, with an unavoidable delay, higher inflation.

Why is this important, you may ask?

Additions to an Article on the Stock Market Boom from The Wall Street Journal

This is important because it will influence our investment behaviour. A journalist recently addressed this topic in The Wall Street Journal. Today’s boom, or, if you will, the bubble surrounding artificial intelligence. In our view, this boom has much in common with its predecessors, such as the leveraged buyouts of the 1980s, dot-com stocks in the 1990s and the property market in the 2000s. Each of these bubbles featured stocks of companies with dizzying valuations, easy and sometimes relatively cheap credit for risky borrowers, and trendy new financial products.
But something feels different today than it did back then. The wave of speculation has spread far beyond the usual stocks, bonds and real estate. Cryptocurrencies, a brand-new asset class, have now reached a value of around $4 trillion. According to the American Gaming Association, Americans bet $150 billion on sports last year, a 24% increase over 2023. Gold, a hedge against bubbles, seems to be in a bubble itself. Speculation is now firmly embedded in the political, economic and cultural psyche. Instead of opposing speculation, official Washington is actually promoting it. The Federal Reserve is lowering interest rates, not without political pressure. The current US administration is loosening regulations on the entire financial system, and the president’s family is benefiting from this. I am not writing this to moralise, but to show how much the environment has changed quickly. Speculators buy products with no intrinsic value or connection to a productive asset, and their prices are being pushed into new spheres.

But just as with any bubble, a few seem particularly aware of these risks. Warren Buffett addressed this issue in what may be his last letter to Berkshire Hathaway shareholders.
While many wonder why he has built up a record cash position in recent years by reducing his stock holdings for eleven consecutive quarters, he has been quite transparent about it. For him, some parameters no longer add up. So, for risk reasons, he prefers to hold an increased cash position, allowing him to increase existing positions and enter into new ones in the event of setbacks.

We take a similar view. We buy in areas where we can expect solid cash flows in the coming years and reduce positions that no longer meet our valuation criteria.

Our Own Products

We are often asked why we do not include our own products in private client portfolios. The reason lies in the question of governance, i.e., whether and to what extent an asset manager or bank should use its own products at all. Those who use their own products generally do so for financial reasons. Own products can generate additional income. Well, we have always believed that it is inappropriate to fill private client portfolios with strategies managed by our asset management.

Conclusion

We buy dividend stocks on weak days and sell shares in companies whose valuations have reached their ceiling on strong days. We are patient and invest for the long term.

As noted in the past, markets fluctuate, but our responsibility remains the same.

Passive income

We endeavour to build portfolios that are somewhat less volatile than the markets and can recover as quickly as possible after slumps, while always showing a reasonably stable dividend yield and thus generating a solid passive income within the scope of the invested assets. We have managed to do this quite well so far. Despite the financial crisis of 2008, the Covid-19 pandemic, the war between Russia and Ukraine, the oil crisis (when the price of crude oil on the futures markets was negative, i.e. investors received money when they bought oil because there was not enough global storage capacity for oil already produced due to a slump in demand), the gas and oil crisis following the Russian attack and the resulting sanctions against Russia and the subsequent very sharp rise in fossil fuel prices, the inflation and subsequent interest rate shock, the property crisis in China, global political uncertainties, the prophecies of doom regarding the abolition of the USD or the ultimate banking crash, or the dissolution of the EU, the euro, etc. Our portfolios have proven resilient during all of these crises. This resilience comes at a price. The price is the lower return compared to more aggressive portfolios, which, in certain situations, enable significant gains but often plummet during crises and remain stuck at the bottom for a long time. On the other hand, the growth in our portfolios also comes at a price compared to a zero return on savings. The price for this is measured in the short-term volatility of our portfolios compared to the low volatility of savings deposits.

Our investment approach: cash flows / passive income / purchasing power

With our investment approach, we endeavour to invest in companies that can generate mostly positive cash flows over the business cycle with their intrinsic business model and are willing to share them with their investors.
Our universe is regionally limited primarily to Europe and Switzerland. We do not invest directly in the USA, but a third-party product may cover US exposure. In terms of sectors, we want to be flexible and invest across most sectors, but we have never invested in banks to date.
We also try to invest directly wherever possible and sensibly. In other words, we buy the shares of company XYZ directly and avoid investing in investment funds, as these generally increase the portfolio’s overall costs. In return, we accept a lower level of diversification and possibly higher short-term volatility.
We always measure the weightings of the individual positions in the portfolios we manage as a percentage. Therefore, you will probably never see an even number of shares in an investment. We believe optimum portfolio weightings are between 1% and 5%. If a position is below 1%, it will either be liquidated entirely sooner or later or built up to over 1%. Positions above 5% are trimmed back sooner or later. When adjusting to a position, we consider the market environment, outlook, dividend yield, valuation ratios, etc., and often take our time to change the 1% – 5% rule. It is always essential to us that you understand this investment approach, which should also be in your interest. If you are unsure about our approach, don’t hesitate to contact us, and we will be happy to explain what this approach is all about. In the past, we have found that our approach has led to favourable long-term performance and purchasing power retention thanks to the compound interest effect.

The frequency of our reporting (repetition)

As we have welcomed new clients, I would like to discuss our report briefly. We are obliged by supervisory law to report every quarter. At least in part, this is done for us by the respective custodian bank at the end of each quarter with its quarterly statements. We therefore do not usually send out our reporting at the end of a quarter, as our clients can already view a quarterly statement from the Custodian Bank on their online banking tool. We prefer to report between the ends of the quarters, but we do not commit ourselves to a specific date. Instead, we are somewhat guided by our agendas and ask for your understanding. In the first half of the year, the annual financial statements, the audit of the annual financial statements by the Financial Market Authority, the Annual General Meeting, two Board meetings, the internal audit and then the regulatory audit by the Financial Market Authority determine the timetable. There will be fewer time-consuming administrative activities in the year’s second half.

Relevant changes with the defined investor and risk profile

As we do every quarter, we must point out that this report contains the suitability test required by Art. 19 Para. 2 of the Asset Management Act through the allocation ranges shown in the supplementary information. The allocation ranges reflect strategy definition based on the jointly developed investor and risk profile. We thus continuously review, among other things, the investment objectives and preferences we have jointly defined. Suppose the defined bandwidths are adhered to, or there is only a slight deviation due to market or value conditions. In that case, the portfolio in Annexe 2 of the asset management contract is suitable. As always, however, we request that you contact us immediately if there are any relevant changes on your part concerning the defined investor and risk profile. Please also note that a detailed breakdown of the costs of the mandate for the past year can be found in the year-end statement from Bank Julius Baer, and the anticipated future expenses for the mandate can be found in the enclosed list and visualisation of the expected total costs of an asset management mandate with Incrementum AG.

Thank you very much

Thank you, dear clients, for your trust in my/our deliberations and in what we do. I hope I have given you insight into your asset manager’s mindset. If you have any questions, please do not hesitate to contact us. We will be happy to try to answer them.

Now my partners and I wish you a wonderful fall with all our hearts.

Stay healthy, and I hope to see you soon!

Best wishes”

Ladies and Gentlemen

Feel free to send your messages to smk@incrementum.li. Many thanks, indeed!

I wish you an excellent start to the day and weekend!

Yours truly,

Stefan M. Kremeth
CEO & Head of Wealth Management
Incrementum AG – we love managing assets

Tel.: +423 237 26 60
Cell: +41 79 303 48 39
Im alten Riet 153
9494 Schaan/Liechtenstein
Mail: smk@incrementum.li