For over a decade, our team has worked together to refine an investment approach informed by both successes and (even more instructive) mistakes. Our objective is straightforward but ambitious: to deliver double-digit returns over rolling five-year periods. We believe that achieving this requires a long-term, absolute return focus.
First, we focus on absolute returns, rather than returns relative to an index. Many fund managers build portfolios that closely track their benchmark, often spreading investments across hundreds of stocks to minimise performance differences. We think this approach is destined to produce mediocre results, as portfolios end up invested in many companies and sectors irrespective of their prospects. Instead, our portfolio is concentrated in just 20 to 40 of our highest conviction investments. This means the Fund looks meaningfully different to our benchmark – and we believe that’s necessary to achieve our return objective. Over the long term, we expect this focus on absolute returns will also lead to outperformance versus our benchmark.
Second, we are long-term investors. We believe that stock prices eventually follow company earnings, and much of our work focuses on understanding the likely trajectory and risk to long-term earnings growth. When we buy shares in a company, we’re not speculating on its stock price next quarter – we consider that we’re buying a stake in a business that we intend to own for years.