Perhaps a proper thing to begin with would be to explain what we are not. We are not passive investors who think that valuations capture accurately the future prospects of companies. We don’t believe in blindly following momentum herd or slavishly adhering to what AI algorithm indicates as a right asset to buy —though we do acknowledge that those who completely ignore momentum-chasing algos do so at their own peril. We don’t believe that investment decisions can be made on numbers alone, even by super computers and complex machine learning algorithms. Passive has its place, providing low-cost market access with, on average, better after fees results than active managers.
However, it has little to do with the process of allocating capital to innovative companies – though on that point it has much in common with many active managers. We are not a run-of-the-mill active manager either – we believe this term has become a one-size-fits-all T-shirt that is very unhelpful to investors. It has been hijacked by many fund managers who think it suggests ‘activity’ and simply being different from an index. The reality is that much of this activity has more to do with trying to outsmart other investors than with the creative deployment of capital, and that defining active as being different from an index is to start in the wrong place. Many of those declare themselves firmly in the camp of Value investing or— more popular these days —Growth investing and stay in that tent regardless of evolving market conditions.
This is why most active investors fail to deliver returns that outperform passive investment strategies over the long term. They’re not even trying to do the fundamental job of investing. Some perceive the collective failure of active management as an argument to embrace passive. We see it as an opportunity to redefine our original purpose of deploying clients’ capital into tangible, return-generating activities. And we believe that redefinition is ‘actual investment’
Actual investment is not easy in our world of streaming 24/7 news and clickbait-driven chase after attention grabbing headlines. Noise seems to be ubiquitous and it gets confused with rational judgement. Active investing requires the resolve to focus only on what really matters, to think independently in the face of camp of consensus that seems to be on the other side, and to maintain a long-term perspective. It requires a willingness to stand apart, being different, to accept uncertainty and the possibility of getting it wrong. Most of all, it requires a rejection of the now conventional wisdom that has led our industry astray: investment management is not about processing power, constant trading and speed. It is about imagination and creativity, due diligence and inquisitiveness, and working constructively on behalf of our clients with inspiring individuals and companies who have greater ideas than their competitors or our own.
We believe our approach to investing not only consistently delivers positive outcomes for clients, but it also helps to develop great companies that provide for the needs and wants of people, thereby benefiting society as a whole. Investing responsibly for the long term is not counter to outperforming for clients, it’s intrinsic to it.
Reminder: consider capital at risk