Patient Capital

 

The world of investing is beset by many challenges and hurdles. At the core is the fact that we are humans and human behaviour is often driven by emotions. The two emotions that are most often cited as being prevalent in financial markets are greed and fear. It is the ability to control these two emotions that is widely claimed to have been the key to the success of legends such as Warren Buffet.

In a recent interview highly acclaimed investor Howard Marks made some other very valuable observations. He cited a money manager that he had found in his research from the American Midwest. This manager, for 14 years, had returns that had been between the 27th and 47th percentile. Hence for 14 years his returns had been in the second quartile of managers. This may not sound spectacular to anyone at first glance. However, the net result was that, over the same time period this manager was in the top 4% of managers in his universe. This served to illustrate such a vital point in investment management. That is, if we can eliminate the bottom half of investment outcomes over shorter time periods, we should have an exceptional outcome over the longer term.

A key issue facing the industry today is that time frames have become shorter, not longer. It is very hard to marry up time horizons of clients and managers in our modern world. We feel one potential solution could be to try and have better and more frequent communication between the investor and manager. The manager and investor, in the end, are on a journey together. This needs to be aligned in its thinking and time frame. In the above example it is very unlikely that any investor that was looking at the best performing fund over the previous 12 months would ever have selected this manager from the Midwest.

There are very few long-lasting competitive advantages in investment management. In the Sanlam Global High Quality Fund, we feel that time horizon is an advantage we can exploit. We spend our time trying to identify great businesses. Then we look to pay the correct price for that business. Often this is not the bargain basement price that some investors may desire, but one that we feel is acceptable. Once we have bought a company, we then need to watch to see that this business stays great and that it doesn’t become excessively overvalued at any point in time. In doing this we try to think like business owners and not business renters.

This concept of “getting rich slowly” is one that resonates very deeply within our philosophy. As a natural by-product of this thinking, like the manager mentioned by Howard Marks, we also look to have an excellent outcome over a 14-year time period. This outcome does however require patient capital that has a time horizon of decades, not years. This is a harder attribute to attain in today’s fast paced and dynamic world but one that for all stakeholders is exceptionally rewarding.



Learn more about Sanlam Global High Quality Fund



Fund risks
The Fund may invest in companies based in emerging markets which may involve additional risks not typically associated with other more established markets such as increased risk of social, economic and political uncertainty. The Fund has holdings which are denominated in currencies other than sterling and may be affected by movements in exchange rates. Consequently the value of an investment may rise or fall in line with the exchange rates.

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Marketing material. Issued by Salam Investments UK Limited. Authorised and regulated by the Financial Conduct Authority. Registered office: 24 Monument Street, London, EC3R 8AJ. The value of investments can go down as well as up and investors may not get back the full amount invested.

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