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Philosophy

Independent Thinking

Conviction Investing

Absolute Returns

Philosophy Detailed - intro

Our investment approach is shaped by the below beliefs.

Independent thinking

First principles thinking is key to alpha generation. We use external research but never rely on it.

Conviction investing

Great ideas are rare so should be made to count. Where we find attractive risk-reward we invest with conviction albeit we always look to avoid anchoring. We seek to have strong convictions loosely held: if we feel the facts have changed, we will change our positioning.

Absolute returns

Risk Management is key to long term compounding. We think in absolute rather than relative terms, we manage money without reference to benchmarks and we seek to make positive returns in all market environments.

Alignment

'Show me the incentive, I’ll show you the outcome’. We are heavily invested in our own strategies and believe correct incentivisation and successful outcomes are closely linked.

Stock prices

Over the medium to long term it is corporate earnings that move share prices.

Stock selection vs. Portfolio construction

Analysing companies is one skill set; creating a portfolio that reflects positive outcomes is a completely different skill set. We prioritise both.

Risk management

Risk management is the critical part of any investment process. Avoiding large drawdowns is key to successful long term compounding. We often find rejecting investments is more important than selecting investments.

Flexibility

Economic activity is cyclical and market leadership changes. The optimal investment strategy should be unconstrained and adaptable and not beholden to factor or ‘style boxes’. Such rigidity is restrictive to alpha generation.

Mean reversion

In the absence of structural change, what is out of favour will come back into favour. We believe in mean reversion.

Short selling

Short selling requires a unique and highly differentiated skill set. Many long-short strategies eventually end up as long-only businesses as a result. Our short book is our greatest source of alpha.

Volatility

Volatility and risk are not the same thing. We always look to mitigate downside risk but our job is to make money and so we are comfortable taking on equity-like volatility.

Keep learning

Mistakes and errors are part of life and represent opportunities to learn. To get good at chess it is better to spend time reflecting on the games one has lost. Our investment process is a product of 25 years of learning, refinements and occasional mistakes. We are always looking to get better.