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Objective

To preserve capital and generate superior long-term returns through investment in the equities of world leading companies. The Fund seeks to deliver total returns in excess of the risk free rate (the yield of US 10-year Treasury Bonds). The Fund only invests in listed equities and bases investment decisions on a long-term investment horizon.

Investment Strategy

The Fund invests across the globe in listed companies, both large and small, that are amongst the leaders in their product or service. The investment strategy is not driven by regional or local stockmarket indices or by fashion. Neither does the fund buy the famous for being famous. It simply seeks out companies with sound long-term prospects that are priced cheaply in the stock market in relation to their intrinsic value.

Investment Pillars

World Leaders

The Fund invests in world leaders. We believe that world leaders can be very valuable and also safe companies to invest in.

Having proven their business model in their domestic marketplace, they can extend their sales and competitive advantage, territory by territory.

  • Global companies offer diversification of geographic and currency risk.
  • Global companies offer exposure to growing and more mature economies.
  • Global companies, through scale and other barriers to entry, can create and sustain good returns on shareholders capital.
  • These companies because of their scale, know-how culture or practice can create very long-lived barriers to entry around their businesses.

Intrinsic Value

Intrinsic value can be defined as the discounted value of the cash that can be taken out of a business during its remaining life. In more everyday terms, intrinsic value can be thought of as the value a business might fetch if sold outright, in a private transaction. The stock market often prices businesses well above or below intrinsic value.

The Fund aims to invest in companies trading at discounts to appraised intrinsic value.

It is fair to assume that:

  • A financially strong company, which is selling well below its intrinsic worth will, in time, see its value recognised in its market price.
  • The greater the discount, of market value to intrinsic value, the greater the potential profit.
  • The greater the discount to market value, the greater the margin of safety.

Long-Term

The Fund adheres to a long term investment mentality.

There are several reasons to support this approach.

  • Transaction charges, in buying and selling shares and currencies, can be a significant drag on capital growth.
  • The capital investment cycle of most industries/companies in which the Fund invests is long term.
  • The Fund's strategy of investment at a discount to a businesses' intrinsic value often requires time for returns to achieve their full potential.
  • If a fund turns over 75% of its portfolio a year, and the stockmarket rises, say an average 8% per annum, then transaction costs would eat into the fund's performance to the extent that the manager would have to ensure 14% outperformance of the market each and every year just to keep pace with it.

Focus

The Mundane World Leaders Fund is a focused portfolio. It rarely exceeds 25 equity holdings. The Fund may also hold cash and/or cash equivalents if deemed appropriate.

The Investment Advisor considers that a portfolio concentrated in twenty to twenty-five holdings offers adequate diversification and also creates an exacting discipline for capital allocation decision making.

A target of 20-25 stocks gives adequate diversification of risk (4-5% approx in each security) but also helps maintain rigour in the investment process.

Human bandwidth is limited, you can only keep so many balls in the air at any one time.

World Leaders Fund Performance
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