Rationality
Strive after sound reasoning. Be mindful of contagious irrational market emotions. Be discerning enough to avoid the popular opinion and have the courage to foster contrarian insights. Profit from market folly; do not participate in it.
Integrity
Put the Fund’s interests first. Treat others as we would want to be treated if our positions were reversed. Be consistent, never mislead and never over-promise. Remember, it takes years to build a reputation but minutes to ruin it.
Alignment
Align our interests with the Fund’s. Don’t just manage conflicts of interest, eliminate them. Ensure that all of our investable net worth is invested in shares of the Fund alongside the interests of all the Fund’s shareholders. Total fee income is designed to be more sensitive to the long-term investment outperformance of the Fund than the size of assets under management. Outperformance Fees are awarded only when the Fund’s investment objective is met and these fees must be used to purchase additional shares in the Fund. View all shareholders of the Fund as co-owner-partners who have entrusted their capital to us for what may well turn out to be the remainder of their lives.
Industry
Always be employed in seeking to achieve the investment objective of the Fund which is to generate a total return that exceeds that of the global equity market measured by the MSCI ACWI. Cut off all unnecessary actions and simplify administration. The Fund’s outperformance shall be the principal means of building shareholder confidence. Never allow for segregated accounts or more than one fund which would dilute management’s time across competing priorities at the expense of the Fund.
Teamwork
Balance convictions with consideration for teammates. Give constructive feedback. Be upfront but courteous. Give credit where it is due. Do not be disturbed by petty issues or quarrels. Encourage a close family type culture. Associate with people better than oneself and emulate their behaviour.
Disclosure
Be candid. Tell all shareholders of the Fund how we think so that they can adequately assess our management and capital allocation approach. Be discerning on public disclosure of individual securities since good investment ideas are rare, valuable and subject to competitive appropriation.
Orientation
View each stock investment as if we are the owners of the entire underlying business. Investment is most intelligent when it is most business like. In the short-term, share prices are affected by market psychology; but over the long-term, share prices are determined by the economic progress of the underlying business. Look to the underlying earning power of the business and the margin of safety that the market price may or may not offer. Market prices are there to serve us, not to instruct us.
Safety
Intrinsic value is an estimate of the discounted value of the cash that can be taken out of a business during its remaining life. Always ensure there is a satisfactory margin of safety between an investment’s market price and intrinsic value so that there is adequate cover for absorbing the effect of miscalculations or worse than average luck. If securities are bought on this basis, even a moderate decline in earning power need not prevent the investment from showing a satisfactory result.
Risk
Use leverage and derivatives sparingly. Diversify appropriately. Do not trade even one night’s sleep for extra profits by taking on unnecessary risks. Research diligently and remember, risk comes from not knowing what you are doing.
Frugality
Waste nothing. Never spend money on things that don’t add value to the Fund. Strive after resourcefulness and self-sufficiency. Frugality drives efficiency.
Accountability
Accept responsibility for the consequences of one’s actions. Individuals make the best investment decisions because committees do not allow for precise isolation of responsibility.
