Durable Investing

When measured over years, portfolio out-performance relies on above-average stock selection, strictly contained mistakes and a handful of winners. Of the nearly 5,000 Emerging Markets stocks monitored, roughly 1-3% are held at any one time. From motorbikes in Indonesia to grocery stores in the Middle East, from the world’s best copper mines to its most recognised beer brands, from the underbanked to car insurance and Hong Kong real estate. This collection of portfolio payoffs is deliberately diverse, reflecting the flexibility to roam across geographies into the best ideas.

At its heart, durable investing demands active position-sizing: responding objectively as facts change, as prices move and as the future unfolds. Any ‘edge’ we have over thousands of peers is fine and fleeting, that is until it is repeated over decades, compounding with experience.

Environment, Social, Governance (ESG)

Investment returns can be boosted by durable companies bought at compelling prices; those well-governed, investing to protect and build their future, addressing the interests of multiple stakeholders. Equities out-perform other assets over long time-frames because companies adapt to circumstances, whether it be currency movements or inflation, regulation or consumer tastes.

ESG is a framework for identifying where sustainability and profitability clash, or reinforce each other, with profound investment implications. The wide-ranging catch-all includes our views on a company’s governance, organizational culture, incentives, environmental impacts and its social licence to operate. Flaws – company-specific or industry-wide – might pose an existential threat if intractable, or they might prove cursory where improvement is pronounced.

Representing long-term owners, we look ‘beyond the numbers’ and engage with management to be answerable for outcomes. We seek detailed understanding, constantly tracking the ‘ESG’ of each investment while avoiding an ‘ESG score’ which has little meaning when detached from value, just as the investment payoffs cannot be separated from the price paid.

Click here for our ESG Policy

Click here for our climate-related disclosures