Alastair Unwin is a fund manager on Polar Capital’s Technology team.  We discuss Alastair’s career as a technology investor, AI’s exponential curve of improvement and potential as a general purpose technology, as well as the issues that investors should consider as ever more capital is spent to realise AI’s promise.

Show notes:

[01:33] Alastair discusses how he got into investing

[03:14] Lessons from Herald, Neptune and Polar

[05:05] Heuristics for technology investing

[07:29] AI scaling laws

[10:10] AI bottlenecks

[13:45] Capital formation and AI’s new infrastructure

[17:42] A hardware cycle

[19:37] Motivations for increasing capex

[25:08] Capex in the context of improving models and the global wage bill

[28:49] Increasing circularity of AI financing

[31:14] Is it winner takes all or will models be commoditised?

[33:34] Nvidia and the depreciable life of chips

[37:52] Hyperscalers’ ability to win in the new paradigm

[40:32] Alphabet’s prospects

[44:21] Adoption rates and use cases

[49:03] Sitting with ambiguity and not being dogmatically convicted

Sebastian Lyon and Charlotte Yonge co-manage Personal Assets Trust  and Troy’s Multi-Asset strategy.  We discuss the strategy’s evolution over the last 25 years, Troy’s equity-centric approach to multi-asset investing, and why creating a resilient portfolio is as relevant as ever in today’s world.

Show notes:

[01:34] Founding philosophy

[04:21] Avoiding complexity

[07:25] Reasons for not owning derivatives

[08:45] Charlotte’s career

[10:41] Becoming co-manager

[12:35] How Sebastian and Charlotte complement each other

[16:43] Avoiding wasting assets

[19:19] Finding opportunities with asymmetric risk

[21:44] Hubbell and Verisign

[24:45] Evolution of fixed income investments

[27:08] Shortening of duration

[31:00] Will the US$ remain a safe haven?

[34:55] Attractions of the Japanese Yen

[36:11] Gold as essential portfolio insurance

[38:44] Does the macro impact asset allocation?

Seth Brennan is co-founder of Lincoln Peak Capital, which owns minority stakes in several asset management companies, including Troy. We discuss Lincoln Peak's long-term partnership model and the importance of autonomy and a strong alignment of interests as foundations for success.

Show notes:

[01:15] Seth discusses how he got into the industry

[02:49] Joining Affiliated Managers Group

[03:43] Lessons from AMG

[06:37] Setting up Lincoln Peak

[07:51] Starting a business in 2008

[10:01] The importance of having long-term capital

[14:10] Lincoln Peak’s long-term ambitions

[16:20] Exits

[18:51] The due diligence process and reasons for a transaction

[22:53] Importance of autonomy and alignment

[25:01] Adding value to partner firms

[28:26] Avoiding the temptation to intervene

[31:52] Continuing relevance of active management

[34:44] Catalyst for Troy transaction

[35:35] Why Lincoln Peak is a good partner for Troy

[37:14] Sebastian’s strengths as an investor

[38:35] Be curious and ask questions

Matthew McLennan is co-head of First Eagle’s Global Value team and one of the portfolio managers of Global Value, a strategy that has delivered strong long-term compound returns.  We discuss the importance of humility and patience, why resilience is emphasised throughout the portfolio, and how Global Value has survived and thrived across a broad range of market environments.

 Show notes:

[01:24] How an unusual childhood informed Matt’s approach to investing
[03:52] Succeeding Jean-Marie Eveillard
[05:46] Continuous refinement of the investment kernel
[07:04] Successful succession planning
[09:45] Sustaining success over different market cycles
[12:15] Important character traits and attributes
[17:01] Impact of passive investing
[19:20] The benefits of having a Senior Advisor Board
[22:09] What value investing means to First Eagle
[26:38] Endogenous integrity with the capacity to suffer
[28:40] Discerning between secular change and noise
[33:44] Approach to asset allocation
[35:46] Benefits of owning gold
[37:45] Role of cash in the portfolio
[40:11] High valuations and prospective returns
[42:51] Gold miners vs bullion
[44:41] Understanding the process of growth and the role of endogenous confidence cycles

Gabrielle Boyle and George Viney co-manage Troy’s Global Equity strategy.  We discuss why the market persistently underestimates the compounding power of rare and exceptional companies, the importance of recognising one’s biases and striving to learn and improve as investors, and why Gabrielle and George work so well together as a team.

 Show notes: 

[01:26] Why the market persistently underestimates the compounding power of rare and exceptional businesses
[02:41] Companies don’t compound in a linear way
[05:09] Having the right environment to sustain success
[08:55] How Gabrielle and George complement each other
[10:35] The importance of having an inner critic
[12:45] Continuous improvement
[14:24] Combining resilience with reinvestment potential
[16:10] Characteristics of special businesses
[18:35] Sell discipline
[20:41] Minimising biases and ensuring accountability
[24:39] Balancing strong operational performance with fair valuations
[27:32] A concentrated portfolio with broadly diversified businesses
[29:17] Troy’s broader team
[30:57] Cognitive diversity with shared values
[33:04] Confidence in the future
[34:29] Back your conviction

Dan Davidowitz is lead portfolio manager of Polen Capital’s Focus Growth strategy.  We discuss Dan’s evolution as an investor, Polen’s investment guardrails, and other factors that have helped the strategy deliver exceptional returns over the last 35 years.

Show notes:

[01:16] Dan discusses how he pivoted from public health to investing
[02:56] Thoughts on healthcare investing
[04:30] Shifting from a deep value shop to Polen Capital
[07:44] Keep things simple
[10:01] Time arbitrage with businesses that are the best-of-the-best
[12:12] Creating a high performance investment team
[14:23] The importance of being both optimistic and open-minded to change
[16:34] Getting better each day to remain competitive
[17:59] Polen Capital’s evolution
[20:40] Polen’s investment guardrails
[22:14] Vigilance and conservatism for continuous compounding of earnings growth
[24:35] Making sure companies are investing adequately for their future
[26:34] Acquisition-driven companies
[28:45] Investing across the growth spectrum
[31:17] Having a broad mix of competitively-advantaged businesses
[33:51] Valuation discipline
[36:45] Lessons from the last few years
[38:30] Impact of GenAI
[41:03] Why Amazon is a large holding
[45:35] Building any experience is good experience

In this episode we speak to Robbie Robertson.  Robbie is on the Board of Personal Assets Trust and spent a nearly 40-year career in the investment trust industry.  We discuss the evolution of the investment trust industry, the advantages of a closed-end structure and the role Personal Assets Trust can play in a portfolio.
 
 Show notes:
 [01:28] A different world
 [03:17] Observations from a career in the investment trust industry
 [06:42] Characteristics of successful investors
 [08:03] How Robbie got involved with Personal Assets Trust
 [09:03] Advantages of the investment trust structure
 [11:39] Evolution of the investment trust industry
 [15:05] Impact of higher interest rates and a changing cycle
 [16:48] Are they investment trusts or operating companies?
 [20:54] Valuing assets in newer parts of the market
 [22:24] Appropriateness of the investment structure for alternative assets
 [23:57] Is there demand for general equity investment trusts?
 [25:51]  Why some investment trusts scale and others fail
 [27:25] Common pitfalls to avoid
 [28:57] Trading discounts
 [30:50] What makes a great investment trust Board?
 [32:58] The role Personal Assets Trust plays in a portfolio
 [37:56] Advantages of a discount control mechanism
 [39:36] Why most Boards do not commit to a discount control mechanism
 [40:47] Enjoy yourself

In this episode we speak to Jim Strang, Chairman of HGCapital Trust.  The Trust has an outstanding track record investing in business-to-business software companies.  We discuss the evolution in private markets over Jim’s career, the benefits of specialisation and the reasons behind Hg Capital’s success.

Show notes:

[01:15] Jim discusses his early career
[02:12] HgCapital Trust’s history
[03:41] The benefits of specialisation
[05:56] The importance of controlling the capital structure
[08:02] Characteristics of typical Hg investments
[10:07] The growth model
[11:29] End market fragmentation
[13:29] Being highly selective
[16:25] Having the flexibility to own the best businesses over the long run
[18:07] Replicating Hg’s success in the US
[19:58] Why Hg is an attractive owner for entrepreneurs
[22:35] Sustaining Hg’s culture and using greater scale to drive operational improvement.
[25:25] Objectively assessing each company’s potential
[27:03] Low loss rates and a few major successes
[27:57] Why things typically go wrong
[30:22] Leverage and the capital structure
[33:33] Valuing private companies
[38:43] M&A in a higher interest rate environment
[40:54] Trust your gut

Stuart Widdowson founded Odyssean Capital, is co-manager of the Odyssean Investment Trust, and has a wealth of experience investing in UK-listed smaller companies.  We discuss the lessons Stuart has applied to public equity investing from his days in private equity, the rewards derived from investing in good quality companies that can be improved, and the overall state of the UK market.

 Show notes:
[01:28] Stuart discusses his early career
[04:12] Swapping private equity for public equity investing
[06:11] The market imperfections in small cap investing
[07:44] A focus on global niche market leaders
[09:35] Stuart’s ambitions for Odyssean Capital and its cultural values
[11:51] The meaning behind the Odyssean name
[12:49] The benefits of concentration
[14:25] Managing risk and avoiding bad businesses
[16:41] The quality attributes Stuart looks for
[19:38] Pattern recognition in TMT, healthcare, specialist industrials and services
[22:18] Being cycle aware rather than trying to time cycles
[24:18] The role of static and dynamic valuation
[28:20] Managing for liquidity
[31:27] Identifying companies with the potential for self-help
[34:15] Backing people and focusing on what is fixable
[36:05] Being credible when engaging with companies
[39:37] The structural headwinds facing UK equities and the valuation opportunity
[43:16] Contrarians come in first
[44:18] Navigating a higher cost of capital
[47:20] Find out what you enjoy and are good at and get a good mentor

In this episode we speak to Oddbjørn Dybvad, co-founder of REQ Capital, an Oslo-based investment firm.  Oddbjørn manages REQ’s Global Compounders and Nordic Compounders funds, which focus on acquisition-driven businesses.  We discuss the entrepreneurial energy within these companies, why they are able to reinvest capital at attractive rates for a long period of time and how their diversified and decentralised nature makes them both resilient and adaptable.

 Show notes:

[01:22] Oddbjørn discusses his career
[02:26] The risk and return characteristics of acquisition-driven compounders
[04:25] The influence of geography
[07:01] Defining the different types of serial acquirer
[09:12] Focusing on small/mid-caps with a long runway for redeploying capital
[10:41] The diversification benefits of acquisition-driven companies
[12:11] A preference for insider ownership, decentralisation and acquisitions funded by cash
[13:29] Communicating with investors in a different way
[14:53] Key person risk and the sustainability of culture
[16:28] Change at Diploma
[18:07] Harnessing entrepreneurial energy through decentralisation
[20:43] Decentralisation and adaptability
[21:59] Motivating behaviour through simple incentivisation structures
[24:52] Focusing on track record and management
[25:56] Constellation Software and the decentralisation of capital allocation
[28:07] The valuation differential between public and private markets
[30:51] The attractions of selling to acquisition-driven compounders
[33:06] Looking for the dual engine of organic and inorganic growth
[35:04] The underlying characteristics of REQ Global Compounders
[37:13] Becoming more conscious about evaluating risk and management
[39:07] Finding people who are process-oriented and have a long-term mind-set
[39:55] Learn from your mistakes