Our investment philosophy
Our investment philosophy (Testing)
Only by constantly questioning each other and the investment case for our portfolio holdings can we ensure that we stay focused in generating sustainable, long-term returns for our clients.
We believe in quality
We seek to invest in quality companies, as defined by the strength of their management, franchise and financials. Poor quality businesses do not form a part of our investment universe, no matter how attractive the growth opportunity or valuation becomes.
We are bottom-up stock pickers
We invest in people and real businesses, not pieces of paper or stock market tickers. We do not, and cannot, forecast market movements and therefore believe the best way to generate superior long-term returns is to identify highly competent management teams and entrust them to grow our clients’ capital, no matter the underlying economic backdrop.
We believe in the investment case for Asia and Emerging Markets
The fastest growth, some of the highest levels of innovation, and the bulk of human advancement is happening in Asian and Emerging Market economies. With this progress comes a burgeoning middle class with a heightened propensity to consume and levels of company formation that is reminiscent of the United States in the early 20th century.
We are long-term growth investors
We are growth, not value investors. Once we have identified our preferred companies – those that can grow earnings sustainably – we aim to benefit from the power of long-term compounding. We are, however, sensitive to valuations and strive not to overpay for growth. A great company might not make a good investment if it is overpriced.
We define risk as the risk of capital loss, not underperforming an index
Our investment approach focuses on generating absolute returns for our clients. With every investment we make, we look at the potential downside and not just upside. We endeavour to avoid getting carried away during periods of irrational exuberance and are willing to accept underperformance in the short and even medium term when compared to a benchmark index to ensure we protect capital when the tide turns.
We are pragmatic contrarians
While many in the industry build detailed financial models and aim to forecast the next quarter’s earnings to the nearest cent, we find it is better to be approximately right in the long term than be exactly wrong in the short term. We do not try to time our entry and exit from companies – we merely wish to buy great companies at reasonable valuations.
We invest in companies where we are an aligned partner
As minority investors in businesses, we need to be aligned with management and the controlling shareholder. We find that companies who treat their shareholders as partners rather than as privileged onlookers are more likely to treat all stakeholders well.
Sustainability is a key part of our process and always has been
We have always believed that sustainability issues are also investment issues and can have an outsized impact on a company’s returns. Poor environmental or social practices could eventually mean losing the licence to operate, while weak governance indicates a lack of the necessary checks and balances on management.
We believe in the team
We operate in a collegiate working environment with a flat structure. We encourage the kind of culture where the most junior team member can speak up and question the most senior. All members of the FSSA team are analysts. There are no experts – we are all generalists, striving to challenge each other and ourselves.
We believe in our funds
All members of the team have a significant portion of their wealth invested in FSSA’s funds. We invest our clients’ money as if it were our own money, and our co-investments reinforce this belief. Not only do we wish to align with our clients, we cannot think of a better long-term investment for our own money than our own funds.