Fund Aim
The Company's investment policy is to invest in companies which, in the opinion of the Investment Manager, have the majority of their operations in, or revenue derived from, Developing Economies and which provide direct exposure to the rise of the consumer classes in those countries.The Investment Manager intends to find companies which make their money by a large number of everyday, repeat, relatively predictable transactions. Its strategy is to not overpay when buying the shares of such companies and then do as little dealing as possible in order to minimise the expenses of the Company, allowing the investee companies' returns to compound for Shareholders with minimum interference.
The Investment Manager will avoid the financial sector and heavily cyclical sectors such as construction and manufacturing, utilities, resources and transport, and will instead focus almost exclusively on consumer stocks and in any event only on stocks in companies which will benefit from the rise of the consuming class in the Developing Economies.
The companies in which the Company will seek to invest have relatively predictable revenues and low capital intensity, and correspondingly high returns on capital. The targeted companies will also deliver most or all of their profits in cash. They will have defensible and strong market positions, typically derived from a combination of brands, trademarks and distribution systems or networks. The Investment Manager believes this combination will deliver compound growth in shareholder value over the long term.
The Investment Manager is also cognisant of the additional risks of investing in Developing Economies as opposed to developed economies, both in terms of the countries in which the companies operate and the standard of corporate governance within the companies themselves. The Investment Manager will take into account the degree of economic freedom, particularly the measure derived by the Heritage Foundation, of the country in which the companies are listed and/or operate in assessing the risks of any particular opportunity.
Approximately a third of the companies in which the Company may invest are quoted subsidiaries or franchisees of the multinational companies which may be invested in by the Investment Manager's existing fund, Fundsmith Equity Fund. This means the Investment Manager is well placed to conduct due diligence and assess the corporate governance of these companies.
1Source: Bloomberg, starting NAV 995.5. 2MSCI Emerging & Frontier Markets Index, £ Net, source: www.msci.com.
3Bloomberg/Barclays Bond Indices UK Govt 5-10yr, source: Bloomberg. 43 Month £ LIBOR Interest Rate source: Bloomberg.
Portfolio Comment for February 2020
We exited our holding in Tiger Brands over concerns about management’s ability to execute a strategy which would deliver meaningful returns for shareholders and began buying a new position for the fund, the name of which will be revealed when we have accumulated our desired weighting. The top 5 contributors in the month were Philippine Seven, Metropolis Healthcare, Avenue Supermarts, Hindustan Unilever and Nestlé India. The top 5 detractors were Godrej, Eris Lifesciences, Foshan Haitian, Mercadolibre and Travelsky.
Top 10 Holdings
- Vitasoy
- Mercadolibre
- Eastern Tobacco
- Foshan Haitian
- Philippine Seven
- Asian Paints
- Nestlé India
- Hindustan Unilever
- Info Edge
- Metropolis Healthcare
Our Values
- No Fees For Performance
- No Upfront Fees
- No Nonsense
- No Debt or Derivatives
- No Shorting
- No Market Timing
- No Index Hugging
- No Trading
- No Hedging