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Alternative Market Briefing

Long term investor, Tollymore, generates 20% returns p.a. since inception

Thursday, June 04, 2020

Mark Walker
Matthias Knab, Opalesque for New Managers:

Tollymore Investment Partners, a private investment partnership for long term investors, has generated returns of 19.9% p.a. gross since inception in May 2016. This includes a return of 8.9% gross in 2020 YTD despite significant market turmoil, according to information reviewed by Opalesque.

Tollymore highlights that £1 invested at inception (12 May 2016) would be worth £2.08 today, after expenses but before fees paid to Tollymore. Over the same period £1 invested in the MSCI All Country World Index would have generated a return of 60p. Around two thirds of this benchmark outperformance, and around 85% of the absolute investment result, would have accrued to investors choosing to commit their capital for three years. The fund charges 1% management fee and 10% incentive fee payable over a 5% hurdle.

Tollymore, which partners with family offices, HNW investors, Fund of Funds and offshore funds, aims to compound partners' capital over the long term by investing in a concentrated portfolio of around 10-15 undervalued high-quality businesses. Some of these companies include the Aspen Group, the NASDAQ listed education technology holding company; Sea Limited, the leading Southeast Asian ecommerce and gaming business and Trupanion, the US medical insurance provider for pets. Tollymore partners with investors who think like business owners rather than traders, and who understand the importance of patience and independent thought in an investment philosophy.

Corona crisis confirms the value of long-term investing

Mark Walker, Managing Partner at Tollymore Investment Partners, commented: "Recent unpredictable events should be a reminder of the value of long-term investing. There is a time arbitrage to be enjoyed by investors able to look beyond the next quarter or year. With average investment holding periods a mere matter of months, this is not the case. And we don't expect it to change.

"Large asset managers have marketing-led investment strategies. They are trying to create an investment strategy they think will sell. That tends to lead them down a path of having niche investment universes predicated on analytical edge. There's an asset gathering imperative in the asset management industry. This is a scalable model. It's tempting to grow assets and rapidly increase the profitability of the business. This imperative can become misaligned with the providers of the capital under management. If you have an investment management business owned by shareholders, there's clearly an obligation to those owners to maximize the profitability of the investment management firm. There are ways to enrich the owners of an asset management business that are consistent with compounding LPs' capital, and there are ways that are inconsistent. An asset gathering imperative is mostly inconsistent. Having managers with high levels of insider ownership in their own funds is consistent. Having a performance fee-led structure is consistent.

The limits of linear systems in investment management

"Pressure to sound smart encourages detailed, but ultimately reductive, financial forecasting.  But we're not operating in a linear system. Indeed, the volatility of stocks in the near term makes predicting share price movements exceptionally difficult. Recent events could not provide clearer evidence of this. Furthermore, credit conditions of recent times have possibly allowed weak companies to thrive. This event-driven macro crisis may expose those firms who have been swimming naked.

"Knowing what to do in a crisis and being able to do it are two different things. Our companies are appropriately capitalised, we do not employ leverage at the portfolio level, and our investment process, capacity constraints and working environment allow us to act decisively when the odds are overwhelmingly in our favour. In times of economic stress and market dislocation, sound judgment has the potential to be most lucrative. Stress biologically shortens one's horizon. Myopic loss aversion increases in crises; our ability to exploit the institutional constraints of our competition matters now more than ever."

Differentiated long-term investment approach pays out

Tollymore Investment Partners is a private investment partnership investing in a small number of exceptional publicly listed businesses to compound partners' capital over the long term. Tollymore believes its ability to execute this long-term investment approach is differentiated: "A sensible long-term, business owner investment philosophy is of no use if the investing ecosystem is a barrier to faithfully executing a thoughtful investment process. Execution is everything."

Mark Walker adds: "A great investing ecosystem must cultivate a bi-literate brain; one capable of navigating data and filtering noise; and one capable of deep work in a digital era. To us the obvious source of investment edge is behavioural, the ingredients of which are a long-time horizon, an environment conducive to independent thought, and an investment philosophy and investor cohort matched to an investment manager's temperament. As such Tollymore partners with investors who think like business owners rather than traders."

Leaving behind the limits of the institutional investment paradigm

Mark Walker was recently featured on Opalesque.TV. The full video can be watched here:

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