Fund manager Gerrit Smit is a disciple of investment guru Charlie Munger – Warren Buffett's former number two – who died last month at the ripe old age of 99.
Munger liked to buy businesses for Buffett's Berkshire Hathaway company that he understood and didn't overpay for. His mantra was that 'people calculate too much and think too little'.
It's an approach that Smit says influences the way he manages Stonehage Fleming Global Best Ideas Equity, a £1.9 billion fund he has managed since its launch just over a decade ago.
Although any company included in the portfolio must first pass a series of qualitative and quantitative tests, Smit will not buy it if he does not understand how it makes its money and if he thinks it is not getting value for money.
Just like Munger and Buffett, Smit also has a passion for investing. With almost 40 years of investment management and business analysis under his belt (he doesn't reveal his age), he wants to continue managing money for as long as possible.
He says: 'I started the Global Best Ideas fund in 2013 and I live and breathe it. My commitment is indefinite and I see it as my proverbial baby that I nurture and care for. I still have at least ten more years as a manager – and more to come.”
His dedication has amply rewarded investors. Over the past ten years, the fund has achieved a return of 230 percent. This compares to the 14.2 percent profit achieved by the 'average' global investment fund.
Smit doesn't like to chop and change his portfolio. His ideal fund purchase is a stock he can hold – and hold. Of the 28 companies that make up the fund, seven have been held since launch, including Accenture, Alphabet, Microsoft and Visa.
He says: 'The key is to identify high-quality companies and then hold on to them even when the market turns against them.'
The universe he shops from includes 150 global companies, many of which derive a significant portion of their revenues from the world's emerging economies. Although the fund's portfolio consists of more than 90 percent of its assets from companies listed in the United States or Europe, these companies generate more than a fifth of their revenue from emerging markets.
The French-listed LVMH (Louis Vuitton Moet Hennessy) is an example of this. “LVMH is truly a global company,” says Smit. 'The brands under his care – such as Dior and Louis Vuitton – are loved throughout Asia. They appeal to the emerging middle class and are really ambitious.'
Smit's focus on the long term means that he works with his winning stocks instead of taking profits. This is reflected in the fact that Microsoft and Alphabet account for more than 14 percent of the fund's assets. Companies involved in the digital revolution and the growing healthcare sector are important investment themes for funds.
On the other hand, companies that do not meet expectations are culled.
For example, the fund's position in Walt Disney was sold earlier this year. “The company bought 21st Century Fox before the pandemic,” Smit said. “It became mired in debt and turned out to be a disappointing investment.” In addition to the fund, Smit also manages a further £1.5 billion of assets using its Global Best Ideas investment strategy.
This money is managed on behalf of institutional investors, charities and wealthy families.
The fund has annual fees of 0.83 percent and can be purchased through all major investment platforms. Income is not a priority of the fund and corresponds to one percent per year.