Having decided to pursue a career outside funds management, today will be my final day at Forager. It is rare you get to work with people of this calibre, personally and professionally, so cheers guys for making Forager such a great place.
Before I go I’d like to share with you all some of my experiences in the business, and a few things I’ve learned about funds management and investing generally.
When I first joined Intelligent Investor Funds Management, as it was then known, four and a half years ago, we became a three-person business, based in Rushcutters Bay. We had $14m in the 2 year old Value Fund (now the Forager Australian Shares Fund), still some way short of what’s required to have a viable business, and were still in the process of establishing a track record. Steve declared he would wind the business up if we didn’t have good results by year five – I’m pretty sure he meant it. It’s fair to say it was an exciting time, but we had lots to do.
But once I took my first look at the portfolio, an eclectic assortment of cheap shares, I knew we were cooking with gas. And so it’s proven. Today Forager is closing in on $200m funds under management, has tripled to six people, is now a standalone business. Most importantly, we have produced good performance for our investors through some difficult years for the market.
So what’s worked well for us? For me three factors come to mind.
The first is that value itself works and we’ve stuck to it. Though we don’t get every decision right, the focus on value at Forager hasn’t wavered. Many investors seem to think value is just one attribute of the investing equation. For us, all the attributes of investing form part of the value equation. Having a deep and resolute grasp of that basic principle is so important.
Astuteness is the second factor that comes to mind. This is the skill of investing, a matter of continual improvement. It involves having people who are widely read, numerate, fluent in accounting and have a practical sense of how business works. You then need to take these skills and combine them to produce good analysis, sorting out in a coherent manner what is important and why.
That itself requires a blend of independent thought, healthy scepticism, but also the balance and humility to ensure you understand the uncertainty and only invest when the odds are truly in your favour. And I think at Forager we’ve had a good blend of these characteristics through the team. We try not to be madly contrarian, just contrarian when the facts support it.
Thirdly and lastly, the ability to be opportunistic has been crucial for us. It might sound obvious, but investing is competitive, and if you have a good team you want them to be empowered to act (the opposite of course holds too!). Compared to other fund managers, we’ve had a huge free-kick in this area. There is no institutional pressure on us to worry about short-term performance, and that gives us enormous freedom to roam the market seeking value in whatever form it appears.
Over the years we’ve invested in over-leveraged property trusts, botched healthcare amalgamations and distressed mining services companies. Some had dubious management, some too much debt, some were lousy businesses, some were good businesses temporarily obscured. The only thing they had in common was they were cheap.
Inevitably, many of these cheap businesses got even cheaper after we purchased. For most fund managers that’s a big issue. For us, funded by a diverse base of like-minded value investors, it’s been no problem at all. When we’ve told you, and we try to be upfront, that we are venturing into unconventional areas, there has been no pressure to change tack, even when early losses are worn.
Many of you I’ve met or spoken to over the years, and I’d like to send a big thanks for your support. You are a big part of what makes Forager tick.
I’m sad to go but also really looking forward to a holiday and then a new challenge. It’s been an amazing experience that I’ll always remember fondly, and I’d like to send a special thanks to Steve for being such a fantastic boss and teaching me so much.
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