We have been pleased with the performance of the funds over the quarter but we will always look to improve and we think that part of this involves learning from successful teams and individuals in any and every discipline.
An opportunity to do this came in listening to a podcast with Jonny Wilkinson. The former England fly-half has left a legacy in the world of rugby as one of England’s greatest ever players. But it is precisely that desire to leave a legacy and the impossible search for perfection that he now attributes to the ruin that should have been some of the latter, but greatest years of his career. His search for perfection, immortality and invincibility meant he lost the passion, freedom and fluidity that made him the player he was. A reflective Wilkinson said in the recording that he now thinks that true invincibility is only achieved when you can enjoy your successes to the same extent that you can be curious about your disappointments.
We do not by any means want to compare ourselves to Jonny Wilkinson but we do want to learn from his invaluable experience in elite sport.
As we reflect on the year to date we think there is at least some cause for celebration. Overall performance of the fund has been strong (outperforming its benchmark by more than 6%). And we are excited to have added a number of stocks to the portfolio - all of which have provided a positive contribution since our initial purchase and we hope that they will continue to do so in future years.
However, our performance has clearly not been without disappointment.
Back in July, we wrote in our quarterly market commentary about our continued addition to our holdings in Close Brothers and Shaftesbury saying, ‘whilst valuation is a poor tool for timing, we suspect that these kinds of price falls for such excellent businesses will not be sustained’. Since then, unfortunately, they have.
We do not think that our investment thesis for these businesses has been disproven – we still think they are exceptional companies. But we do think that we could have taken greater heed from our own warning that ‘valuation is a poor tool for timing’. Where there is no obvious or imminent catalyst for the valuation to reverse of what we believe to be a high quality but cheap company, it may be more appropriate to allocate a smaller proportion of capital.
It is impossible to achieve the dictionary definition of invincibility but we hope that by aspiring to achieve Jonny’s definition, over time we will be able to report more successes than disappointments.
The value of investments and the income from them can go down as well as up and investors may not get back the amount originally invested. Past performance is not a reliable guide to future returns.