Fund manager Gerrit Smit is a disciple of investment guru Charlie Munger – Warren Buffett’s former number two – who died last month at the grand old age of 99.
Munger liked to buy businesses for Buffett’s company Berkshire Hathaway that he understood and wasn’t overpaying for. His mantra was that ‘people compute too much and think too little’.
It’s an approach that Smit says influences the way he runs Stonehage Fleming Global Best Ideas Equity, a £1.9 billion fund that he has managed since launch just over ten years ago.
Although any company brought into the portfolio must first pass a series of qualitative and quantitative tests, Smit won’t buy it if he doesn’t grasp how it makes its money and if he thinks he is not getting value for money.
appreciate Munger and Buffett, Smit is also passionate about investing. With nearly 40 years of investment management and company analysis under his belt (he won’t disclose his age), he wants to keep running 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 look after and nurse. I’ve got at least another decade left as manager – and more besides.’
His devotion has paid off handsomely for investors. Over the past ten years, the fund has delivered a return of 230 per cent. This compares against the 14.2 per cent gain registered by the ‘average’ global investment fund.
Smit doesn’t appreciate to chop and change his portfolio. His ideal fund purchase is a stock that he can hold – and hold. Of the 28 companies that make up the fund, seven have been held since launch – among them the likes of Accenture, Alphabet, Microsoft and Visa.
He says: ‘The key is to recognize high quality businesses and then hold them, even when the market turns against them.’
The universe that he shops from comprises 150 global businesses, many of which derive a key slice of their revenues from the world’s emerging economies. So, while the fund’s portfolio has more than 90 per cent of its assets in companies listed in the United States or Europe, the businesses produce more than a fifth of their revenues from emerging markets.
French-listed LVMH (Louis Vuitton Moet Hennessy) is a case in point. ‘LVMH is a truly global business,’ says Smit. ‘The brands under its wing – the likes of Dior and Louis Vuitton – are loved across Asia. They appeal to the burgeoning middle classes and are truly aspirational.’
Smit’s long-term focus means he runs with his winning stocks rather than take profits. This is reflected in the fact that Microsoft and Alphabet account for more than 14 per cent of the fund’s assets. Companies involved in the digital revolution and the growing healthcare industry are key fund investment themes.
On the other hand, companies that don’t live up to expectation are culled.
For example, earlier this year the fund’s position in Walt Disney was sold. ‘The company bought 21st Century Fox before the pandemic,’ says Smit. ‘It got bogged down in debt and proved a disappointing investment.’ Apart from the fund, Smit also runs an additional £1.5 billion of assets using his global best ideas investment strategy.
This money is run on behalf of institutional investors, charities and wealthy families.
The fund has annual charges of 0.83 per cent and can be bought through all major investment platforms. Income is not a fund priority and is equivalent to an annual one per cent.
