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Permit me to tell you my understanding of asset markets. This will help you understand why we do what we do. I have travelled to many countries around the world and noted one common denominator between peoples from the Americas, across Europe, into Africa and onto the Far East – people wake up in the morning for their personal betterment. Human endeavour plays a key part in wealth generation. However, at an individual level it is largely impotent unless it facilitates itself into a group environment, i.e. companies and partnerships. Wealth can only be generated in society by this behaviour; every other structure remunerates itself from companies e.g. governments. | ||||||||
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If you add up the infinitesimally small improvements of billions of people each day you tend to find a long-run improvement across the world generally. This is key. This is why the world does not in the long run go backwards. If therefore the value of the world goes up, how can we both invest in this (to aid the improvement) and benefit from it (to receive a return on our investment)? Ah, now we are at the fundamental point of where to invest. For an investor to optimise long term returns on capital, company investing is therefore essential. Traditionally such investments have been promoted on the basis of companies listed on a recognised stock exchange. This has created the investment myth that the stock market, in other words public market investment, is the only credible way to invest in companies. But there is another way. There are many private companies in all shapes and sizes that are hugely successful, and there is a major market in taking publicly listed companies private in order to better develop their business and long term profitability.Investment into private companies can be less volatile and offer higher returns. Now imagine for a minute, the future increased wealth in the world as a long-run journey, reached by a train. Each carriage of the train gives you a different share in the future ‘certain’ value growth of the world. At the front are brave investors pioneering capital investment in emerging companies and markets. The next carriage is for investors backing growth-style companies on the recognised stockmarkets – still rather a brave carriage. The next carriage is for investors who are happy to support mature stockmarket companies, provided they also receive a dividend in the process each year – this is called equity income and is quite a pleasant carriage, near the front but not subject to as much trouble in a head on smash. The next carriage is the First Class carriage to which access has traditionally been denied to ordinary investors. This carriage is usually reserved instead for the investment banks who want a profit for themselves. It offers investments into private companies (equity) and private finance, again high growth low risk areas of the investment landscape – provided, of course, you know your way around.Next carriage back is property, a good investment but a bit dull over time unless the world runs out of land (and mankind is now developing apartments on man-made floating islands!) And at the very back of the train are the carriages for sleepers – cash and fixed interest. These are the dullest of the lot, because they do not participate in the long-run future wealth expansion of the world, they just oil the wheels of the train.Not surprisingly, we major on investing in the First Class carriage.A final point. All my personal investments are in the cru Portfolio, so worrying about making the thing grow is quite a personal issue! I look forward to welcoming you as a cru investor. Enjoy the ride because over time I believe we will all do very well. | |||||||||
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