In the Room with Allan Gray

As Allan Gray celebrates its 50th anniversary, it is an opportune time to reflect on the lessons we have learnt about long-term investing. It is interesting to explore the history of investing, as unlike in science and engineering where knowledge is cumulative, investing tends to be cyclical. In other words, investors tend to repeat the same mistakes. As valuation-oriented investors, we believe investors are better off focusing on the fundamentals of the companies they invest in and not on the economy. Perhaps the single best way to compound wealth is to avoid the significant drawdowns when bubbles eventually pop. This is harder than it sounds, as it requires great discipline to go against the crowd, who are all making money.

Each investment period, which typically lasts between 10 and 20 years, has different rules, and it is important to have that context and invest accordingly. We believe that we entered a new period post 2019 and have been positioning our portfolios accordingly.

Investing and managing capital successfully over long periods is difficult, and even the best investors may underperform for prolonged periods. It is important not to get complacent when things are going well. Having a business structure and offering investment professionals incentives that allow them to take a longer-term view is key to success, in our view. 

Outcomes: 

• You can still find great companies which compound value in weak economic conditions
• Avoid bubbles – they can wipe out your capital
• Know the rules of your time
• Do not become complacent
• Implement a business structure and incentives that will allow you to take a long-term view
• The world will look different in 50 years, but we believe these lessons will endure