Triple-P rated investments aren’t a new investment product built in response to the low yield environment. We’re talking about history, and the knowledge gained from 50 years of investing in the Australian sharemarket through Perpetual’s Industrial Share Fund. One of our key learnings is that the three Ps – People, Philosophy and Process – remain the constants of successful investing.
A proven philosophy, consistently applied
Australia and the Australian sharemarket have changed significantly over the past 50 years. Companies that dominated in one decade later vanished from the boards (Bond Corp anyone?). What hasn’t changed over the decades is the importance of having a clear investment philosophy – in Perpetual’s case one of active investment underpinned by the deep analysis and research required to find quality investments trading at attractive valuations.
The fundamentals of quality and value remain as relevant today as they were when our Industrial Share Fund began half a century ago. Staying true to our philosophy is one of the reasons why $1,000 dollars invested in the Perpetual Industrial Share Fund in December 1976 would today be worth over $212,000 – around twice the result achieved by the All Ords Accumulation Index.*
The right people, the right time
A clear, guiding philosophy is one key element of investing success. Turning that philosophy into performance is all about process.
A process part art, part science
An investment process provides the framework to execute your philosophy. It requires a systematic approach to investment where decisions are consistently assessed and constantly reviewed. At Perpetual, fund managers follow a structured process to ensure this happens:
- Valuation – rigorous valuation disciplines help stop a fund manager falling in love with a stock.
- Ranking – Perpetual analysts are compelled to place – and defend – a rank on the companies they cover.
- Peer review –investment theses are tested by a jury of peers to validate stock selection.
- Accountability – each Perpetual analyst and Portfolio Manager is rated and remunerated on the quality of their stock picking – because that is what delivers returns for investors.
History has taught us that the most successful investors adhere to the process – the science – but aren’t constrained by it. That’s where the art – and the people come in.
People and Culture
Today, all sorts of businesses spend a lot of time on their culture. It’s perhaps even more important in a business that manages money for others. Many of our senior and most successful fund managers have come through the ranks, working across many areas of our business, learning from the experience of others. It is a rite of passage that develops disciplined investors who apply the lessons of the past to the investment opportunities of the future.
As Grant Kennaway, Global Practice Leader from Morningstar observes, “I like the fact that people who’ve gone on to run the Perpetual Industrial Share Fund have come through the business, worked in the back office, done the books. They’ve had the grounding, stuck around, bought into a culture and process that is bigger than one person.”
That’s because what really counts is layering experience and judgement onto the analysis. Having the investment experience to consider all factors and make the right judgment on when assets become opportunities.
As Perpetual Industrial Share Fund Portfolio Manager, Anthony Cay, says, “You’ve got to do the 10,000 hours, because investing is art as well as science. You’ve got to know the numbers, but it’s time that teaches you what to look out for.”
* Audited results available as of December 1976. Returns as of June 2016.
You can find more on the lessons we’ve learned – and enjoy a brief tour of Australian investing and economic history – in our new eBook. Decimal to Digital – Lessons from 50 years of investing in Australian shares at www.perpetual.com.au/decimaltodigital.
