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Peter Higgins 00:17
Hello and welcome to this Investing Matters Podcast. My name is Peter Higgins, you can find me at Conkers3 on Twitter.
Today I have the huge privilege of speaking with Gabrielle Boyle, the Investment Director, Head of Research at Troy Asset Management.
Gabrielle is responsible for Troy's Global Equity Strategy is the co-manager of Trojan Global Equity Fund, which for those of you who are unaware has outperformed Nick train’s Lindsell Train Global Equity Fund, and the total returns based on the past 10 years.
Gabrielle is also the fund manager of the Electric and General Investment Fund with 33 years investment experience. Gabrielle, thank you ever so much for joining me, you know, you've been an absolutely huge success.
It's fantastic to actually get you on the Investing Matters Podcast with me now.
Gabrielle Boyle 01:13
Thank you so much for having me on the show Peter, thank you, pleasure.
Peter Higgins 01:16
So again, thank you for joining me initially for the Investing Matters all-star investing panel that we held at the UK Investor Show in June of this year.
Gabrielle Boyle 01:24
That was great. Thank you very much.
Well, very good events very well organized, busy, lots people seems like a long time ago now.
Peter Higgins 01:33
It does, the summer’s flow by, it does indeed, I'm glad you enjoyed it.
I want to start this conversation with you, Gabrielle by discussing your starting life, University College Dublin gaining a BA in History and Economics and going on to gain a Master's degree in economics.
What triggered your earliest sort of interest in economics?
Gabrielle Boyle 01:56
That's a very good question. I so I grew up in Dublin, one of five kids that went to UCD when I was 17.
So quite young. In Ireland, the system in UCD you get quite a broad education.
So you start with three subjects, then you go down to two for joint honours that I really enjoyed economics.
And I spent my summers when I was at university, back in those days, Ireland wasn't the booming economy it is today.
So most of our students wanted to get out in the summer and I came to London and tempt basically, I learned to type.
And tempt I worked in all sorts of jobs in the City.
So I worked in Goldman Sachs was the first place I went to then I worked to fund management businesses or worked at City I worked all over the place and I just loved it.
I love the whole sort of vibe of London back then in the late 80s, it was really booming.
And so and I was going to economics and I liked it. So I did a master's and then I applied for loads of jobs and ended up in London, which was a pretty common sort of route for Irish students back then.
Peter Higgins 03:24
Fantastic.
I love the fact that you said that you came over on your holidays to work in London and actually got the bug there from the late 80s/90s.
You haven't lost it, because you still here working and doing it so brilliantly.
So your first ever role in the City? What was that?
Gabrielle Boyle 03:45
So I started, I was really, I was very fortunate. So my kids are at this stage now where they're, you know, university and applying for jobs and I always tell them, you know, you just have to keep I probably sent literally hundreds of applications.
And I was offered three jobs, one of which was in investment management.
I mean, I didn't know very much about it.
But I was incredibly lucky in that I went to work for a company called Royal insurance Asset Management, which was the asset management arm of the Royal Insurance Company.
And I worked on the European team, which was, I mean, it was fantastic.
It was a fascinating time, the Wall had come down in 1989 in Germany, continental Europe was dealing with the kind of aftermath of West Germany absorbing East Germany and all of the consequences of that.
And actually, by the time I started the markets, they were dealing with the kind of fallout of it.
So it was a challenging time, but a really, really interesting time and Europe was starting to kind of adopt much more kind of Anglo-Saxon style ways of thinking, the American investment banks were caught crawling all over companies IPOs were happening, governments were selling off assets and all of that and so, so I worked in the European team there for three years and then joined Lazard three years later.
So it was a work with really good people. And I was very fortunate to have that grounding I spent time in before I went to the European team I worked on in fixed income worked on US equities, Japanese equities, UK equities.
It was a great training, we don't probably do enough of that today with our young people. But it meant that you've got a good grounding in the fundamentals of bond markets and all the rest of it.
So yeah, good, good start.
Peter Higgins 05:43
Fantastic start, you mentioned the fact that you did so many different roles and got engaged in so many different things.
So, like you say, it's fantastic that you've got that level of exposure.
After that you moved on to Lazard Asset Management for where you were for 17 years and you attained the position of Senior Managing Director of which you were responsible for global and European portfolios, please can you share with our listeners your greatest lessons from that period, 17 years at Lazards, please?
Gabrielle Boyle 06:13
Oh, well, I mean, I've been incredibly lucky in my career to do this job.
It's fascinating, fun, challenging, never boring.
Constantly, you are in meet all sorts of amazing people.
And Lazard was a microcosm of that some really bright people from all over the world.
And I was fortunate, I started in London, but I spent a lot of time in the US, I did Europe for a long time, but then I broadened out to do initially World Ex US and then so I was investing in Japan and Asia and Emerging Markets, then move to do global so worked alongside my US colleagues.
So it was a it was a great learning experience and worked with great people and was incredibly formative in my kind of investment approach, which is one of wanting to be really very discerning and owning great businesses not paying too much for them, and holding on to them for a long time. So really thinking long-term, really understanding the power of the wonderful power of compounding.
And I learned the hard way, I mean, really the hard way that there's a big difference between investing in great businesses and investing in in less than good businesses. We were in those days, we used to call ourselves relative value.
And, you know, investing in Europe and Asia and Japan in those days, when you could get caught in all sorts of value traps of businesses, which you might think are one thing and then discovered that actually, the corporate governance is terrible.
The disclosures weren't what they are today. And it could be a minefield, so it was very formative in my investment approach, which is one of really wanting to be incredibly discerning, and trying to and really great businesses, and that you can have the confidence that you're going to and for the long-term.
Peter Higgins 08:27
Thank you for that reply. And I appreciate the fact you took some value traps and we'll talk about those a bit later on.
And the fact that there's always more to learn regarding the markets, markets are always changing and evolving and therefore that's what you know, that's what you've done clearly because you've been such a success.
Now, briefly after Lazard you were at New Smith Capital Partners.
You just touch on that because was that a hedge fund if I'm blind understanding it?
Gabrielle Boyle 08:53
So I left Lazard in 2010 having been there for 17 years, and I had a brief interlude where I joined some former Lazard colleagues, Simon Roberts, who very sadly died last year and Neil Baker, it it was a very brief time I had a very long non-compete from Lazard when I left because I'd been there a long time, which was basically a year and joined NewSmith for a short period.
But in that time, I met Sebastian Lyon and Francis Brooke from Troy Asset Management and it felt like sort of coming home really, I was very, very lucky to meet them and I knew that was the right place to be so.
So I came to Troy, which has been fantastic for me and a wonderful experience.
Peter Higgins 09:53
And as you mentioned that you met Sebastian and Francis, and then you joined late November 2011, I believe, and you were given control of the what was then the 59 million pounds Trojan Capital Fund from Sebastian and Francis.
Please can you share with our listeners an overview of Troy Asset Management, its size scale, number of funds, if possible, and essentially Troy's overall investment philosophy please?
Gabrielle Boyle 10:25
Yeah, so Troy started life in 2000.
Originally set up by Sebastian Lyon and Lord Weinstock, really to manage the assets of the Weinstock family.
And the history of Arnold Weinstock was that he managed GEC through their sort of heyday of industrial conglomerates in the UK, very and had a tremendous reputation for managing it in a very prudent and disciplined manner.
He retired in the early to mid-90s, and then had the misfortune to sort of witness the demise of GEC, which turned into Marconi and ultimately went bankrupt.
So, by the time he and Sebastian got together, he really both of them wanted to, they wanted to do something different.
It was at the time when, you know, we were coming off the TMT bubble, the technology mania of the late 90s.
The objective really was to manage money in a sensible long-term with a keen eye on capital preservation, you know, very influenced by the sort of thinking and teaching of Warren Buffett and Charlie Munger, and just invest very, very sensibly for the long time and without regard for the fashions of the day, you know, or benchmarks or all of that sort of sort of thing. And Sebastian and then with Francis Brooke built a very successful business in Troy Asset Management, which today is just under 14 billion pounds sterling.
And we have four key strategies, multi-asset, which is the flagship business of Troy, a UK income, global income, which is managed by my colleague, James Harries, Blake Hutchins runs the Treasury income fund strategy today and then global equities.
But so I when I joined in 2011, it was really part of this sort of effort by Sebastian and Francis to increasingly invest outside of the UK, and they'd always invested in the US.
And we're always very open-minded in that perspective.
But I think they recognise very sensibly, that it made a lot of sense to kind of increase that effort and to invest more actively, particularly in Europe and the United States.
And that's what we've gone on to do.
So we took that fund the which was the Trojan Capital Fund, which in those days was predominantly Weinstock money with some other outside capital, to turn it into a global equity strategy, essentially, but one, which is very consistent, it's obviously fully invested in equity.
So it's different to our multi asset strategies.
But it's consistent in that we look to invest in really strong businesses that are growing that are well managed, that have strong corporate governance that generate a lot of cash and can reinvest those cash flows at high rates of return and where we don't want to pay too much for them.
And it's managed in a concentrated way, again, which is consistent with our other strategies.
So we currently have 28 holdings in the fund, and that's the turnover is very low.
Again, that's consistent across our strategies at Troy.
We tend to want to own companies for a long time.
Peter Higgins 14:08
Thank you for that response. I'm going to concentrate and focus on your global equity fund in a second, I want to ask you, firstly though being Head of Research, you and your leadership team face many unprecedented events in recent times, numerous leaders of the UK Government, different Chancellor's rapidly rising interest rates, soaring inflation, and also a war in the Ukraine.
How would you say you and the Troy leadership team have navigated this high period of uncertainty thus far?
Gabrielle Boyle 14:40
Well, it's been it has certainly been very challenging, and in pretty dramatic period of time.
I mean, we're very lucky in a few things.
Firstly, that we're pretty seasoned team.
So, we've been through a lot, we've been managing money, I mean, Sebastian and I, particularly, we’re a bit older than the rest of them.
And Francis obviously, as well, you we manage money through, you know, I said, I started in Europe in the early 90s.
That was a time when interest rates in the UK I think there were 15%, there are there abouts when I started.
So we've seen what it's like to have very high interest rates and how dramatic and profound that can be on the impact of it on economies.
We went through the technology mania.
Yeah, we I was managing money through 9/11 and, you know, spend time in New York at that period, which was extremely stressful.
We went through the financial crisis, which, you know, that was a serious existential threat at every level.
So we've been through a lot, and that I think, is really comes into its own through the kind of events that we've lived through over the past few years of COVID, and so on, as a business overall, through COVID.
We managed that.
I mean, I think, incredibly well, we're very lucky in that we've got a really strong team, both in the investment team, but also in the infrastructure around us at Troy, which has been fantastic.
So we've invested a huge amount in the technology, for example, which allowed us to seamlessly not just work from home, but also trade and manage money through that period in it without missing a beat.
But you know, from more fundamentally, from an investment standpoint, you know, our whole sort of raison d'etre, Troy is about being prepared for the unexpected, if you like, you know, we know bad things can happen.
And that's why we invest the way we do and we consciously look to invest in businesses, that from an equity point of view that are going to be okay.
Even in much more difficult macroeconomic environments. We invest in companies that have pricing power companies that sell stuff, which is fundamental to our lives, companies that have got independent forces at work, which are driving them structurally.
So for example, digital payments is something which is almost a multigenerational force that is at work. And because we seek not to overpay, that also gives us a sense of defensiveness to the way in which we invest in you in a multi asset context.
We have other strings to our bow, which allows us to navigate through very difficult times. So it's kind of in our DNA that we are prepared for difficult times.
It doesn't mean that it isn't very challenging and it isn't very, you know, from a sort of emotional perspective, if you like it's extremely stressful but working in a good team where you have a very clear sense of what you what you what you're aiming to do and a clear investment philosophy and a sense of priorities gives you amazing kind of strength and frankly can be quite liberating when everyone else around you is slightly floundering.
Peter Higgins 18:18
Yeah love the way that you've responded to that question, I think it's essential.
You've touched on there the experience of the team and the fact that as a team, you've been there, seen it, done it and experienced the good and bad times of the markets.
And it makes you as a team more resilient and adaptable.
But you also touched on the importance of being prepared. The markets are never very, in their nature uncertain.
And being prepared for the good, and the bad periods and choosing higher quality stocks that can be forming during difficult times is important.
Now, I want to touch on one stock that you rolled in both your portfolios, and that's Alphabet.
And it would appear that there's been a series of events over the past decade or so, where everybody who says Microsoft, we're going to come after them with Bing, mobile search is going to kill it.
Social media platforms are going to reduce search, voice search is going to reduce their availability for revenue.
TikTok even is going to observe them and now we've got AI, what are the pillars of Alphabet that make it such a long-term bedrock investment for you, and the Troy asset management team?
Gabrielle Boyle 19:32
Well, so we invested in Alphabet at Troy in 2013 and I had been an investor in it at Lazard and we were investors shortly after it came to the market back in 2005. It is an extraordinary business.
So when we invested in it, initially, it was because everybody was concerned about the impact of mobile, and the fact that if they were looking at an ad, it would be more difficult on mobile, it would be margin dilutive, they wouldn't make as much money out of it, that we'd all be using apps rather than using search and that, therefore the advertising revenue would be negatively impact etc.
And there were a number of other controversies as well. But it was very clear to us then, and it still continues to be the case that this is an amazing franchise, it's incredibly strong.
And that core search functionality, and they're the sort of strength that they have accrued by the investment in that over now many, many years, gives them…talk about barriers to entry. I mean, it is it is it is amazing.
And it's a great example of why you want to invest in really strong businesses that have the ability to invest their very strong cash flows at good rates of return. But they are investing big chunks of their revenue and capital expenditure and R&D consistently.
And we love businesses that do that.
Because, you know, here we are now 10 years later. And our investment case on Alphabet back in the day wasn't about artificial intelligence, although they were already starting to get involved with Deep Mind and but it just shows you that when you've got a really wonderful business that's investing, they're innovating, they're kind of entrepreneurial, and other things come through, you know, and we've got multiple examples of that, in the companies that we own in the portfolios, where they kind of are nurturing or growing little small businesses that become big oak trees, if you like over the long-term.
And Alphabet is an example of that. And so through the time that we've owned it, as you say, they've been multiple controversies.
And yet, over that time, the revenues of the business have gone from about 60 odd billion dollars to these days, just shy of 300 billion.
So you know, it's incredible what they have achieved over that time, the earnings have increased from about $1 a share to about $5 a share there.
I mean, you know, these are general numbers, but it just gives you a sense of you that incredible power of compounding.
And so if you can find these special businesses that do something unique, but also have that capacity to reinvest in themselves, that's a really powerful combination.
And what's been amazing with Alphabet is that these controversies have just given us amazing opportunities to buy more frankly.
And it's one of the reasons why the shares have, they haven't really ever traded, and people always talk about FAANGS, and the overvaluation, all this sort of stuff.
Actually, Alphabet has traded really consistently at a valuation lower than a lot of consumer staples businesses, despite the fact that it's grown, you know, way, way higher than that in terms of revenue growth over that time.
So it's an intriguing and intriguing company. And, you know, obviously, always controversies, and there are aspects of it, which aren't very attractive, but ultimately, it's a money printing machine, which is interesting.
Peter Higgins 23:39
Thank you for that response. I think it's a fantastic company. I think he's got more to come as they, as they say, there's lots going on there.
What I find brilliant about the fact that you and your team have held it for so long is that the Trojan Global Equity Fund has outperformed Nick Train’s Lindsell Train Global Equity over the period of 10 year from July 2013 to July 2023. I think tech has been part of that. But I think also it's been about finding of quality companies. Would you agree with that, Gabrielle?
Gabrielle Boyle 24:15
Yeah, I mean, I think one of the things that we obsess about is that we want to own really resilient businesses.
But we also want to own adaptable companies and that adaptability component is, in our mind, absolutely fundamental.
I mean, people talk about tech, almost as if it's a sort of new phenomenon in our lives as investors reality is that technology, and its impact on commerce and our lives, has been a dominant theme throughout my career, and I'm sure will continue to be for many, many more years to come.
And, so owning businesses that have that, recognize that embrace it, and adapt accordingly, is it to my mind, absolutely fundamental.
And so we, you know, historically, we would have been very comfortable to say, within the zone of consumer staples, businesses, maybe healthcare, where, you know, they we know, they're selling goods and services, which are used every single day, and we can understand the products and so on.
But actually, if you think about it, we sort of think about technology as tech staples, once you are using Microsoft, whether it's now 365, or back in the day, or using Office, you're in, you're in and that will continue to be the case, we invested into it, it once you're using QuickBooks, or you're using Intuit TurboTax, to fill in your tax return, you know, the chances are, you're going to continue as a customer.
And so we've always taken the view, we need that adaptability. And it's one of the reasons why when we look at their sort of characteristics of the portfolio, in aggregate, we have very high rates of spending in terms of CapEx to sales, R&D to sales is way higher than the average company in the index. And, and we continue to do that.
And where we see companies pulling back from that, we worry, we really worry where we see companies not embracing that change. And whether too many sacred cows, we worry, and I think it's something that we are proud about at Troy is that we have embraced that.
And it's it is more challenging, it's difficult. Sometimes these companies are big, they're dynamic, they're changing their lifecycle and potentially shorter than that of some of historical sort of staples companies.
But nonetheless, you've got to understand them, you've got to embrace them, you got to know them. And there's been, it's been a tremendous opportunity for us and our clients over many years now.
Peter Higgins 27:03
Thank you. Now, one company you only bought recently, back in July, you made a small purchase a new holding, and UK listed information services provider, RELX (REL), and I believe that fulfills all the criterias that you spoke about, about reinvesting and being innovative and adapting to, to what's going on in the world.
And I just thought it was really, really good, because they're making recent advancements in regarding AI as well.
So, can you tell us a bit more about that, and how the team came to identify RELX?
Gabrielle Boyle 27:36
Yeah, so RELX is a company that we have known for many years, it's been held in our, in our UK Income Strategy for a long time.
And it's, we've owned it in the past, actually in the fund.
And it's, it's a great example of a tremendous success in the in the UK market, it kind of came to our attention in for the Global Equity Fund, because like a lot of companies in in the UK, the valuation we felt was very compelling, relative to what the financial productivity of the business and all of the good stuff that's going on in the company.
And so we've kind of admired it from afar, if you like in recent years, and we felt the valuation gave us an opportunity.
It's an example of so many of the things that I was talking about earlier, where the company has evolved with the digitization of data.
And they've, they've managed to sort of reinforce their amazing competitive position, despite all of the challenges that have come with that digitization and reinvested in the franchise, and continue to do so.
And again, they've been over the years, numerous times where people have failed, that they're, that the franchise would be challenged.
And, and in fact, they've managed to prevail. But it's been a bit like Experian actually, where, again, it's one where they've embraced that adaptability, they've embraced the challenges that come from technology to reinforce the franchise.
Peter Higgins 29:30
Thank you for that. I want to ask now, if you can give us an overview, slightly different for that you manage the Electric and General Investment Fund, because it's got a slightly different mandates.
Can you just tell us a little bit about that? An overview of it, please?
Gabrielle Boyle 29:47
Yeah, so the Electric and General Investment Fund we've been managing for a number of years now.
And actually we run it alongside the Global Equity Fund, in a very, very similar way.
The Electric and General used to be interestingly used to be an investment trust.
It was one of the oldest investment trusts in the country back in the day, and it made the decision in I can't remember exactly when it was maybe maybe around 2011 to turn it into an open ended fund, which was a shame because actually, it was one of the few global equity investment trusts in the UK, but, and we were appointed to manage it back in 2015.
And so it's a really lovely fund that, you know, sort of gets forgotten about and in the context of an incredibly competitive and aggressive sort of global equity sector, but you know, we're delighted to have it in our stable.
Peter Higgins 30:56
It's done phenomenally well for you as well.
And like you say, your own similar sort of stocks within that, but I wanted you to share with us one stock you hold in that particular fund that most of our listeners that I think will not be aware of, and I'll also share the characteristics of it.
And that name is Fiserv, one of the global leaders in fintech and payments, because what I noticed is actually Troy Asset Management don't invest in banks.
So it's really good to see that you got some fintechs and some payments companies within that.
Gabrielle Boyle 31:31
Yeah, so again, Fiserv is a company we've owned in the fund for both funds for a long time, I think we began and probably was 2013, if not earlier than that.
And, again, you know, it's evolved quite a lot from when we first bought it, they merged with First Data.
We have a number of companies in the fund that are exposed to digital payments, essentially.
And Fiserv is an example of that, too.
To an extent, it's a slightly, it's slightly different in that it's more old tech than new tech.
But they are an outsourced provider for the banking system in the US where the banking system in the US is an extraordinary thing.
And that we have, you have these huge banks like JP Morgan, but then you have the multiple thousands, actually, of thrift banks and smaller regional banks, which would use the services of Fiserv to help them with digital banking, etc.
And Fiserv will have also moved much more actively into digital payments, they have a number of products in that space, which have had been incredibly successful, one of which is Clover.
So it's an interesting company, because part of the growth in earnings that have come from Fiserv has been through really pretty aggressive cost management, it's managed in a pretty tight way, they've been a very active and quite aggressive purchaser of their own stock over the years, which has also been quite a powerful part of the kind of return that we've made.
The shares have continued consistently to trade on pretty low valuation. So I mean, for example, at the moment, they're trading on about mid-teens, on a forward looking P/E. And that, you know, it's this is isn't the most perfect business in the world. But they've done a lot of really good things and continue to do really good things. And so we would argue that valuation is more is on the low side.
And it's been a fabulous investment for us over many years now. So it isn't a company that would be well-known to everybody has a $72 billion market cap business now.
So it's not small. It's not small at all, and actually, we probably all use their products in ways that we wouldn't, wouldn't be aware that they’re in that chain when you're tapping your credit card to pay for a cup of coffee or whatever. So it's a really interesting business.
Peter Higgins 34:31
Brilliant, yeah, I didn't know much about it myself up until a few weeks back.
So yeah, one for listeners to definitely go and research.
Now Gabrielle, the 10 years total returns performance for the Electric and General Investment Fund has been outstanding circa 177% over the past 10 years.
What pleases you most about the long-term performance of this particular fund?
Gabrielle Boyle 34:54
Well, I mean, for me, it's all about delivering returns for investors.
And we're me, I'm an investor, obviously, in both funds and so it's really matters to me, but it does matter an awful lot for the underlying investors of many of whom I know quite well.
And you know, they're interested in they're obviously interested in capital preservation, but they're also interested in in the return, you know, they need them many of them will, if they need capital, sell a few units to live off and it's an important you know, at the end of the day, we're in this job to look after our investors capital, which frankly, is a massive privilege and a massive responsibility.
So for me that's, that's what it's all about. And, and that's particularly the case for Electric and General because it's a small fund and it's one which is very close to our heart.
Peter Higgins 36:00
Thank you. I want to touch now on a quote from Troy Asset management's founder, Sebastian Lyon.
Lyon recently quoted legendary investor Jeremy Grantham, saying 'volatility is a symptom that people have no idea of the underlying value', you showed steely fortitude and stuck with Meta formally known as Facebook, when the shares eight-year low back in November 2022 of around $88 per share, when many other fund managers had already exited Meta after questioning their continued investment potential.
What did you and your team identify that gave you such conviction to hold on, as you are obviously richly rewarded, as Meta shares rallied since to a 52 week high of $326 per share just last month?
Gabrielle Boyle 36:54
Yeah, well, that was a stressful period, I can tell you.
Yeah, that's a great example of where it was a stressful one. But so why did we? Why did we hold on? How did we get through that? Why did we add to it?
Not quite at the lows, but not far short of it.
I think that Meta is an example of why working in a firm like Troy is a really good place to manage money.
Because this is a job where you are so easily distracted, you are in such an emotional, you know, psychological challenge every day, and working in a firm, where you're given the time to think, to do your homework, to do your research, to really get into the weeds and to take a step back and take a breath.
You know, we have one of you people talk about the your what's your competitive advantage, and you can talk about, oh, well, we do better work, we do more detail work, and we have better access and all this.
Actually, the biggest competitive advantage we have is that of time and being able to take a breath and having a clear idea of what you're looking for.
And so we did so much work on Meta, we analyzed it to the nth degree.
But I think one of the biggest things was that being able to take a step back and be objective, because it's such an emotive company.
I mean, honestly, we didn't do a single meeting with anybody where that wasn't the first thing they wanted to talk about.
And just being able to step back and look at it as a business that is highly financially productive.
In the same breath, as people were you know, as George, my colleague likes to say, we're hate selling.
They're using WhatsApp, they're on Instagram, you know, their kids are using Facebook to advertise their local business that they've set up, and so on and so on.
And so the services are were being there were a whole host of factors behind what was challenging Meta, the post pandemic kind of fallout, the investments, that they wouldn't be this some of the crazy Metaverse stuff.
The challenges is from Apple, and IDFA, you know, a whole host of different factors going on.
But ultimately, despite all of that, Meta generating lots of cash generating lots of returns, and actually still underlying, growing etc.
But I would say that one of the biggest things is that's an example of where being in a small team with a very clear investment philosophy, and the time to take a breath and focus, it comes into its own.
Peter Higgins 40:01
Thank you, I think, I love the fact you've touched on time, objectivity, and having a small team, they're all getting around the table and disagreeing at times.
And to then get to a point of consensus where you go, you know what, we'll stick with this, and you've been rewarded accordingly.
That, I think is fantastic when teams do that.
We're going to slide straight into another point is the complete opposite of that now, how teams tend to fall for the fragility of some of the meme stocks, mania stocks and hype stocks as well which you guys have navigated so brilliantly, you know, since so many fund managers fall for the likes of Zoom, Beyond Meat, Peloton, and WeWork.
How do you guys ensure that you avoid those fragilities?
Gabrielle Boyle 40:45
Well, we're never going to be immune.
But we have a very high hurdle rate essentially.
So the process that we undergo, when we're looking at a company, we'll start off by doing what we call a working progress note, which is the sort of sketch out the investment case, we'll discuss that as a team, decide if it's worthy of further work will then go away and do the work that could take really quite a long time and do quite a lot of detailed analysis where we'll meet with a company, meet with perhaps competitors, customers, etc, and get a full sense of what they're about.
We'll discuss it as a team decide if it's appropriate, we'll go into our investment universe and then potentially, we will decide to invest, the valuation has to be right.
But you know, we're really looking for businesses, which generate very high returns consistently over a long period of time, where they have got those competitive advantages in a whole host of different ways.
We want to understand the management, how they're incentivised what their history of capital allocation has been, how are they motivated, what's their incentive structure, like we love businesses where there is still a family or a founder investor, when we have confidence that they're going to act as long-term investors and we don't want to pay too much for it.
And so that whole sort of list of factors means we look at an awful lot of stuff that doesn't make the cut.
But we at the same time, we want to balance it between being very discerning, but also not being too close minded.
And it goes back to this point I was saying earlier about adaptability.
So we do want to look at new things and keep on doing that research.
So it's a balance, and we will look at things will miss things, and we will pass on things that will perhaps do very well.
But again, I think as well, we try not to have that FOMO of fear of missing out.
But balance it at the same time as the other thing, which is important to say is that we have a process whereby when a stock moves a lot, very quickly, we'll review it, we'll write up the notes, we will get an alert from our risk team, which is saying this is not a big fall, what's going on, we try and have that healthy, self-critical process where we kind of will look through well, what are the mistakes?
What can we can we learn from this? How can we do this better next time? And I think that's a really, and being very honest about that is an important part of being an investor, you know, you're not going to get it..
I mean, the stats are that you are, you're doing well, if you're getting right 60% of the time, which means you're getting it wrong 40% of the time, and how you deal with the getting it wrong bid is as important.
And you know, that sounds a bit trite. But it really is so but you know, we're not going to get it right all the time. And we just have to be to be honest about that.
Peter Higgins 43:59
Love that response. Thank you.
Now, I want to touch on what's been happening here today regarding the markets, if I may, they say the narrower that the stock market leadership, the less healthy the stock market with just seven stocks, Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia and Tesla, accounting for over 77% of the US stock market performance in the first half of 2023.
What are yours and Troy Asset Management outlook regarding the potential health of the UK and the US markets over the next six to say 12 months?
Gabrielle Boyle 44:36
Yeah, I mean, look, we are definitely in a challenging period.
We've, as you said earlier on, we've had a reemergence of inflation, significant and dramatic move in interest rates, the biggest most of us have seen in our and fastest we've seen in our careers.
Most people operating and financial markets have not lived with this kind of an environment ever, particularly, we haven't seen it in the US in our careers.
So this is different and so that brings with it all sorts of fragilities, when you when you have rises in interest rates, and rises in the cost of borrowing.
At a time that following on from a period of very, very low interest rates for a very extended period of time, inevitably, there are going to be accidents.
And there will be and it'll be messy.
And we know that and so I mean in our multi asset strategies that Sebastian manages with the team, they are very much back in batten down the hatches mode, and have been for some time now, from a fully invested equity perspective.
You know, it comes back to what I said earlier that we really want to own very strong businesses that I can navigate through what's likely to be a pretty tough macroeconomic backdrop.
But we do as investors deal with a lot of exogenous force forces, which are not always rational.
And that can be anything from the activities and ETFs and lack of liquidity in certain parts of the market, and so on that definitely do create this sort of weirdness that we've we're probably seeing at the moment.
And again, it just comes back to this point that you've just got to have your wits about you and try and use that volatility to your advantage.
So one of the things that we are very George and I'm very conscious of is that when we are trading when we are active is to is to try to be incredibly price sensitive.
And then you because you do get this volatility, and you do get these big moves.
And you want to be buying when when you're on the upside and selling and you know, that sounds really obvious, but you've got to be very mindful of it.
And, and so we look periodically to see, look at our sort of trading activity and assess, have we added value and we want to be adding value.
We don't trade very much. But when we do we want to be very price sensitive.
And so yeah, it's definitely it definitely feels choppy and perhaps more dangerous than we've seen for quite a long time.
Well, I mean, to be honest, we've had every year it feels like this last few years has been dangerous, but there's much longer indeed.
Yeah, it's definitely been stressful and probably will continue to be.
Peter Higgins 47:33
Thank you. Well, that's run seamlessly to my next question really regarding all of what you've just said, how do you maintain your focus because they say, you know, that focus is the bridge towards intention and income and accomplishment?
How do you maintain it because it's must be so difficult?
Gabrielle Boyle 47:51
Well, I mean, I think one of the things about this job being an investor is that it never it never leaves you, you you live it. I mean, you really do and and it's a wonderful job, but it's also it's never it's never done and read a tremendous amount and reading is a gift. I've got four kids so that keeps me pretty busy.
And I've said this many times where I really do believe it like they expression, you're only as happy as your least happy child.
Investing is a bit like that you're only as happy as you are at least the whatever, whatever. There's always something to worry about, you know, but you've just got to wait.
You know, we try and do lots of exercise that helps. We've actually got an investment team, gym session today. That's a good distraction.
But I think I think reading, listening, you listen to a lot of podcasts, and we discuss a lot as a team, we do all of these things.
But it's also that fact that if you work with a group of people who where you got a very clear idea of what you want to do, it helps to just keep you sane, I think you know where you're going, you have a plan that helps to kind of cut through some of the intense noise that we that we live with.
Yeah, so that's, that's the way I think about it.
Peter Higgins 49:27
No, I love that reply. Thank you ever so much.
You've touched on the fact you've got four children, or they expressed an interest in investing or ESG, or ethical, environmental issues?
Gabrielle Boyle 49:40
They are all interested in investing.
And I tried to instil in them this look at the power of compounding works, right?
You know, the earlier you start investing, the more that compounding is going to work for you.
And I tell them that all the time they take the mickey out of me about it, because I bang on about it.
My eldest daughter is actually she now works in the music industry, so that's a different tack. But she does invest.
My next one is just starting his career and we'll see where he ends up.
But they're a bit a bit in the other ones are too young yet.
My husband is a doctor, so he has a different way of spending his life.
And I think maybe the younger ones might follow him more than me, but I think they will all continue to be interested in investing and interested in the world around them.
Peter Higgins 50:43
Excellent. I'm really pleased to hear that.
Now. You touched on I think you might have answered this already about your investing side of it.
And obviously you're quite well invested. With regards to investing in Troy, tell us a little bit about your own personal investment strategy.
Is it all in regarding Troy Asset management and the funds etc?
Or do you have some external things that you do?
Gabrielle Boyle 51:05
So I from an investment point of view, I am invested in the in the funds that I manage and the funds that we manage at Troy and we value that alignment of interest as being absolutely fundamental with our investors.
And we have structures in place for remuneration perspective for Troy which encourages that. And then sitting indeed in system that, that so from for me, I'm all in in that regard and have been and will continue to be and consider that to be absolutely fundamental, frankly.
But in terms of investing timewise, one of the things that we do encourage at Troy is for people to have outside business interests.
So I'm involved with two charities, I'm a trustee of Launch it, which is a charity that helps young people from the tougher parts of town to start businesses.
And that is it's a fantastic charity that really gives young people an opportunity to be independent and have a different life.
And I'm also involved in a rural charity, which is bunch of us set up, which is something which is very close to my heart.
And I'm on the board of Witan Investment Trust, which is great, wonderful role where I get to meet other managers.
And that gives me a fascinating perspective on the world. And that's, again, it's something that a number of my colleagues will also have other outside business interests, which we encourage and you know, we think is helpful if you want to be a rounded investor.
So from a financial point of view, all in on Troy and aligned with our investors.
But from a sort of from a time point of view, we think it's very important to one of the things we do at Troy is we give a substantial amount of money as a percentage of our revenues to charity every year.
And that we have a charity committee which allocates those funds.
And we try to give the money to charities which where we can have great confidence they make an impact.
So small charities that are kind of we kind of take a similar approach to the way we do investing in businesses, more charities where the money, it goes directly to the causes, and is something that where, you know, we really feel confident that we can make an impact but involves all the employees at Troy.
And that's been something that we're particularly proud of.
Peter Higgins 53:50
Fantastic. I love that you're doing that. I'm an ambassador for a charity. So I know exactly what you mean by putting money and time into charities where the money goes directly to the actual users of that particular charity. So very, very well done.
What if you could just expand briefly though, on the charity GAIN - Girls Are Investors for us, please? I think that's really one that I really want to hear much more about I think people would like to know about as well.
Gabrielle Boyle 54:15
Yes.
So GAIN is a fabulous charity was set up by one of my colleagues, Charlotte Yonge, with some other people to, to really try and address the fact that there is a massive under representation of females in the investing community and that young women don't always think about investing as a career.
And don't and don't necessarily even think about investing frankly. And you know, that you look at the stats around ISAs, and SIPPs and so on, you know, there's the female representation is way below where it should be. And so GAIN do an amazing thing.
They go into schools, they go into universities, and they talk to girls and young women to get them interested in investing, particularly as a career and try and sort of break those boundaries and assumptions that you've got to be really good at maths if you want to do investing well, that it's a really sort of testosterone led career.
And it's a fabulous thing, because there's a lot of work being done about the fact that actually women make very good investors because they tend to be patient. I mean, Willis Towers Watson did a study which actually demonstrated that they women, lead and female participation teams did better on average.
But you know, regardless of that, we're good at this. And we want girls to think about it. And we want, at the very least for them to take an active responsibility for investing, even if they're working in other careers, GAIN do a brilliant job of that.
And they run an internship program, which takes so speaking from point of view of being an employer, Troy, they take away a huge amount of the pain of managing internships, which is a wonderful thing.
And so we were one of the Troy were one of the founding sponsors of it when Tilly Franklin and Charlotte Yonge set it up. And we're really proud of that, but we continue to support them in a very active way.
And we have an internship program. In fact, we have somebody here as an intern at the moment, who's come through that, and it's, it's fantastic, and it's spread like wildfire.
I went to their awards earlier in the summer, and it's amazing to see all these young, enthusiastic women really, you know, pushing on in their careers. And and I hadn't, you know, I wish they'd been more of that.
Through my career. It's, it's, it's kind of been a bit of a sadness really, that a lot of my female colleagues have left the industry over the years and we miss them.
Peter Higgins 57:16
That’s fantastic that you're all doing that piece of work.
Now I've covered all of my questions bar one, anything that you want to share that you feel I haven't covered that you'd love to share?
Regarding Troy, before I go to my very final question.
Gabrielle Boyle 57:31
I think we've covered a lot.
I think you've covered a lot. Thank you. We have yeah, I think hopefully, we've got that message across.
Peter Higgins 57:38
Thank you ever so much. Right. I'm going to give you my final question.
Now, if I may Gabrielle, I have one final question for you. And if you are granted the complete autonomy, and power to change one thing globally, for the betterment of the whole human race, what would that be? And why Gabrielle?
Gabrielle Boyle 58:00
Well, gosh, that's a big question. I think I would have to I don't know, I'm not. That's a very big question.
I mean, the one that comes to mind immediately is our poverty. But it's an impossible thing to fix. But I think issues around children and children's lives and some kids having it so so difficult is something that is extremely close to my heart. So I would have to say that but an impossible thing to achieve.
Peter Higgins 58:34
That's a worthy cause that but thank you.
Thank you ever so much for that reply. Thank you.
Gabrielle Boyle 58:37
Thank you, Peter. That was great.
Peter Higgins 58:42
Okay, ladies and gentleman that was Gabrielle Boyle, Investment Director, Head of Research at Troy Asset Management, and a fund manager, also one of the most successful women that we have in the City. So please give this a very, very good and lengthy lesson to be learned from. Gabrielle, thank you so much for joining me, and absolute pleasure to have you on the Investing Matters Podcast today.
Gabrielle Boyle 59:03
Thank you, Peter. Thank you ever so much.
59:08 LSE
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