Letter to Investors

After much consideration and preparation, I have decided that now is the right time for me to hand over the reins to the new generation. This new generation I have been preparing and working with very closely for a number of years. When crafting the succession plans for SIM, the board’s objective and that of myself as founder were both clear; to ensure continuity for our clients’ portfolios, for the clients themselves, for the partnership managing the business and for the partners – in that strict order of priority. I take this decision in the firm conviction in the talents and suitability of this next generation in my family, as well as the working partners, and that the company is ready for such a change. The team is as strong as it has ever been, the philosophy clear and the process fully established. This move has been long in the planning and is slow and gradual in the execution. We are all fully aligned on what Seilern is and what it should be.  

There are a small number of core principles that I have sought to instil the business with. These are part of the company’s DNA and define what we are. We are an investment house committed to a clearly defined investment strategy. We have proven this commitment by embracing the same strategy consistently through many different market environments, independently of the prevailing investment fads of the day. The process by which we apply our philosophy is designed to ensure that each step is replicable, can be clearly articulated and, most importantly, is not dependent on the skills of any individual. We have sought to instil a culture of forthright and open communication with our clients. Over the years this has afforded us the privilege of a loyal client base that allows us to invest their capital according to our shared objectives. These are our core principles.  

Focus 

During the early years of my career in financial services, and especially in the early 1980s at the beginning of the multi-decade bull market in bonds, market gimmicks abounded. This was aided by the loosening of capital, foreign exchange and other controls around Europe and beyond, as well as the new single market in trade. It was particularly true in the fast-developing field of hedge funds. Here, various styles acted as a magnet for short-term players or fund managers who embraced any new opportunity to embark upon financial innovation. It was a product of the burning competition in this field. I always considered these fads once removed from the perennial and core investment principles I had espoused, even as renowned market players and their investors took to the gimmicks with alacrity. Therefore, and despite many decades in this business, I have always been a convinced Quality Growth investor as opposed to following other fashions in financial markets that come and go. My aim was to build a company that would deliver the purest form of Quality Growth investing to the market, even more disciplined than those who portrayed themselves as embracing this philosophy.   

Here is an example. Many investors seek shelter behind the perceived protection of portfolio diversification as a way of minimizing risk. Yet our aim was always to become true specialists in one principal investment approach and concentrate our clients’ portfolios therein. At the same time, it was essential to grasp clearly why most trends and fashions that regularly spring up in the marketplace should be understood but by-passed, fully knowing why to bypass them.  

We have not been distracted from this one goal over the past 35 years. Spending such a long time on a single objective has served to concentrate our investment focus on what we believe to be the best combination of risk and return.  

Clearly Defined Investment Philosophy 

To all in the Seilern team, Quality Growth investing has a clear definition. We have developed this over the years to ensure that, when asked what we do, we can offer a clear and precise definition of our Quality Growth philosophy based on our ten golden rules. These are a set of simple rules which companies   will follow to be considered a Quality Growth business.  

To distil an investment philosophy into a set of rules is challenging but crucial, especially in light of adverse market pressures. Even then, any philosophy is only as good as the team’s ability to put it into practice. 

Quality of Execution 

Defining and perfecting our investment process has been our primary objective. This rests on some overarching principles.  

Our investment process seeks to be consistent, replicable, clearly articulated and independent of the people that put it into practice. This process covers the full extent ranging from idea generation to portfolio construction. We have been honing this process for 35 years. 

Discipline and Independence 

Even the most clearly defined philosophy and process will fail in the absence of a sound structure. As a family business with partners, we think in generations and not in years. Our investment team’s remuneration does not look to incentivize any single year’s performance. As shareholders, our investment team are partners in the business and, like the underlying investments in our funds, are incentivized to ignore the short-term and maximise long-term value creation and clear communication with clients. By not receiving a yearly bonus based on the performance of the funds, the team’s interests are closely aligned with those of the family partnership and most importantly, those of the clients. Independence enables us to break away from the widely used annual bonus incentive structure which so misaligns interests in the industry. This unique cultural selling point, in my opinion and that of our partners, affords us one of the greatest competitive advantages. 

This has been specifically designed to encourage an unwavering discipline. Our aim is not to generate performance in every market environment but, instead, to fulfil our stated objectives. Although we know that Quality Growth cannot outperform in every short-term market cycle, we believe that this philosophy has the highest probability of success over time. The evidence lies in our long-term investment returns when compared with the averages. To conclude this message, we have been Quality Growth investors for 35 years and the evidence of combining low and reasonable risk with robust returns through in-depth knowledge of our portfolio companies is compelling.  

Our clients 

Financial markets have an unlimited time horizon, as do those who manage international Quality Growth businesses. From this point of departure, I believe that successful investment that combines measurable risk with concomitant returns must always lie at the heart of the services to our investors.  

Challenging times will require enhanced communication with our investors. This will go beyond regular client updates, as has been the case throughout 2024. The purpose of this is to give comfort to investors that we enact our Quality Growth philosophy at all times, be it in circumstances where the underlying quality and growth characteristics of our portfolio companies are expressed in their share prices; or when market noise masks the underlying signals of ongoing robustness in our companies’ growth trajectories. 

Our clients and their portfolios are our highest priority and lie at the heart of everything we do. This involves a belief in adding value coupled with diligent and conscientious execution. Clients’ understanding of the service we offer is second only to the long-term well-being of their portfolio. Over the years we have built a truly global client base. I have had the privilege of working with clients whose convictions and long-term investment horizon are closely aligned with my own and those of our entire team. It is both an honour and a responsibility to manage their capital and we are deeply grateful for their trust and confidence.  

Managing Change 

In his book The Leopard, Giuseppe Tomasi di Lampedusa stated that “if we want things to stay as they are, things will have to change”. The company has been no different. We have seen both a lot of change over the years, yet very little change in the core offering we have proposed and continue to propose to our investors. It has always been a priority to achieve a smooth transition from the research process that goes into the selection of the Seilern Universe components to the investment execution at portfolio level and the communication with clients.  

As time elapsed and funds under management grew, so did the need for adding human resources to our company at all levels, including operations, client servicing, or expanding the business over the long term. We have always sought to find the highest-quality employees and partners for our company. Internal challenges require careful consideration, as they can often prove more demanding than those addressing external problems. Our ability to navigate these challenges is reflected in our steadfast commitment to our philosophy and process throughout the consistent increase of the headcount, expertise and productivity of the business. This is no coincidence, but testament to the overriding principles laid out above. The current changes further reflect these core principles. 

Time is on our side 

With time on our side, we look to build a business on solid foundations and fewer compromises. Generational thinking makes this goal achievable. Our aim will always be to gather convinced Quality Growth managers and support staff and to achieve our long-term aim of preserving and enhancing our clients’ capital through measurable risk and robust returns. 

Investing in Quality Growth businesses requires an unlimited time horizon, patience and perseverance. 

Our core principle states that only the best will do.

Any forecasts, opinions, goals, strategies, outlooks and or estimates and expectations or other non-historical commentary contained herein or expressed in this document are based on current forecasts, opinions and or estimates and expectations only, and are considered “forward looking statements”. Forward-looking statements are subject to risks and uncertainties that may cause actual future results to be different from expectations.  Nothing in this newsletter is a recommendation for a particular stock.  The views, forecasts, opinions and or estimates and expectations expressed in this document are a reflection of Seilern Investment Management Ltd’s best judgment as of the date of this communication’s publication, and are subject to change. No responsibility or liability shall be accepted for amending, correcting, or updating any information or forecasts, opinions and or estimates and expectations contained herein.

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