Realising value. Compounding capital.
Magdalen is opportunity-led rather than allocation-led. We take a patient, long-term approach to capital allocation and go where we believe the relationship between price, value and risk is most attractive.
A long-term approach to value and compounding.
We go where the opportunities are. We invest with an emphasis on the relationship between price, value and risk, and with the patience to allow successful investments the time necessary to compound.
Today the portfolio consists entirely of listed, liquid businesses across a broad range of market capitalisations. That reflects the current opportunity set rather than a permanent restriction on where Magdalen can invest; we remain willing to invest directly in private businesses or other assets when the opportunity warrants it.
We research extensively, maintain a high hurdle for deploying capital and act decisively when an opportunity warrants it. Otherwise, we are comfortable doing nothing. Downside is considered before upside, and capital is deployed because an opportunity justifies it, not simply because capital is available.
A disciplined approach to capital.
Realise value
We look for situations where we believe value can be created, recognised or ultimately realised over time.
Protect capital
We place considerable weight on downside, resilience and avoiding permanent loss of capital.
Be patient
We are comfortable waiting when the opportunity set is unattractive and acting when it becomes compelling.
Think long term
We make decisions with a multi-year horizon and allow successful investments the time required to develop and compound.
Stay selective
We do not diversify for its own sake. Capital is concentrated where we believe the relationship between value, resilience and prospective return is strongest.
Compound
Our objective is to compound capital over the long term through disciplined allocation and reinvestment.
Long-term compounding.
Performance is calculated in GBP. Unit values are rebased to 100 at inception in May 2013.
A consistent philosophy across different opportunities.
Since 2013, Magdalen capital has been deployed across different opportunity sets. While the nature of those investments has evolved, the underlying objective has remained consistent: allocate capital where the opportunity appears most attractive, realise value where appropriate and compound capital over long periods.
Predominantly direct opportunities. Capital was deployed predominantly in direct real estate and private-company opportunities, alongside other investments where we saw attractive value. A small number of concentrated investments were significant contributors to returns; because these assets were not continuously quoted, reported unit values could remain unchanged for periods before value was ultimately realised.
Listed opportunities. Capital is currently invested entirely in listed, liquid businesses, ranging from large established companies to micro-cap opportunities. This reflects where we currently find the most attractive opportunities rather than a permanent restriction on where Magdalen can invest.
Opportunity-led. The asset class may change; the philosophy does not. Magdalen remains willing to invest in public or private opportunities where we believe the relationship between price, value and downside is sufficiently attractive.
Four principles guide our decisions.
Value
We invest where we believe the prospective return justifies the price paid and the risks accepted.
Patience
We are willing to wait for opportunities and willing to give successful investments time to compound.
Resilience
We prefer situations where the underlying economics can withstand uncertainty and adverse conditions.
Discipline
Capital is allocated selectively, with a long-term perspective and without a requirement to remain constantly active.
Concentration and caution are not opposites.
Magdalen is deliberately concentrated. We do not regard owning a large number of investments as a substitute for understanding them, nor do we diversify simply to reduce short-term movements in reported value.
We do not use leverage. Returns are not enhanced through borrowing; we prefer each investment case to stand on its own economics.
We think about risk primarily as the possibility of permanent loss of capital, rather than short-term movements in quoted prices. The hurdle for deploying capital is deliberately high. We place considerable weight on downside, resilience and the range of outcomes that could cause an investment thesis to fail.
Concentration can increase volatility and means that an error in an individual investment can have a greater effect on overall performance. We accept that trade-off where we believe careful selection gives us a better chance of preserving and compounding capital over the long term.