The fund is “new”; it has been in incubation since its unofficial launch with about $20 million invested. The aim is that the fund can build up a track record and then launched. It is coming up to its three-year anniversary in October. The fund was designed and set up by Darryl Lucas. The philosophy is about identifying the best companies based on cash flow, financial profile and stress testing. The investible universe is 120 companies (4 of which are emerging markets).

From this universe the maximum number of holdings is around 42 but currently he holds 35 companies with 45% of the holding in the top ten. Turnover is low and holding periods are expected to be 7 to 10 years. We discussed mistakes: he believes that the focus on high quality businesses reduces the risk of mistakes and would expect a positive hit rate of about 80%. One company we discussed was Sage, where he felt that although it was the weakest of the accountancy software businesses, it could deliver high growth returns. In reality the likes of intuit are taking market share through innovation and cheaper cost bases…..read more