How did you come up with the idea of Talents?
Charles: "After 12 years at JPMorgan, I got fired. Rather than starting another job right away, I went far away deep into the mountains of Kerala in India to see a friend of mine. I stayed a month in the jungle there, eating only vegetables, and came up with the best analysis I had made in years: I realised that perhaps I was not a good analyst! There was no reason why I should be better than others.
What could I do from there?
I thought that it would be interesting to see why people become good at what they do, and focus on talented people. As these people make the difference, why not invest in talented people? This is why I created Talents in 2001.
At the beginning, we were very successful, 2001 performance was 30% above the MSCI World Index. At the time, I invested in talented entrepreneurs that were not necessarily large shareholders. Then came Vivendi. But I soon felt there was something wrong. In 2002, I even said in an interview with Bloomberg TV that the risk was that Jean Marie Messier was not a large shareholder and had less to lose than to win. Vivendi had too much debt and it almost went bankrupt.
That's when we decided to add two criteria in our process: that entrepreneurs should be major shareholders and that the companies should have little debt!"
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Why do you give away some of your secrets?
We want Talents investors to know what they own. The more we all invest this way, the more we will all support creativity, courage and long-term vision in our listed companies. People with creativity and courage need our support. We also wish to share our ideas and interact with our investors.
Contact us to suggest hidden "talents" and/or share your talents stories with us.
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How can you follow as many as 3,900 companies with a team of just three ?
It's not about following companies, it's about people. People do not change as fast as companies. We do not want to analyse each business model every quarter because we believe in the leaders instead.
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Could the size of the funds become too large over time?
We do not want excessive assets under management as we feel becoming too big would hurt performance. As of June 2008, we manage more than € 540 million. When we analyse the investments opportunities in the talents we spotted, we estimate our capacity to be above € 3 billion.
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Is sustainability important when you decide to invest?
We would not necessarily invest in companies that claim to improve the Earth's sustainability. As our approach focuses on people, we prefer that the leaders themselves show us when we meet, that they personally act for their employees, our society and our planet. Moreover, it is one of the best criteria - making that they consider the long-term, taking into account factors others than pure profit.
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Why should people invest in Talents funds if they can invest directly in the listed companies of entrepreneurs?
The ability to spot talented entrepreneurs worldwide is a talent in itself. Our business is time-consuming and requires linguistic, cultural and business skills. The criteria to select talents are simple, but not all are intuitive.
"I made my biggest mistakes when I bought or sold a stock based on a view of the business and not of the people," says Charles Firmin-Didot; "it took me many years to get rid of the habit."
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Are market conditions taken into consideration?
We pay special attention to any change in market conditions and are experienced in adapting the investment approach accordingly.
Two examples:
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After the September 2001 terrorist attacks, the strategy suffered due to its large position in Cendant, a company particularly exposed to the slowdown in the travel industry. Since then, we actively avoid excessive concentration in single stocks or sectors. The exceptions to this rule are the strategy's largest holding:
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Financière de l'Odet - a well diversified conglomerate with little debt, which has represented close to 9% of the fund's net asset value,
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and Softbank in Japan - which represented 9% of the portfolio following a strong and fast rise in value. The position was reduced to below 5% as soon as the portfolio manager deemed it appropriate.
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After the 2001 and 2002 corporate governance scandals (Tyco, Enron: not owned – and Vivendi: owned), the portfolio manager focused principally on entrepreneurs who have a large stake in the company they manage.
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