For investors, the two key challenges are to select a manager or strategy that can perform over the long term, and to remain invested during periods of difficulty in both absolute and relative performance. When a performance setback occurs, the natural human instinct is to cut losses and move to cash or a different strategy that currently “works.”
Strategy hopping or moving into cash are the key reasons why most investors obtain disappointing returns investing in public equity markets. We believe that staying invested in a sound investment strategy is the best way to benefit from the almost magical long-term compounding potential of outstanding public companies.
At 2Xideas, our mission is to address both challenges. Our four core tenets are:
- Achieve strong returns and a similar risk profile as global equity markets.
- Build direct and lasting relationships with our investors.
- Offer investors unrivaled insight and transparency.
- Ensure full alignment of interests.
Achieve strong returns and a balanced risk profile
Our entire firm is dedicated to a single team-based investment process. We believe in collective intelligence that is supported and amplified by technology.
We constantly work on enhancing our process and invest heavily in our own business to build the capabilities needed to achieve strong returns. Our target is to generate a 2X return over 5–7 years, equivalent to 10–15% p.a., while at the same time maintaining a balanced risk profile. We focus on risk management as large negative performance swings relative to global equity markets make it harder for investors to remain confident.
Build direct and lasting relationships with our investors
In our opinion, it is easier to remain confident during difficult performance periods when the investor knows their manager well and is familiar with its investment philosophy and process. This is why we focus on building direct and lasting relationships with our investors. We communicate openly and proactively, especially in periods of underperformance.
Offer investor unrivaled insight and transparency
We provide unrivaled insight and transparency to our investors through our Quarterly Review reports and various Research publications. Our Investment Cases give investors a better understanding of the quality and growth potential of the companies they are invested in.
We also publish frequent Industry insights and present them in detailed webinars so that investors can follow our thought process when it comes to comparing business models. Traveling the world to meet management teams, we compile Logbooks to provide our investors with the key takeaways from those encounters.
Ensure full alignment of interests
We win and lose together with our investors. The partners and employees of 2Xideas have collectively invested over USD 100 million into the firm’s strategies. This allocation continues to grow, fed by private investments and our own pension plan.
We also directly link compensation to the success of 2Xideas via a profit-sharing mechanism that includes all employees. As we continue to emphasize strengthening our capabilities by expanding our team over optimizing short-term profitability, this mechanism ensures a self-selection of long-term-minded individuals.
We apply the same long-term mindset and collective decision making when it comes to managing 2Xideas as a company. The ownership is currently shared among 13 partners. This setup avoids key-man risk and leads to a very high level of governance, further supported by our four-member Board of Directors, of whom three are independent.