Update No. 267 – 13/05/16

What you want is a Fund Manager that feels terrible when they lose some of your money (even if it’s just a quotational loss). They should really sweat bullets when things aren’t going well, or they’re not fit for the job.

I met for the first time a couple of weeks ago a legendary small-cap fund manager who has been for some years retired. It was one of the best experiences I have had of late; he was so gracious and forthcoming in talking a little bit about some of the things that he’s been through over his many years in the market. The meeting had an enormous impact on me.

My biggest takeaway was just how much talk focused on mistakes. Every time I meet an investor with a really good record, it never fails to surprise me how quickly talk will turn to their mistakes. Anyone who has operated in the market for a long time will have made many. Even if their record may be so good it isn’t obvious.

If you put a quarter of your portfolio into 4 ideas and over the course of a year three of the ideas double and one goes bankrupt, you would probably find the 50% return in invested capital quite satisfactory. The best investors I know, however, would have trouble putting the loss behind them despite things turning out well. This is what makes them good investors. If it is at all possible, they never want to make the same mistake twice. There are too many new mistakes one could potentially make to repeat the same ones.

Also, if you eliminate the loss, even if the 4th business goes nowhere in valuation terms, the return improves to 75%. So it’s not just the psychic satisfaction of not making the loss, the avoidance of it will materially improve your returns.

The ugliest part of doing a decent job as a money manager is that you need to constantly rub your nose in your own mistakes. The things you should have known but didn’t. The things you knew, but didn’t act on. The times when you sensed that the game had changed and didn’t react. The self-flagellation should be almost unceasing. And if you get it right and prevent yourself from repeating mistakes by improving your process, you make really good returns.

The portfolio hit a new all-time high again this week and widened our all-time lead over the market. Probably doesn’t seem a natural time to be thinking about mistakes, but whenever things are going well, that’s the time to be most vigilant to ensure mistakes don’t creep in – Tony Hansen 13/05/2016


Apr 1st 2011

Jul 1st 2015

Current Price

Since July 1st 2015

Since Inception

EGP Fund No. 1












EGP Fund No. 1 Pty Ltd. Up by 13.83%, leading the benchmark by 10.37% since July 1st 2015. Since inception, EGP Fund No. 1 Pty Ltd is Up by 111.35%, leading the benchmark by 70.26% all-time (April 1st 2011).

*1 after a 31 May 2013 dividend of 2.333 cents per share (cps) plus 1.000 cps Franking Credit, a 31 May 2014 Dividend of 7.000 cps plus 3.000 cps Franking Credit and a 31 May 2015 Dividend of 8.6667 cps plus 3.7143 cps Franking Credit

*2 calculated based on dividends reinvested