The fund aims to provide growth by investing in companies where an entrepreneur or family owns a majority stake, with little or no debt, as this means bankers and other lenders have no influence over business decisions.
Fund manager Charles Firmin-Didot will be supported by five colleagues based in the US, Latin America, Europe and Asia. As a team, they will focus on companies with a 10-year track record of delivering consistent returns. A solid track record is important because it indicates companies will have weathered the storms of the economic cycle. Developing good ideas, having the courage to make decisions and take considered risks are also factors that Firmin-Didot and his team like to see in companies.
Firmin-Didot, who developed the Talents fund concept three years before he joined Axa in 2003, will not be bound by a benchmark index. He will have a shortlist of 900 stocks, which will be whittled down to a portfolio of 100 stocks, diversified in relation to region and industrial sector. In terms of market cap, half of the fund will comprise medium-sized companies, a third will go into bigger companies and the remainder in small caps.
An important consideration for Firmin-Didot is whether entrepreneurs invest in their own business. He believes doing so indicates their long-term motivation and provides a degree of comfort, as it is unlikely they will take too many risks with their own money. Firmin-Didot will also practice what he preaches by investing his own money into the Talents fund.
Exposure to financials, oil and utilities will be limited in this fund because there are fewer entrepreneurs in these sectors. However, Firmin-Didot will monitor market changes. His offshore Talent funds suffered in 2001 as a result of a large position in a company exposed to the slowdown in the travel industry after the terrorist attacks in the US. Since then, he has avoided concentration in region or sector and will look at where a company’s sales are generated, not where the head office is based.
This fund is unique in making people the focus of stock selection and this may strike a chord with investors more than other types of analysis. However, some UK investors may prefer more exposure to UK entrepreneurs than this fund is likely to offer.