The performance of the Ranmore Global Equity Fund in 2022-2023, run by London-based South African portfolio manager Sean Peche, ranked in the top 1% of a basket of 3,000 European/Asian/African global equity funds categorised by Morningstar. As Sean is keen to stress: past performance in no guarantee of future performance, but its 30% return after all costs in 2023 helped ensure the Fund’s position since inception in 2008 is within the top quartile of similar funds. In this interview with Alec Hogg of BizNews, Peche explains that while guessing big trends is fun, the money gets made because of a strong investment process that exposes winning stocks at a micro level.
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Edited transcript of the interview
Alec Hogg: Well, South Africa’s most renowned independent financial advisor, Magnus Heystek, started the year on a high note, as per his email to me. In the first week, Magnus shared the exciting news that Sean Peche’s Ranmore Fund was declared the top fund globally in 2023. Sean, welcome and congratulations on this remarkable achievement.
Sean Peche: Thank you, Alec. It’s a pleasure to be here. I appreciate the acknowledgment.
Alec Hogg: Magnus also provided me with your fact sheet, revealing that among 3,100 global equity funds on Morningstar, only two managed a positive return in 2022 while outperforming the MSCI World Index in 2023. Both were associated with Ranmore—the Global Equity Fund and the Global Value Equity FEDA Fund. This is truly exceptional, Sean. The last time a South African topped the charts was Kokkie Kooyman some years back. How did you manage this feat?
Sean Peche: Alec, it’s been an interesting journey. In 2022, we observed a trend where funds excelling in that year struggled in 2023, and vice versa. Value funds performed well in 2022 but underperformed in ’23, while tech-oriented funds that struggled in 2022 thrived in 2023 due to AI advancements. We recognised that we outperformed in both scenarios. In 2022, when the market declined by 18%, we were up nearly 2%. Working with Morningstar, we analysed data from 3,000 global funds, excluding the US, to validate our performance.
Our approach is straightforward. We have a single fund, and the feeder fund in South Africa channels into it. We avoid segregated mandates to ensure all clients benefit from scale, even if a large investment comes in. This allows us to navigate global markets strategically, capitalising on opportunities in different regions without complicating client portfolios.
Read more: Mastering market mindset: Sean Peche on navigating volatility and avoiding investment pitfalls
Alec Hogg: It’s not only about returns; it’s also about efficiency. Now, you mentioned your recent holiday at Grootbos. Tell us more about that.
Sean Peche: Indeed, Alec. My wife and I celebrated our 25th anniversary, and Rory Steyn recommended Grootbos. We had an incredible time in Cape Town, making it difficult to leave. But what stood out was our visit to the Grootbos Foundation, aligned with the hotel’s community program focusing on conservation, sport, entrepreneurship, and green futures. Witnessing their transformative impact on the Overberg area’s youth through sports facilities and community initiatives left a lasting impression.
Inspired by their work, I’ve publicly committed to establishing a charity once our fund reaches $200 million. More than half of my dividends will be directed to organizations like Grootbos. It’s crucial to give back, and the Grootbos Foundation serves as a model for positive change.
Alec Hogg: That’s truly commendable, Sean. It’s essential to recognize and support impactful initiatives. Now, let’s shift gears a bit. A year ago, we discussed your predictions for 2023, most of which didn’t materialize. Yet, your fund delivered outstanding returns. How do you reconcile this?
Sean Peche: Alec, it emphasises that macro predictions don’t determine our success. We are bottom-up investors, focusing on individual companies rather than macro trends. Take the example of consumer staple stocks being affected by obesity drug trends. While others panicked, we looked at each company individually. For instance, Heinz seemed undervalued amidst the chaos, presenting an opportunity. We don’t rely on getting macro predictions right; instead, we focus on asymmetrical opportunities at the company level.
Alec Hogg: It’s a valuable lesson—focus on the specifics rather than getting caught up in macro uncertainties. In your fact sheet, you drew parallels between being a good cricketer and a successful investor. Can you elaborate on that analogy?
Sean Peche: Coming from someone not skilled in cricket, let’s liken it to a good batsman’s approach. You want sixes, fours, singles, and twos, but you must protect your wicket. Swinging for a six on every ball leads to getting bowled out eventually, as Clive would attest.
That’s our strategy. We prefer having a few winners. Contrary to retail investors who go all-in on one idea, it’s all or nothing for them. We don’t want to get bowled out, so we protect our wicket. When a promising opportunity arises, inspired by Warren Buffett’s “fat pitch,” we take a swing, but we’re not aiming for sixes on every ball.
Looking at competing funds with big names like Microsoft, Meta, Novo, and others, one might assume they had a stellar year. Surprisingly, they underperformed due to a couple of companies that got them bowled out. Being cautious about losers is crucial. Out of 25 positions contributing over half a percent, only one resulted in a loss greater than half a percent, yet it contributed positively last year.
Read more: Exposed: The hollow promise of ‘Long-Term Sustainable Growth’ in the corporate world – Sean Peche
Alec Hogg: Explain that, what do you mean by that?
Sean Peche: Consider a position at 2.5%, which goes up 20%. That contributes half a percent to your performance. We had 25 such positions, with only one losing more than half a percent, but it still added more than half a percent to our performance last year.
Alec Hogg: In this book you recommended, “Richer, Wiser, Happier” by William Green, Howard Marks suggests that getting two out of three investment bets right makes a successful investor. Last year, you achieved three out of four, with 75% of the portfolio in the positive and only 25% going backward. How do you maintain this success?
Sean Peche: It boils down to risk management. When we buy a stock, we’re not aiming to beat the market; we believe we’ll make money from it. It’s about skewing the odds in our favour—buying high-quality companies with good balance sheets at a reasonable price. Overpaying nullifies other positive factors. Value investing makes sense; even if we’re wrong, not overpaying is like buying a demo car instead of the shiny new one.
Alec Hogg: Let’s touch on China. In our BizNews portfolio, we have Prosus, which took a hit due to Chinese government restrictions on gaming time. It’s recovered somewhat but is still down. Do you have hope for that stock and Chinese shares overall?
Sean Peche: We don’t own Prosus, not big fans. The Chinese stock market had a rough start, down nearly 4% today. However, GDP numbers are decent. People are pricing in risks due to government actions. China has good businesses with strong balance sheets still growing on low multiples. Maybe the risk is priced in. The Chinese government may have learned a lesson from companies like Tencent and NetEase, realizing the impact on employment and economic growth. There might be opportunities in China, finding diamonds in the dust.
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