🔒 Unconventional strategies: Meet the fund managers beating the market odds

In a world increasingly favouring low-fee passive investing, a select few active fund managers defy the norm with unconventional strategies, reaping remarkable returns. Meet Nadim Rizk of PineStone Asset Management Inc., who bucks the trend by holding a compact portfolio for over a decade, echoing Warren Buffett’s approach. Rajiv Jain of GQG Partners and Ken Jesudian of Crimson Asset Management also embrace concentrated investments, challenging conventional wisdom with impressive results. Discover their unique methods in this insightful Bloomberg Businessweek feature.

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By Layan Odeh, Mathieu Dion and Ye Xie ___STEADY_PAYWALL___

Even as the investing world increasingly concludes that low-fee passive investing is the most reliable way to build wealth, a handful of active fund managers who embrace unorthodox strategies are beating the market. They typically run lower-profile operations and exhibit a patience that’s rare in today’s market, making big bets on a smallish number of stocks based on intense research and analysis.

Nadim Rizk, founder and chief executive officer of PineStone Asset Management Inc., during an interview in Montreal, Quebec, Canada, on Tuesday, Jan. 23, 2024. Photographer: Nasuna Stuart-Ulin/Bloomberg

Nadim Rizk, the founder of PineStone Asset Management Inc., has a simple concept: focus on only about two dozen stocks and hold them for a decade or more. “Essentially, we’re extremely long duration,” says Rizk, whose firm manages three funds with a total value of about C$70 billion ($52 billion). “You can stress the extremely. We hold stuff for 20 years, 25 years.”

While not unheard of—the idea has, after all, fueled Warren Buffett’s fortune (Rizk shows off a basketball signed by the Oracle of Omaha in his office)—it’s unusual in a world where many managers execute hundreds of trades a day. In the past five years, Rizk has changed just a handful of companies in his portfolio. “The best years are where we do nothing, because it means that the businesses we own are performing,” he says.

Rizk’s biggest fund, focused on global equities, has booked an average annual return of 15.4% since its launch during the depths of the financial crisis in 2009, outperforming the MSCI World Index. Its top holdings include Microsoft, Taiwan Semiconductor Manufacturing, Moody’s and LVMH Moet Hennessy Louis Vuitton.

Rajiv Jain, founder and chief investment officer of GQG Partners. Photographer: Christopher Goodney/Bloomberg

Rajiv Jain, co-founder of GQG Partners in Florida, has taken a similar approach, making concentrated bets on just a handful of stocks. His biggest fund, a $42 billion vehicle distributed by Goldman Sachs that includes old-guard energy companies such as TotalEnergies SE and tech superstar Nvidia, has returned 13% annually since its inception in 2016, double the gain of its benchmark.

Last year, Jain scooped up shares of Adani Group companies as others fled amid a short seller’s accusation of accounting fraud. The contrarian bet paid off, with the value of his investment growing fivefold when Adani weathered the crisis. “We are a business of taking risks,” Jain says. “You have to be uncomfortable sometimes. If you look like an index all the time, guess what? You get indexlike returns.”

Ken Jesudian, co-founder of Crimson Asset Management, runs a fund focused on small-capitalization companies that he deems underpriced and overlooked. The fund, which holds about 20 companies such as furniture retailers Lovesac and Wayfair and satellite pioneer Iridium Communications, has returned an average of 10.2% a year since its inception in 2018, almost twice the performance of the Russell 2000 Index of small-cap stocks. “We don’t care about looking different from the index,” he says. “We actually wear it like a badge of honor.”

Ken Jesudian, co-founder and CEO of Crimson Asset Management. Photographer: Galit Rodan/Bloomberg

Rizk, 49, was born in Lebanon and moved to Montreal in the 1990s to pursue an MBA at McGill University. In his first job, he worked as an analyst at Canadian National Railway’s investment arm. He later got a job at Montreal’s Fiera Capital Corp., where the funds he oversaw grew from C$300 million in 2009 to about C$60 billion, a rare bright spot for the Canadian money manager.

In 2021, Fiera spun out PineStone, which took about one-third of Fiera’s assets under management at the time, sparking a selloff of its stock. But Fiera still owns most of the underlying assets and has outsourced their management to PineStone, a deal that has helped shore up Fiera’s finances while giving Rizk greater freedom to pursue his investment strategy. “The market expected that we would lose all or almost all of these assets, including the income, then the profitability of that, which is obviously not the case,” says Fiera Chief Executive Officer Jean-Guy Desjardins.

Jain, who moved to the US in 1990 from India, makes outsize bets on companies with strong balance sheets and decent earnings growth. Unlike Rizk, though, he is liable to change his mind quickly when market conditions shift, and he has no qualms about liquidating his position if he sours on a company’s prospects. “Our job is to make money for our clients,” Jain says. “It’s not an ideological exercise. We are not trying to change the world.”

A key strategy for Jesudian is finding companies where founders are still part of management, which makes them think like shareholders rather than recently arrived executives who might make “ego-boosting acquisitions just to jack their comp.” To find these stocks, Jesudian has a team of analysts who will move quickly to size up a business and its industry. “Think of a small SWAT team that can go and look for these ideas,” he says, “and doesn’t care about building a portfolio with the index.” —With Derek Decloet

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