Trimark – 30 years with the same style

In September 2011 the Trimark Fund and Trimark Canadian Fund turned 30.

This is remarkable and almost unique because most funds are relatively new and even fewer have followed the same management style for so long. As current Trimark Fund manager Dana Love said in a recent interview

“The investment process is consistent across the Trimark franchise,” Love says. “When you boil it right down, what we are attempting to do with the Trimark investment discipline is to buy good companies, with good underlying fundamentals and economics, for less than they’re worth. It’s a highly flexible global equity mandate, with no restrictions regarding capitalization, sector or geography. In theory, its investment universe encompasses every publicly listed company in the world.”

He also pointed out how different the Trimark approach to investing is from most money managers:

“The thought process behind that is no different than if we were going to buy a private company in its entirety,” he explains. “You want to understand the business, the products, the services, the competition…and ultimately why that company is going to be sustainably a better proposition than all of the other companies it competes with.”

This extends to the Trimark view of time horizon for investing:

“Every time we make an investment decision with respect to buying or selling a company, we’re thinking in terms of years rather than months or quarters,” Love says. “Increasingly that’s a differentiator. There’s hard data that shows the average holding period for a stock is now less than two months among institutional investors.”

In the 1950s, he says the average holding period was about five years; in the 1970s, it fell to five years. In contrast, Love says, the typical holding period across the firm is now about five years, but many companies have been held for more than a decade.

Regarding the current market worries, Love’s opinion, as usual, is contrary to the screaming headlines.

“We see nothing but opportunity in this kind of environment,” Love says. “This is where we are often served our best, long-term opportunities, because the market tends to overreact from time to time, both with excessive optimism and excessive pessimism.”

With decades of corporate knowledge built into its investing philosophy, the Trimark Fund was present long before mutual funds became a popular investment vehicle and the managers have an interesting perspective on how the industry has changed.

“I think in many cases, mutual funds are seen as too commonplace—they’re not sophisticated enough,” Love says. “People are always looking for more sophisticated, more complex products, because they feel they’re going to be better for them. I think there’s probably an inverse relationship between the complexity of an investment product and its actual deliverable investment return.”

As many studies have shown, investors usually fall into the trap of believing more activity is better for an investment. But the underlying concept of a mutual fund is to buy it, and let a professional manager compound your investment by closely monitoring the investments owned by the fund on behalf of fund unitholders. The daily activity and thousands of hours of annual work that go into managing the Trimark Fund are almost invisible to unitholders.

“For the vast majority of people, their performance is worse than the fund itself over, say, a ten year period,” says Love. “That’s because they become impatient at the wrong time, and they try and be too active, which flies against the nature of what a mutual fund is supposed to be.”

When your advisor understands well how a fund is managed and knows that all funds, no matter how well managed, have periods of strength and weakness, he will likely advise you to take no action. Bailing on a fund that is down, and redeploying the proceeds into a fund that is high or even at its peak usually destroys wealth.