22nd May 2026
On the wall of the HFM office in Exeter, amongst some inspirational quotes and a check list to consider before new investments, we have a list of the HFM strengths. Chief among them is a passion and determination to do well for our investors, being performance driven (absolute, not relative), and making sure we always act with humility. An outcome of these strengths is that we are always seeking to be better and live by the Sir Dave Brailsford playbook of seeking marginal gains and slowly but steadily improving our processes and execution of our investment philosophy through continuous and often small optimisations.
Recently, we have been conducting work looking at our long term decision making, active fund selection, and portfolio construction in an effort to understand both where we have been getting things right, but also where we are making mistakes and trying to understand if there are any patterns or lessons to learn on both sides of the ledger. We now have 17 years of decisions under the same core investment process and so feel that we have some strong signals amid the noise.
Without boring you with all of the nitty-gritty work behind this (which is more for the realms of a detailed research piece, not a reader-friendly Friday blog post), there were some interesting takeaways and learnings for us as a team that we will be integrating into our process and decision making going forward.
- We are good at identifying structural growth themes early enough to profit from them. We are truly multi-asset investors with open minds and a bottom-up, research heavy, benchmark agnostic approach. This combination gives access to specialists in nearly every asset class on the planet helping to provide informational advantages and opportunities to identify themes before they have perhaps become mainstream. Our biggest ‘winners’ over the years have come from gold and gold miners, biotechnology, technology, private equity, Japan and broader Asia corporate governance reform. Having a thematic approach within asset classes like property has also helped where high exposure to industrials and healthcare, and no exposure to offices has benefitted performance.
- However, our valuation discipline often results in exiting these structural growth positions too early or not having enough capital exposed to these opportunities. We all know that humans are notoriously bad at thinking in a non-linear fashion and thus at pricing exponential growth, and at times we should be prepared to pay slightly above average multiples where we have strong conviction in the growth of an investment persisting for a long period of time.
- On average we are good at exiting positions. ‘What if’ analysis shows that if we held underperformers for an additional 6 or 12 months, these positions would have continued to underperform.
- However, sometimes we get too dogmatic about valuation and need to change our minds faster when the facts change. Whilst on average we have been good at exiting positions, naturally there are examples in our biggest detractors where we have held on for too long, or more frustratingly continued to hold after a break in our original investment thesis. The latter has most often occurred in the investment trust space, where the market has repriced a trust due to the change in risk (i.e. the discount has widened) and we have retained a holding believing it the higher risk is priced in. The evidence tells us that when there is a break in our thesis we should simply exit and not try to be clever around what is now being priced in or not.
- Idiosyncratic returns, and returns from non-traditional asset classes are an important part of our toolkit and contribute both to absolute performance and meaningful diversification benefits through dampening the volatility profile of our funds. We have been beneficiaries of M&A through the years with notable success within property and infrastructure (Care REIT, PRS REIT, Urban Logistics REIT, LXi REIT, BBGI Infrastructure, Atrato Onsite Energy, Taliesin Property, Downing Renewables & Infrastructure).
- Analysis of special situations (trusts in managed wind-down, undergoing a strategic review, or where corporate activity was an important part of the thesis) shows that the focus should be on the quality and confidence we have in the net asset value (NAV), over and above the attractiveness of the discount. Often the market is right when discounts are especially wide, so the hurdle for the level of research and due diligence to get confident in the opportunity is very high. Where we have been successful has been in identifying attractive, growing NAVs that attract bids when discounts open for non-company specific reasons, rather than trying to force the issue on trusts with wide discounts and less attractive NAVs.
Some of the changes we are making because of this work are improving the ways that we document and track our investment theses on individual positions through time to identify thesis drift more easily alongside more obvious thesis breaks. We are introducing new fund review triggers around underperforming funds, and we are also trying to evolve the way we analyse valuations for those areas where we have high conviction in the long-term growth outlook. We hope these marginal gains will continue to compound and contribute to improving our absolute and relative return potential over the long term.
Dan Cartridge – Fund Manager
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For professional advisers only. This article is issued by Hawksmoor Fund Managers which is a trading name of Hawksmoor Investment Management (“Hawksmoor”). Hawksmoor is authorised and regulated by the Financial Conduct Authority. Hawksmoor’s registered office is 2nd Floor Stratus House, Emperor Way, Exeter Business Park, Exeter, Devon EX1 3QS. Company Number: 6307442. This document does not constitute an offer or invitation to any person, nor should its content be interpreted as investment or tax advice for which you should consult your financial adviser and/or accountant. The information and opinions it contains have been compiled or arrived at from sources believed to be reliable at the time and are given in good faith, but no representation is made as to their accuracy, completeness or correctness. Any opinion expressed in this document, whether in general or both on the performance of individual securities and in a wider economic context, represents the views of Hawksmoor at the time of preparation and may be subject to change. Past performance is not a guide to future performance. The value of an investment and any income from it can fall as well as rise as a result of market and currency fluctuations. You may not get back the amount you originally invested. FPC26708.
