The Conscious Investor Fund - mirroring Teaminvest principles and success

Our next speaker is Mark Morland, co-founder of Team Invest and founding director of the Conscious Investor Fund.

He spent the last 16 years working with over 600 high net worth investors who target double digit returns from their equity investments.

His presentation topic today is the Conscious Investor Fund, mirroring Team Invest principles and success.

Welcome to the presentation, Mark.

Thank you, Angelina.

Okay, so I'll just read through obviously our general advice disclaimer.

This is not personal advice and you need to make your inquiries and make your own decisions.

I'll start off in an unusual way.

I think if anything there's, I'm sure you're all aware, there are thousands of funds out there and rather than give you all the details about how our fund works and then tell you what the results are, I thought we'd start off on the results and then you could decide whether it's worth listening to the rest of it to find out how we do it.

So on here, I've got, since inception, the Conscious Investor Fund, which is 11 years, has achieved $3.15 million return in cash to investors based on a million dollars put in.

So that's in reinvesting the dividends, and that's compared to the Benchmark Index, which is 1.5 million.

So in just under 11 years, the Conscious Investor Fund has doubled the return of the index for investors,

in my opinion, is pretty spectacular.

And it's much more meaningful than just talking about percentages.

And interestingly, that is after all the costs and performance fees.

So that's that's even makes it even better.

But what I'm going to do now is explain to you how we do that.

And it's very, very different to any other fund out there.

So we've got a unique story and I don't have a lot of time, so I'll try and gallop through it and give you a good understanding of how it all works.

So how do we achieve consistent outperformance?

And by the way, the outperformance is on every time period.

So one year, three years, five years, 10 years since inception, we haven't had one period where we underperformed the index.

Well, it's all thanks to Charlie and Warren.

So everyone obviously has heard of Charlie Munger, who's recently departed, unfortunately, and Warren Buffett, who I would argue, without a doubt, the most successful investors in history.

And Buffett's effectively turned a $50,000 investment

when he started Berkshire Hathaway to now about 700 billion, depending on when this goes where.

And most of that's been through passive investing.

So he has chosen companies to invest in and he's had a very, very specific methodology and he works on principles which have not changed.

So he's consistent right through.

And if you go back and read anything he said from 50 years ago or 60 years ago, it's basically exactly the same.

I've been to 13 AGMs at Omaha.

And I can, every year, he does not change.

I mean, the stories are different, but it has been very entertaining, but they've been consistently building their wealth at a time where the world around us become more and more complex and complicated and very difficult to get your hands on what is a sound strategy and what isn't.

So it's not just them.

And what Buffett's done, apart from being super successful, he's also

had an approach of simplicity is the ultimate sophistication.

So he's always worked on keeping things really simple and basic so that anybody can do it.

Now, I'd say he's a polymath, a genius, but the way he invests, you wouldn't think so.

He brings everything down to basic principles.

Anyway, we were very lucky to meet John Price.

He was the professor for mass finance, double degree at New South Wales Uni.

And he started making Buffett his research study about 30 years ago.

So he's had a long history with Buffett, has written several books.

We got to know him quite well.

And basically what John did is he designed a system to replicate Buffett's investment methodologies.

So in other words, every measure that Buffett used has been factored into Conscious Investor, the program, which is initially was software.

And that has a 23 year history now of consistently outperforming the index on its own.

And then basically what it does is it filters down

the companies, if they fail one of Buffett's metrics, they're out.

And the whole idea is to simplify your investing by reducing the target audience, say in Australia of 2,200 odd companies down to about 60 or 70.

So there's only about 60 or 70 companies that will pass.

That doesn't mean they're a good buy.

It just means that they meet all of Buffett's metrics.

And then that's basically what we use as the basis of what we do for our research.

So how does it work?

So it's a three-step process, and basically it's a process elimination.

As I said, we start off with 2,200 companies on the OS X, and we cull it down very quickly.

And the first stage is a filter.

We only look at companies that pass what we believe is what powerful to accept.

John develops some quite brilliant stability measures where we can be unable to prove that we can forecast earnings growth

over a five year forward period with a high degree of probability for certain companies, not for all companies, but companies that have certain characteristics.

And then the stage two is we get those companies and we research those businesses.

We look at their strengths and weaknesses, their moats, their risks, their alignment with management, skin in the game, found mentality, et cetera.

And we score all that and we further eliminate companies.

So the whole idea is we don't even talk about price until a company's gone through our whole process.

in Team Invest before we look at return.

Conscious Investor became part of Team Invest in 2008, which is basically very early when we started Team Invest.

So who's Team Invest?

It's a bit complicated, I'm sorry, but deal with this.

It's a private membership organisation for those who wish to manage their wealth wisely rather than pay others to do it badly for them.

Chaired wisdom for long-term investors and members typically target 15 to 20% compound return and that is generally achieved.

Some higher, some are lower, of course,

A lot of it comes down into your behaviours and biases and things like that.

But we work as a collaboration, as Angelina said, we have 600 members, and we all work in teams to help each other in identifying what we call wealth winners, which are companies that are going to materially improve our wealth through one or more economic cycles.

So our aim is to be better investors belonging to wealth creation and preservation for ourselves and our families, which I think is a worthwhile aim, and I don't think anyone would disagree with that.

So I set one filter, a triage is team of best members in Melbourne in this group.

We do it by every state in the country.

And we we score all the companies that pass, we discuss them and we work and members vote on which ones they want to put in.

And in step two is in-depth research.

And in this one, we actually focus on understanding the how the business makes its money.

We look at the votes.

We have a scoring system votes, which is their competitive advantages and sustainability, which, by the way, goes to likely

sustainability, the stability of earnings in the future.

We also look at risks and score those.

And if the company passes that process, we then move on to the third stage, which is return.

It's the only time we actually look at price.

And the key thing on return is we look at the stability of earnings over the last six years and the likelihood of them being able to continue that growth rate or not.

So we adjust it to what we think.

We use conscious investors statistical analysis as well.

And that'll give a number

of saying, we think it's going to earn this, therefore we can work out what we can pay for it to achieve acceptable return.

So in other words, we're not trying to value a company, we're trying to say, if I buy or invest in a company at X dollars, what will I get in the next five years compound and how likely is that?

Now it doesn't mean we sell it in five years or rolling five years.

So we're long term investors and we're not traders.

So what's a wealth winner?

A wealth winner, to be a potential wealth winner, a company must demonstrate a consistently high return on equity,

has achieved that with little or no debt and have earnings that are rising with high stability.

And as members, we seek to own these companies by acquiring their shares at reasonable prices to give us predictable future returns.

It's exactly the same for the Fund.

So I've got a QR code here, if you'd like to take a snap of that, and I'll bring it back at the end.

That is a Discover the Secrets of Buffett.

It's a white paper we did.

But what you'll find in there, it shows how we use all those, all of his

principles within the fund and within Team Invest.

So you'll find it very interesting.

It'll be very useful for you as investors anyway, so I reckon that.

So Conscious Investor Fund was created in 2013 to provide passive high performance investing options for Team Invest members and their families.

Basically, if members didn't want to manage their own money anymore or they were getting too old or they had health issues or didn't have time or whatever, that's why we created it.

It's never been marketed per se.

It combines both proven conscious investor software and the intelligence and insights generated by TMNS members.

So how's the fund different?

We don't charge fees.

That's a big part of it.

So we have a subscription fee which is fixed no matter how much money you put in the fund.

So that's quite incidental and we lose money on that.

So we make nothing unless our unit holders make a profit first.

We follow consistent proven principles like Buffett.

So we are rules orientated and we've been very consistent for the 11 years.

And we focus on EPS growth and probabilities five years out.

We are long-term investors, not traders.

So we have very little activity at our funds.

We don't chop and change all the time.

We're basically building positions on weakness in companies that are wealthiness.

And we've proven that that has been highly successful when we've demonstrated it in the fund.

We're not interested in consensus or following the herd.

We don't care what anyone else thinks.

And we don't have a few analysts, we have over 600 highly successful members who work in collaboration and that team power and their experiences and their connections and knowledge is proven invaluable for us to really have a significant edge on the market.

And we've beaten the benchmark accumulation index for every period 12 months, 30, 60 months, 10 years and since inception.

So investor options, if you prefer to manage

are all or part of your own portfolio and realistically would like to get 15 to 20 cent compound returns, maybe Tim Invest membership is right for you.

Or if you want to relax and have peace of mind, consider signing up for the Conscious Investor Fund.

So they're the two options.

And I'll just bring the book back, not the book, the report back again if you'd like to get a copy.

Ma, thank you for your presentation.

Do you have time for a few questions?

Absolutely.

Thank you.

The fund is invested in USA and Australian stocks.

So how does the capital allocation team decide the balance between the two?

Okay, well, there's actually, there's not a set formula.

At the moment, it's roughly 50-50.

So it's about 50% Australia, 50% the US.

The advantage we have in Australia is that we

know the management so the company is really really well less so in the US obviously.

We tend to stay with the bigger companies like the Microsofts and so on in the US but they still have to have consistent earnings to meet all of our criteria that doesn't change.

So we're shareholders we bought Apple before Buffett did as an example.

So there's a firm situation on that roughly 50-50.

At the moment we only have US and Australian stocks.

In the future we may start investing further afield but that's where it's currently at.

How does the fund's performance compare to TeamInvest members' performance?

Well funds by definition have a lot of frictional costs and people have, you have money coming in, money going out, it's here to sell shares where you don't want to and so on.

So the fund's always going to be less than members.

So a fund has been, I think it's currently about 11.03 net after all costs and fees average for the total duration, which as I said at the beginning is given a double return on what the index is.

If members are typically getting 15 or 20 cents, so that's significantly more.

15% gives you four times your capital in 10 years.

20% gives you six times.

So it's clearly worth the effort to manage your own money.

And you will do better on your own within the team structure than you will in the fund.

But it will work.

Thanks so much, Mark.

Welcome.

Thank you very much, Angelina.