Investor's guide

Academic studies demonstrate that most investment funds “do not deserve the fees they charge”. In other words, such funds are not able to outperform their respective benchmarks.

May we highlight amongst others the one elaborated by Pablo Fernández, professor at IESE, on the performance of investment and pension funds in Spain. In summary, during the 2000-2015 period, the average annual performance of investment funds (+1.90%) was lower than investing in 15-year Spanish government bonds (5.40%) or investing in Spanish IBEX 35 Index (4.62%). Only 18 out of the 632 funds with 15 years of history outperformed the yields of the 15-year government bonds, only 27 outperformed the returns of IBEX 35 and up to 82 had negative returns.

Therefore, it is our task to recommend investing in strategies in line with such principles.

In general, quality of portfolio management by the asset management industry has been below the majority of investors’ expectations.

A great number of such investors may not know the kind of fund they are invested in, the portfolio manager in charge of it nor the management fee they are paying. Sometimes they are not even aware of being invested in strategies not in line with their risk/return premises.

Our clients come first.

At Magallanes we manage our clients’ money as if it were our very own; in fact, a significant part of our capital is invested in our funds. We co-invest with our clients.

We are fully committed to the quality of our management which prevails over size. Should the time come, and depending on market conditions, such commitment could lead into a soft or hard closing of the strategies managed.

We treat our clients how we would like to be treated ourselves: with dedication, transparency and responsibility.

Magallanes is an equity-only asset management company with value investing philosophy. Our main goal is to preserve and increase our clients’ capital by overperforming the market in the long term.

Long term, patience, continuous work and effort are our day-to-day identifying marks.

Our philosophy is defined by:

  • Co-investment with our clients
  • Skeptical about benchmarks, sectors and size
  • Focused on the selection and deep understanding of companies
  • High conviction of ideas, concentrated portfolios, low turnover and daily liquidity
  • Purchasing cheap companies where market price is below fundamental value. High margin of safety
  • Investors, not speculators
  • We do not try guess or predict the future
  • Patient and disciplined when managing portfolios in a transparent, simple and honest way. No use of derivatives or complex products
  • We avoid both extreme risk and leverage, our priority is to preserve capital

Our investment horizon is for the long term, investing in Magallanes demands great patience. We invest in the stock market, which historically tends to fluctuate. A calm emotional temperament is required.

Value investing outperforms any other investment strategy in the long term. Nonetheless its behavioural pattern sometimes may lead to worse results both in periods of market euphoria and at the end of bull markets.

We may look boring. Low portfolio turnover and lack of stocks in fashion.

We do not pretend to create market opinions nor economic predictions; we read, study and analyse the investment environment in search of cheap companies.

We do not invest if we do not find investment opportunities.

We have to be prepared to invest at the highest levels of market pessimism.