We grow our wealth by participating in the long-term success of thriving businesses.
Every thriving business in any industry needs to be data-driven. This requires each firm to have an agile cloud-based infrastructure. The digitalisation of the world is generating a tectonic shift of wealth within society, thereby creating big winners and losers. Our mission is to let our investors participate in the thriving winners of our time.
The best businesses have a long runway of sustainable growth ahead, generate superior returns, and increase their moat along the way.
We are attracted to great businesses and are willing to pay a fair price to become co-owners of exceptional companies. In our research process, we are focused on the qualitative factors that drive the earnings power for a long time to come.
Great businesses often generate the bulk of their lifetime value after the public offering. We believe that we have an advantage over many private equity and venture funds because we are not forced to sell our winners and have the opportunity to react if prices swing widely based on sentiment. We aim to let our winners run.
The Guardian Fund and Knight Tech Fund are long-only investment funds and open for new investors that share our philosophy.
We study companies from the perspective of an entrepreneur and owner. Our investors don’t invest in the ‘stock market’ but in several businesses.
We own stakes in several companies that we know well and are being run by people with integrity. As kids we already understood that to be among the Forbes-400 you either have to start a business or participate in the success of one. You don’t get there by looking at graphs or worrying about macroeconomics.
Most of our companies are led by an owner-CEO who has a long-term mission and track record of being an excellent operator and capital allocator. We define excellent operators by internal metrics and extensive research. Basically, these operators are the managers of our capital.
We prefer to invest in companies that have a clear purpose solving a problem in society and thereby deserve to succeed.
What is a realistic average return?
You can expect an average annual return of about 6% by owning a S&P 500 index fund. Please find our funds yearly returns here.
What is our personal opportunity cost of capital?
We view Berkshire Hathaway as the superior index. Investors can realistically expect its intrinsic value to compound at around 8-9% per year for the next decade or two. Any commitment needs to have a significantly better risk-adjusted return than what one can get without doing any work.
What investors do we respect?
There are a few investors we would entrust our private capital. Some are our peers with whom we share ideas. Some of our businesses are led by people who have a better track record than us of allocating capital. For example, Brad Jacobs at XPO Logistics or John Malone at the Liberty companies.
Is this a good time to invest?
We like to think that it’s never a good time to invest. It’s never easy and one always has to own the right businesses. The valuations of the companies we own range from fair to attractive. We are fully invested because we like the expected returns.
Do we diversify?
Usually the two funds own around ten to fifteen businesses. It is not our job to manage volatility. Market volatility declines proportionate to the square root of the number of positions you have. Owning four positions gives half the benefit of having an infinite number of positions. We only care about a permanent loss of capital.
What has been our biggest mistake?
Selling ownership of our best performing companies because the valuation looked somewhat rich.
Who are our preferred investors?
It’s a priority to keep the quality of our partnership high. Therefore, we only admit investors who understand that our wealth grows because the value of the businesses we co-own increases over time. The Funds welcome families, family offices, entrepreneurs, and individuals that like to participate in the success of the businesses in the portfolio of the Funds.