Sebastian Lyon, conservative investor and manager of two highly successful multi asset funds, shares his views on markets, building a significant asset management business, managing funds for consistent performance, investing in quality companies, and why he owns gold.
Investing in quality businesses with a strong track record can lead to long-term success.
Simplicity in investment strategies and a focus on understanding the businesses can provide a more secure and understandable investment experience.
Considering macroeconomic factors alongside company analysis is crucial for making informed investment decisions.
Deep dives
Sebastian Lyon's focus on quality businesses and market timing
Sebastian Lyon, a conservative investor who manages a multi-asset fund, emphasizes the importance of investing in quality businesses. He believes that looking at a company's past track record is crucial in determining its quality. Lyon also practices market timing, varying his exposure to equities based on whether they are cheap or expensive. He believes that this approach can be controversial, but he argues that being cautious during expensive market periods can help protect capital.
The benefit of keeping investment strategies simple
Sebastian Lyon's investing philosophy favors simplicity over complexity. He avoids overcomplicating investment strategies and focuses on understanding the businesses he invests in. Lyon believes that knowing what you own and why you own it is crucial for successful investing. He also highlights the importance of investing in stable and predictable businesses that have consistent returns. By keeping investment strategies straightforward and avoiding unnecessary complexity, Lyon aims to provide a more secure and understandable investment experience for his clients.
The impact of macroeconomic factors on investment decisions
Sebastian Lyon acknowledges the role of macroeconomic factors in shaping investment decisions. He pays attention to strategists who provide insights on long-term market trends and macroeconomic dynamics. Lyon believes that understanding these factors can help identify investment opportunities and navigate potential risks. He emphasizes the importance of staying informed about changes in interest rates, inflation, and fiscal stimulus, as they can significantly impact market dynamics. By considering macroeconomic factors alongside company-specific analysis, Lyon aims to make informed investment decisions that align with changing market conditions.
Investing in Higher Quality Businesses
Sebastian Lyon emphasizes the importance of investing in higher quality businesses with a strong track record. He examines factors such as management performance, capital allocation, and the historical performance of the business. He highlights that higher quality businesses are often valued at fair prices by the market and recommends being patient for investment opportunities that come at rare intervals. He illustrates this with an example of Heineken, a company that faced challenges during and after COVID but showed potential for future growth.
Building a Concentrated Portfolio
Sebastian Lyon advocates for a concentrated portfolio of 15 to 30 carefully selected stocks. He believes in knowing each business well and understanding their business models. By focusing on a smaller number of stocks, he can actively manage the portfolio and step in if necessary. He emphasizes the importance of managing risk by setting a maximum percentage for each holding and trimming positions that exceed the limit. While turnover is generally low, he mentions periods of higher activity during market fluctuations. He also discusses the need for continuous learning and training in investment, acknowledging the importance of history, macroeconomics, and understanding traps in the market.
Sebastian Lyon is a conservative investor who manages two highly successful multi asset funds. His motto is simple over complex and he is intent on protecting the downside. In this interview, we discuss his views on markets (spoiler: not super bullish); how he built Troy into a significant asset management business from scratch; how he has managed his fund to deliver only 3 down years in 20 and create outstanding performance as a consequence; what he looks for in stocks; why he invests only in quality companies; and why he owns gold.
