In order to deliver attractive long-term investment performance– and to do so sustainably – we have given considerable thought to the way we manage our firm. In particular, we have established powerful incentives against making decisions that are at the expense of future investment performance.
Being a contrarian investor requires being out of sync with conventional thinking and being painfully wrong at times. That creates career risk for individual decision-makers and pressure for the owners of a firm. As a firm that is owned by the key investment decision-makers, our ownership structure is designed to give our people the freedom to make tough, unpopular decisions and stick with them. This is also true from an operational perspective. We believe our ability, as a firm and as individuals, to focus on the very long term without the pressure to produce short-term results is an enduring competitive advantage in this industry. For more information on our ownership structure, please click here.
Performance fees and co-investment help to ensure that our success is aligned with that of our clients. Our fees have always been designed to reward us for superior performance as well as penalise us for underperformance, making the firm’s profitability much more sensitive to investment performance than growth in assets under management. Under our Refundable Reserve Fee structure, we refund performance fees to our clients in periods of underperformance. We also offer larger investors a pure refundable performance fee structure—in other words, we only get paid if we outperform. Co-investment further reinforces this focus on performance. Orbis’ founders, owners, management and employees invest alongside clients, and pay the same fees. Indeed, as a group they are the largest single investor in our funds. We therefore have powerful incentives to behave as responsible stewards of our clients’ capital.
We believe contrarian investment decisions are best made by individuals, not groups. Our investment process has therefore always been designed to encourage individual thinking and accountability. For all members of the firm, individual performance is evaluated in terms of value added for clients. Our detailed performance attribution systems track the results of individual investment decisions, allowing an objective assessment of each person's contribution, in addition to acting as an early warning system and helping to highlight areas of improvement.
Since inception, we have recognised that assets under management will inevitably grow if we are successful on behalf of our clients. Such growth presents both opportunities and challenges. To maximise the likelihood that we can meet those challenges, we have chosen to invest heavily in maintaining and developing our investment and operational capabilities. Our ownership structure provides the foundation that enables us to prioritise such long-term investments over short-term profitability, while our performance-based fee structures act as a powerful incentive against gathering assets at the expense of investment performance.