We are an SFC licensed investment management company based in Hong Kong. We invest in stocks internationally and serve clients from various countries.
We invest to double our money in 3-6 years by selecting a few special stocks with small permanent downside risk and large upside potential. The intended rate of return is higher than the long-term stock market and other asset class averages.
We search for investments where the market price is at a large discount to our take-private valuation, where such value is growing and visible catalysts are in play to support the investment thesis.
We invest through Separately Managed Accounts, in which a client’s money is held in an account in the client’s name at a 3rd party regulated financial institution. This account is then managed by us as per our GFM Focus strategy.
From a client’s perspective, Separately Managed Accounts are transparent, safer, cheaper, and more tax-efficient than investing through funds.
We are very different from others. We co-invest alongside our clients, we are performance fee-only.
Our Approach
- We invest to double our portfolio value in 3-6 years through high-conviction investments in a few special stocks. For reference, the S&P 500 index has doubled every 9-10 years over many years on average. Over a 10 year period, $100k in S&P 500 could become $200k [2^(10/10)]. In the same period, we aim to achieve $300k-$1mm [2^(10/6) or 2^(10/3)].
- We think of buying stock as buying ownership of the underlying business. As owners, we know that we will grow our wealth if the business prospers, we did not overpay when buying, and if the management is honest with us. Therefore, in-depth business knowledge, fundamentals, valuation, accounting scrutiny, and management evaluation consumes our focus as investment managers. We restrict ourselves to exchange-listed investments like stocks, bonds, listed options and futures.
- We spend months studying a business in-depth, as if we are its owner-operators. From that knowledge, we work out a) if it is a good business compared to others that we have also studied, and b) what we would be willing to pay for 100% ownership if we were to buy it forever with our family’s money.
- We then buy the stock at a large discount to our estimate of its take-private-forever value, when stock market fluctuations throw up such prices. This approach results in a portfolio of a few special businesses that we know intimately, where we track their developments over time, and where the investment risk/reward is skewed in our favor.
- We do not think of stocks as a number bouncing on a graph that we buy for 100 to hopefully sell it to someone else at 120 – and fast! That is a game we do not believe in and do not play.
Why invest with GFM Focus?
Focused Long/Short Investing
Focus. We concentrate on the best investments that we know of, after repeated search and research. We invest after thoroughly investigating the thesis with real-world evidence over several months. Our typical portfolio will have 8-12 long positions and 15-20 smaller-sized short positions.
Long and short positions. Our long investments are usually event-driven situations or high-quality compounders. Short positions are usually structural decliners or stressed companies. This positioning helps us generate returns in both rising and falling markets.
Value and growth. We seek to buy at a large discount to our estimate of the take-private value of a business, after factoring in its growth potential. We value a business as if we are buying 100% ownership of the company forever with all of our family’s money. Like Buffett said, “price is what you pay, value is what you get”.
Performance Fee Only
We charge a 0% management fee. We charge a 25% performance fee, subject to the client’s portfolio being higher than its previous highest value (“the high watermark”). We are only compensated when the client’s portfolio appreciates beyond its previous highest value, otherwise not.
Performance fee is our only income source, with no other charges of any kind. We also pay for all operating expenses ourselves (fund managers typically charge such costs to their clients by expensing the fund entity).
Co-investment
We invest our own money alongside our clients in every investment that we make. Our goal is to protect and grow our collective capital over good times and bad. You will rarely find a fund manager who is willing to do this. We behave like an investment partnership alongside our clients, not as a service provider charging all kinds of fees irrespective of investment performance.
Separately Managed Accounts
Separately Managed Accounts are safer, cheaper, transparent, and more tax-efficient than investing through funds.
We open a separately managed account held in the client’s name at a third party broker-custodian. (we usually use Interactive Brokers) Only the client can make deposits and withdrawals in the account. Only GFM can invest the money as per its Investment Management Agreement with the client. The broker independently sends account statements and does fee calculations. Clients have 24/7 visibility into their portfolio and there are no hidden charges of any kind.
Becoming a Client
Step 1. Sign the GFM investment management agreement.
Step 2. We will help with opening a Separately Managed Account at Interactive Brokers (or alternative).
Step 3. Once the account is open:
– Only the client will have the login/password.
– Client will have enabled 2-factor authentication.
– Client will have funded the account through a wire transfer or a check.
Step 4. GFM will start managing the assets of the account:
– Invest and re-invest cash and assets in the account.
– All client accounts under GFM Focus will have the same portfolio after some time.
We invest to achieve a life of financial independence for our clients. One careful investment at a time.
Ongoing:
– Interactive Brokers do custody of assets and execute buy/sell transactions.
– Interactive Brokers will directly send out client statements.
– Interactive Brokers will do the fee calculations as required.
Withdrawals / Deposits:
– Client makes deposits and withdrawals occasionally as required.
– Client coordinates with GFM to avoid any unintended portfolio consequences.
Terminating the relationship with GFM:
– Client gives a written notice to GFM as per the above agreement.
– Client and GFM agree to one of two scenarios as below:
1. GFM resigns from the account and client takes over the portfolio management of the account.
2. GFM liquidates the portfolio and then resigns. Client then withdraws the money from the account.