Innovation built on 25 years of development

Mark Donnell

Portfolio Manager

Mark has more than 20 years of experience in the finance industry, across investment banking and funds management. Prior to establishing Lighthouse Funds Mark was an investment banking executing M&A transactions, capital raisings and other corporate advisory work. Mark has a Masters of Engineering and is a member of the Institute of Financial Professionals New Zealand (INFINZ).

Andrew has more than 25 years experience in the finance industry, across trading desks in global foreign exchange and interest rate markets. Prior to establishing Lighthouse Funds Andrew held management roles with ICAP International and OMFinancial.

Your investment philosophy is your high-level beliefs of how you think markets and investing are structured and operate. Our investment strategy is based on four key pillars.

Firstly, there will always be stocks that are performing better than the market overall. This is basically explicit in how market indexes work – market indexes are averages so there have to be some companies that are doing better than the index, and some that are doing worse.

Secondly, within that group of higher-performing stocks there will be some companies that have safer characteristics, such as stable earnings, clean balance sheets and high liquidity. We think this is the sweet spot in the market.

Thirdly, we don’t want to over-pay for quality or for growth, but we think it’s better to invest in a great business at a fair price then to invest in a fair business at a great price.

Fourthly, if we can find these higher-performing companies and invest in them at a fair price, then we need to be patient and wait while their out-performance comes to pass and is impounded in their share price. We are investors, not traders.

Your investment strategy is how you intend to operationalise and implement your investment philosophy in order to achieve your objectives. Our investment strategy for implementing our investment philosophy draws on three key principles.

Firstly, we recognise that it’s impossible to produce superior performance unless you are prepared to do something different. Doing the same as everyone else in the industry will lead to achieving the same level of returns as everyone else.

Secondly, we believe there are only two key approaches to achieve superior returns:

1. Stock selection – by trying to hold more of the stocks that will do better, and less of the stocks that will do worse, and/or
2. Cycle timing – by trying to have more exposure when markets rise and less exposure when they fall.

Thirdly, we believe that both of these approaches to achieving superior returns can be distilled down to pragmatic fundamental corporate finance principles. We believe that both quality companies and market conditions can be understood in terms of simple corporate finance theories. So our quantitative methods are based on orthodox corporate finance.

We believe that all funds should have high standards of responsible investing and have strict ESG commitments. But we also believe an equity fund manager’s primary responsibility is to deliver the best possible returns for their investors, not to crusade.

Our funds have strict ESG commitments that we believe match those of funds that are explicitly branded as ESG leaders. Our funds will not invest in companies that develop, manufacture or sell munitions, firearms, alcohol, tobacco, cannabis, palm oil or fossil fuels. Our funds will not invest in companies that are involved in whaling, gambling, pornography or in animal testing for non-medicinal products.

We are prepared to introduce even stricter ESG commitments as societal values evolve.

But we do not view ourselves as impact investors. We are realistic that our funds buy listed securities on the secondary market from other investors – the money our funds pay for the shares they buy goes to those other investors and doesn’t fund specific on-the-ground initiatives.

We are prepared to exercise voting rights in support of ESG values and initiatives. But we are realistic that our funds invest in very large market capitalisation companies, and that our voting influence is never likely to be the deciding factor.

We are signatories to the UN Principles of Responsible Investing and prepare an annual Climate Related Disclosures report.