“Bring your work back to the workshop twenty times…”

This quotation from Nicolas Boileau* faithfully sums up our investment business which was recently rewarded by French magazine Mieux Vivre Votre Argent. Already 20 years have passed during which we have been free to choose the companies, managers and stories in which we have invested your capital. Free to the extent that the notion of index is often foreign to us in our bid to avoid current crazes and the consensus and thereby guaranteeing long-term performance.

This stance did not work for us in 2008 when we were not spared from the intense crisis. However, in 2009 and the first three quarters of 2010, our fund’s performances have proved that the method works. The one-year fund management prize (Corbeille des Sociétés de Gestion sur 1 an) that we have just been awarded for the quality of our range of equities and our profiled funds, rewards our loyalty to our management philosophy and our passion for entrepreneurs as well as our stock-picking methodology, whether for equities or bonds.

While stockmarkets have suffered since the beginning of the year, the dispersion of performances has rarely been so wide. On an SBF 250 performance slightly in the red since the beginning of the year (-1.6% on 24 September), the difference between the best performer (SPERIAN +130%) and the worst (NICOX -56%) is clearly huge. This marks a change from 2008 when all but five stocks in the index ended on a negative performance.

The wide dispersion in performances noted over the past 18 months is the reason why our funds have borne up well. Too much choice? Just when fear dominates and risks seem to be at a peak, selectiveness, discrimination and the specific nature of each company project and each entrepreneur provide a way of standing out considerably and enabling the micro-economy to get the better of a macro-economy which occupies the lion’s share of media reports and hence, investors’ minds. The behaviour of savers noted recently clearly reflects the sombre macro-economic dominant and the aim to no longer take risks, with savings continuing to favour government bonds, despite their low remuneration.

It remains to be seen whether it is reasonable to entrust 10-year capital to the French or German state at 2.3% whereas companies such as L’OREAL and VOLKSWAGEN are set to benefit from growth in emerging markets, which have become the driving force behind the creation of global wealth. Is the choice as Cornelian as all that? We find it difficult to believe. With GDP set to rise 4.6% (latest IMF forecast), 2010 is far from being a bad year for global growth. 2011 is set to be slightly less spectacular but with a likely 4%, it remains one-point ahead of the average noted over 1980-2000!

What is wrong, is not global growth itself, but the view we have of it from our mature economies. Admittedly, these economies are set to grow at a slower pace than before, but they continue to harbour companies that depend on and benefit from global growth. Since good news never comes alone, these companies (notably European companies) are currently enjoying rock-bottom interest rates on loans to finance their development in high-growth regions. This is clearly an advantageous backdrop for our sample of stocks.

While the economic backdrop remains uncertain and sluggish, growth has never been so well financed. The co-existence of these two realities enables us to continue to choose the best players, thereby polishing our work for the next 20 years.

Didier Le Menestrel