Evidence of such artisanal preference can be found across the consumer landscape, from leather goods to bicycle parts to clothing. Many of the brands that exemplify this paradigm virtually define the niches in which they operate and, perhaps most importantly, have been able to avoid the commodification of their aesthetic even as they’ve grown in prominence over time.

First Eagle’s Global Value team applies what we view to be a similarly idiosyncratic and time-tested approach to equity investment. For more than 40 years, we have sought to generate real absolute returns across business cycles while avoiding the permanent impairment of capital, offering access to strategies we believe represent a diversifying complement and source of long-term ballast in client portfolios.

The Illusion of Choice

What constitutes true diversification can be hard to pin down in markets that have become extremely top-heavy. For example, while the S&P 500 Index is considered a proxy for the US equity market, the market capitalization of the 10 largest (primarily tech-related) stocks in the index comprise 35% of its total. Similarly, the MSCI World Index’s weighting in US stocks exceeds 70%.1 The many portfolios benchmarked to these indexes—both active and passive— likely have similar concentrations, challenging investor efforts to realize the potential benefits of diversification.

In contrast, selectivity is at the heart of the Global Value team’s value-oriented investment process, and our flexible mandates allow us to apply this selectivity to the global opportunity set from the bottom up to build go-anywhere, benchmark-agnostic portfolios. We focus on assets we believe demonstrate scarce quality and value, and invest in them only when we can do so at a “margin of safety.”² Cash holdings are a residual of this investment discipline and serve as a form of deferred purchasing power, while stock selection in certain portfolios is complemented by a structural allocation to gold—a store of value for millennia—as a potential hedge against extreme market outcomes.

Going Against the Grain

Many of us on the Global Value team had the pleasure of working side by side with Jean-Marie Eveillard, who spent decades as portfolio manager of our core strategies until his retirement in 2008. Of all the wisdom he shared with the team over the years, this is perhaps the most resonant: “I would rather lose half my shareholders than lose half of my shareholders’ money.” 
Many of us on the Global Value team had the pleasure of working side by side with Jean-Marie Eveillard, who launched the Global Fund in 1979 and served as its portfolio manager until he retired in 2008. Of all the wisdom he shared, this is perhaps the most resonant: “I would rather lose half my shareholders than lose half of my shareholders’ money.” 

The potential for upside capture and downside mitigation has always been central to our investment strategies, and this mindset historically has provided resilience in the face of market downturns that occur more often than most appreciate—even during extended bull markets. The S&P 500 Index has experienced negative returns in 49 rolling five-year periods and 24 rolling 10-year periods since 1979, while the MSCI World Index has posted a respective 58 and 14.³ Importantly, our focus on minimizing potential losses during periods of broad market weakness has amplified potential upside during the subsequent recoveries.⁴

Our historical track record of successfully preserving capital can be at least partially attributed to our active avoidance of areas of the market that don’t meet our strict underwriting standards, whether individual stocks, sectors or regions/countries. While these acts of omission caused us to miss out on periodic sharp rallies concentrated in certain parts of the markets—such as Japan in the late 1980s, technology in the late 1990s and financials in 2007 and 2008—they also enabled us to sidestep the full brunt of the corrections that inevitably followed. Moreover, challenging markets historically have provided us with opportunities to buy fundamentally solid businesses at what we view as discount prices; that is, to plant seeds we were able to harvest when market conditions normalized.  

Confront Uncertainty

The future is uncertain by definition. But as the investment horizon extends from weeks to months and from months to years, we believe the likelihood only increases that a meaningful threat to wealth will at some point emerge.

To combat such risk, we build portfolios from the bottom up, assembling a select group of assets that in our view are positioned to endure the inevitable vicissitudes of the business cycle, local and geopolitical turbulence, and the cumulative ravages of inflation and currency debasement.

In short, we seek quality. And we do so through an approach that mirrors the same characteristics we value in an investment—commitment to craft, consistency of discipline and intentional timelessness.