Investment Approach

Somerset Partners is an independent funds management firm that invests capital on behalf of private investors, family offices, and other wholesale clients.

Our investments are managed through a single fund, the Somerset Global Fund, which aims to invest in 25 to 40 leading public companies from around the world that trade at compelling long-term valuations.

To help manage risk, we place a significant emphasis on the quality of the businesses we invest in.

The characteristics we typically look for in a portfolio company include:

1. A resilient business with relatively predictable cash flows
2. A formidable competitive position
3. Opportunities for long term revenue growth
4. Leading profit margins within its industry or niche
5. Strong free cash flow generation
6. High returns on capital
7. A conservative balance sheet
8. Capable management who think like business owners and are focused on long-term shareholder value

When investing in a stock we typically take a 5-year time frame. As long as the investment case remains sound, we will ideally hold on to positions for many years to allow our investments to compound. In this light, our fund is suited to investors who have a similar long-term time frame.

We tend to be countercyclical investors, and often look to invest when an outstanding company’s share price has fallen out of favour with the market.

Notwithstanding the above, Somerset Partners has a broad and highly flexible mandate, which allows it to capitalise on compelling investment opportunities as they arise.

At times when equity markets become overly expensive and value is harder to find, we have the flexibility to hold cash and bonds in the portfolio. Further, the fund can invest in hedges that help mitigate downside risks.

Our fund has a long-only investment approach and does not engage in short selling or use margin leverage.

In keeping with our objective to preserve capital, we have a distinct preference towards investing in democratic countries with sound institutions and strong rules of law.

Finally, our Fund Managers hold significant personal investments in the Somerset Global Fund, ensuring client interests are firmly aligned.