crypto strategy

13 Questions for ICG Corporate Trust Managers

In this series of short profiles, we ask top fund managers to defend their investment strategies, reveal their views on cryptocurrency, and tell us what they would never buy.

Our speakers this week are Oliver Gardey and Colm Walsh, co-managers of ICG Enterprise Trust (ICGT), rated 5 stars by Morningstar.

Which sector shows the greatest promise in 2022?

We prefer not to focus on specific sectors. Instead, we invest in buyouts that are profitable, cash-generating and exhibit defensive growth characteristics that we believe will generate strong and resilient returns through all economic cycles. We find these characteristics in a range of companies, which is reflected in the diversified sectors in which our portfolio is invested. Throughout 2022, we continued to see opportunities well aligned with our investment criteria across a range of sectors.

What is the greatest economic risk today?

This is a very obvious answer but in a word, inflation! We have all become accustomed to an environment of low inflation and low interest rates and the supply shocks caused by the war in Ukraine and Covid are impacting industries and sectors at all levels. It is also hitting consumers very hard, as we are already seeing in the UK. It will be essential for governments and central banks to find the right policy mix to minimize its impact.

Describe your investment strategy

We focus on investments with defensive growth characteristics. Several themes contribute to a company having, in our view, defensive growth characteristics. These include (among others) attractive market positioning, the provision of critical services to their clients and customers, the ability to pass on price increases and structurally high margins. We believe our focus on companies with defensive growth characteristics positions us well to navigate the current dynamic market conditions.

Which famous investor do you admire?

OG: Seth Klarman is a very smart value investor who really understands the risk and reward curve. It has provided market-beating returns for many years, proving the value of patient and disciplined investing.

CW: David Swensen, who was among the most influential investors of his generation and a master of smart asset allocation.

Name your favorite “Forever Stock”

Nothing lasts forever, as an investor you always have to be on your guard. Some of today’s biggest global companies didn’t even exist 20 years ago!

What would you never invest in?

We avoid anything with a speculative return profile where success or failure is a function of market fluctuations that a manager cannot control. For example, we don’t invest in anything with significant exposure to commodities as prices fluctuate based on macroeconomic events and political factors that are difficult to underwrite. Instead, we focus on businesses driven by long-term trends, whether it’s an aging population, digitalization, or even the growing popularity of having a pet!

Growth or value?

Defensive Growth

House or Pension?

If you can, it’s a good idea to invest in both and diversify. The difference between the two is that a home is more of an emotional investment than just a financial instrument. It is a place to create memories and enjoy with your family. A pension is different in that it is a less tangible investment that grows over time.

Crypto: Brilliant or Bad?

Not necessarily bad but definitely not for us. We do not invest in any kind of mining! Crypto, like conventional mining, has a speculative return profile. It is a volatile and high-risk asset class where a feverish market environment generates returns.

How can we increase diversity in fund management?

Investing in diverse young talent and providing a framework for them to grow and become future industry leaders is crucial. We have an investment team running ICG Enterprise which is predominantly female. ICG in general and our team participate in a number of initiatives – particularly around internship programs which target underrepresented groups and as a company we are very focused on creating an inclusive and respectful environment in which everyone feels recognized, rewarded and included. It’s not just the right thing to do – we also believe that diversity improves decision-making and performance.

Have you ever engaged with a company and been particularly proud (or disappointed) of the outcome?

Post-investment, we maintain an active dialogue with managers to identify and mitigate any potential ESG risk. We maintain strong relationships with all the managers in our portfolio, regularly discuss investment activities and ensure that their strategy remains aligned with our responsible investment policy.

Several of our managers are enrolled in an industry initiative that helps the companies they own roll out stock ownership programs for employees, from top executives to lower-level workers. We really support this initiative because it allows all stakeholders to benefit from the success of the investments.

What’s the best advice you’ve ever received?

Throughout the history of investing, it’s always been easy to get caught up in the latest trend, whether it’s tulips, speculative tech companies, or cryptocurrencies, but over time time, the most consistent returns come from investing in quality businesses. We never compromise on quality. We only look for high-quality, cash-generating companies with attractive market positions and strong growth prospects. These attributes are likely to make them resilient investments, even in an environment of inflation and rising interest rates. In private equity, partnering with the right managers is also key – you never get consistent returns with poor quality managers.

What would you be if you weren’t a fund manager?

OG: I would have liked to be an economics teacher. I enjoy studying, researching, teaching and the intellectual stimulation of a college campus. I find the impact of economic policies on human behavior particularly fascinating.

CW: I’ve always been fascinated by politics and world events. Growing up, I often thought about becoming a diplomat and it is still an area that interests me a great deal intellectually, especially given all the global geopolitical turbulence seen in recent years.


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