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Warren Buffett has inspired generations of value investors, and one 53-year-old, market-beating mutual fund has his legacy all over it. The First Eagle Global Fund (SGENX ), with almost $47 billion in assets under management, reflects the teachings and principles of economist and professor Benjamin Graham , the father of value investing, and Buffett, Graham’s most famous disciple — disciplined investing, ample liquidity and diversification. For almost three decades, starting in 1979, the fund was run by another acolyte of value, Jean-Marie Eveillard, who took over the fund that had begun in 1970 and overhauled its strategy. Since 2008, the fund’s been run by Matthew McLennan, with Kimball Brooker coming on board a year or two later. Since 1979, First Eagle Global has returned more than 12% annually, even including the 5% load fee charged on the first $25,000 invested. The current annual expense ratio is 1.11%. A $10,000 investment in the fund in 1979 was worth about $1.62 million at the end of 2022, excluding sales charges, more than three times the return of the MSCI World Index, First Eagle says . SGENX ALL mountain First Eagle Global price Graham and David Dodd, his fellow Columbia Business School professor, quite literally wrote the book on security analysis, Brooker said in an interview. “They were the original value investors who really were focused on how not to lose money and we’re focused on a means of systematically tilting the odds in the favor of their investors,” adds the First Eagle co-manager. The fund beat the market during 2022’s market turmoil with a 6% loss, and is up about 4% this year. How to find value? The fund employs three main elements when it comes to security selection within the universe of global value, Brooker said. It first insists on finding durable businesses, Brooker said. The concept is similar to searching for the so-called “wide moat” around a business that Buffett has called the single, “most important” factor in judging a company’s competitive advantage. “To us, survival and persistence is really the key question. That’s kind of our view of quality,” Brooker said. One example is Swiss elevator company Schindler Holding , which is as dominant in the industry as Otis Worldwide. Another name First Eagle considers a durable business is Richemont , a Swiss luxury goods holding company that makes Cartier jewelry, Brooker said. Another stock outside the U.S. that First Eagle holds is Jardine Matheson , a Hong Kong-based conglomerate whose origins date back to the 19th century, and whose businesses include Mandarin Oriental hotels. Margin of safety The second piece of the puzzle is to find stocks with a margin of safety, Brooker said. The principle, popularized by Graham, instructs an investor to only buy securities when they sell at a discount — significantly below their intrinsic value. “What is interesting is that this discount that international markets trade at relative to U.S. markets is very wide,” Brooker said. The third element is to minimize risks stemming from management-related issues or unethical behavior, Brooker said. Brooker joined First Eagle in 2009 around the time when Eveillard stepped down. With a B.A. from Yale University and an MBA from Harvard, Brooker previously worked as the chief investment officer of Corsair Capital, a private equity firm spun off from JPMorgan. Big cash One notable characteristic of the First Eagle fund is that it holds a significant amount of cash — 7.5% of the portfolio right now. “It’s our default position. When we’re not able to find things that make sense to us, that meet our underwriting criteria, we’ll wait in cash,” Brooker said. “We don’t want to force the money to be put to work into things that don’t fit.” Buffett, too, is known for his preference to hold large amounts of cash, comparing it to oxygen. Berkshire’s cash hoard grew to nearly $130 billion at the end of 2022. Buffett said in his recent annual shareholder letter that Berkshire will continue to hold a “boatload” of cash and U.S. Treasury bills along with its myriad businesses. Deep roots Within First Eagle Global’s portfolio, which is half U.S. and half international stocks, there’s a degree of overlap in a handful of companies that Berkshire Hathaway also owns, including American Express , Taiwan Semiconductor and Bank of New York Mellon . The fund has also owned shares in Berkshire itself for decades. “It’s probably not too surprising that like-minded investors often end up in in some of the same places,” Brooker said. The connection to Berkshire doesn’t end there. Eveillard, who served as First Eagle’s senior advisor for years after surrendering day-to-day management, also taught at Columbia Business School’s value investing program, where Buffett got an A+ from Ben Graham in 1951. “The roots of the value tribe are pretty deep here,” Brooker said.
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