Note: Picture of Booker T. Washington
Philosophy
[1] Booker T. Washington was born enslaved in the state of Virginia in the USA. His exact date of birth remains uncertain yet is believed to be 5th April 1856. He was freed from slavery at the age of 9 and then started working in a salt furnace and later a coal mine. At the age of 16 he began college in Hampton, Virginia. He became the first principal of what is now known as Tuskegee University in July 1881 and remained in that role till he passed away in 1915. Booker T. Washington received an honorary Master of Arts degree from Harvard University in 1896 and an honorary doctorate from Dartmouth College in 1901, and he was the first African American to be featured on a United States postal stamp in 1940. At Tuskegee University there is a monument in his honour called “Lifting the Veil” which reads “He lifted the veil of ignorance from his people and pointed the way to progress through education and industry”. Booker T. Washington gave what many consider his most significant speech in September 1895 to a racially mixed audience at the Atlanta Exposition, Washington. Here he said “In all things that are purely social we can be separate as the fingers, yet one as the hand in all things essential to mutual progress”. Booker T. Washington demonstrated that, against all odds, it is possible to drive enormous valuable societal change from seeking to improve knowledge and better alignment. He is a true inspiration to Aligned Capital Partnership.
Aligned Capital Partnership believes that trust and transparency are the bedrock of all relationships.
Like most others, Aligned Capital Partnership aims to grow wealth for its co-investors in the Aligned Capital Partnership Investment Trust. Despite this common objective, I believe the Aligned Capital Partnership Investment Trust and its investment manager are different to many others in several key respects, the most important of which is that of true alignment.
The core values of Seeking the Truth and Acting in Good Faith guides all Aligned Capital Partnership’s actions – with co-investors, with portfolio investment companies, with service providers and with all other stakeholders and people Aligned Capital Partnership interacts with.
Rather than living up to preconceived ideas, standards or formulas of how things should be done, being the best investor I can, involves channeling my love for the work I do in a way that is unique to me. That is how I can serve my co-investors in the best possible way. The purpose of the Aligned Capital Partnership Investment Trust is to play a role for its co-investors that nothing else can substitute – not because it is the best or anything of the sort, but because it is completely itself and the right match for every co-investor.
My objective is to make money for my co-investors and with my co-investors. Not off my co-investors.
I want to be the best investor I can be, and I want my co-investors in the Aligned Capital Partnership Investment Trust to benefit from what results. With this in mind, and taking inspiration from the partnership Warren Buffett ran in the 1950s, prior to taking over Berkshire Hathaway, I have set up a fee model I believe is right and fair. In doing so, I concentrated on the correct philosophical approach to incentives, and so the job was easy:
- the management fee should not be a profit centre as I do not create value through managing Aligned Capital Partnership per se; and
- a performance fee should respect the notion of the opportunity cost of capital for my co-investors and me.
Hence, Aligned Capital Partnership does not charge any management fees.
The objective of the Aligned Capital Partnership Investment Trust is to invest for the long term and generate a minimum 7% return compounding annually. No index or share market benchmark is relevant. Why 7%? Because I believe 7% p.a. represents a reasonable premium to the long-run opportunity cost of capital of my fellow principals and me. Should the performance of the Aligned Capital Partnership Investment Trust exceed 7% compound p.a. then Aligned Capital Partnership will earn a fee of 20% of the performance by which the return of the Aligned Capital Partnership Investment Trust exceeds 7% p.a. This will be measured once per year and all performance fees earned will be reinvested in the Aligned Capital Partnership Investment Trust.
To summarise, the structure of Aligned Capital Partnership and the Aligned Capital Partnership Investment Trust is based entirely on the philosophy of seeking to provide complete alignment between me and my co-investors:
- The entire worth of my family and myself is invested in the Aligned Capital Partnership Investment Trust in the same class of units that is issued to the co-investors in the Aligned Capital Partnership Investment Trust (the only class that will exist!);
- No management fees will be charged to co-investors in the Aligned Capital Partnership Investment Trust;
- A performance fee of 20% is payable to Aligned Capital Partnership for returns exceeding 7% p.a. compound; and
- All performance fees earned will be reinvested in the Aligned Capital Partnership Investment Trust.
The name has been chosen carefully. Aligned Capital Partnership “does exactly what it says on the box”. There is and will only be one strategy. The sole focus is on investing well for the Aligned Capital Partnership Investment Trust – not diverting my time, efforts and resources on the gathering of assets and the development of additional investment strategies that might be considered desired at a point in time. My view is that if I focus solely on investing my co-investor’s money well (along with that of my own family), things will take the natural course.
By following this approach since early 2010, I have generated a pre-tax return of ~20% p.a. (unaudited). These results are shared with great humility. Please know that I understand one-year performance numbers are subject to more randomness than skill and hence the focus of the Aligned Capital Partnership Investment Trust is to produce great 10-year+ returns.
Aligned Capital Partnership understands it is the businesses it invests in that do almost all the heavy lifting in the wealth creation process. As such, Aligned Capital Partnership looks to back and support management teams in growing their businesses. This can take many forms – from being a passive long-term supportive investor to more actively seeking to support or drive change at the board level. The preference is to look for and to help and support great leadership.
Aligned Capital Partnership believes better investing means thinking and acting like a business owner, and that rewards come to those not scared of rolling up their sleeves. As a result, Aligned Capital Partnership is an inquisitive and persistent investor. Examples of interactions with investment companies (past and present) can be found here…
December 2021