Welcome to Investing the Templeton Way!
May 9, 2023

20: Global Investing Strategies for Uncertain times with Matthew McLennan

20: Global Investing Strategies for Uncertain times with Matthew McLennan
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Managing Risk in a Volatile Market with Matthew McLennan's Approach 

The investment landscape has evolved significantly over the years, and with the uncertainty in the market, it is essential to adapt strategies accordingly to stay ahead of the game. As an investor, you must be open to new opportunities and practice intellectual humility, patience, and flexibility in your strategy. Methods should include differentiated investment approaches and a dedicated focus on long-term returns. Investors can make the mistake of obsessing over near-term economic metrics, including inflation, or striving for perfection in short-term results.  

Join our conversation with guest Matthew McLennan as he shares his investment philosophy, risk management strategies for a volatile market, and outlook for the global economy. As co-head of the Global Value team and a portfolio manager of various strategies, Matthew has a wealth of experience in the investment industry. Prior to joining First Eagle, he co-founded and co-managed a focused global equity portfolio for offshore private wealth clients at Goldman Sachs Asset Management in London. He also served as the equity chief investment officer of the investment strategy group for Goldman Sachs' private client business. Learn how to create a high-performance investment portfolio that stands the test of time.

What You Will Learn:

● [00:01] Episode intro and a quick bio of the guest, Matthew McLennan

● [02:55] How Matthew became interested in investing and in pursuing it as a career

● [06:53] Investing landscape and how Matthew has adapted his strategy to stay ahead of the curve 

● [08:58] Revolutionizing the traditional ways of handling balance sheets and asset  

● [11:45] Matthew's experience with the market and interest rates and how he repositioned  

● [19:19] How Matthew has preserved the culture of the First Eagle in the changing market 

● [23:38] First Eagle; the use of gold and cash in the portfolio and the strategy behind it

● [28:51] Mistakes investors make in the gold market in inflation and financial repression 

● [33:01] How Matthew goes through the decision-making process of holding gold 

● [34:44] First Eagle distribution in the world and the opportunities they see outside the US  

● [38:41] Where Matthew draws the line for factors that are more complex to a bottom-up analyst  

● [41:29] Tips to cultivate the right temperament and build in humility, patience, and flexibility in your strategy

● [44:37] Matthew’s investment time horizon, its nature, and offers in the Market

● [45:50] What Matthew does at First Eagle as an investment portfolio manager

● [49:54] The philosophy of position sizing and the mistake most investors make 

● [51:52] What keeps Matthew awake in his investment strategy

● [53:30] Where to learn more about Matthew's strategy and his company 

Tune in!

Standout Quotes:

Sometimes in life, you have to make all the right mistakes before you chart a more reasoned course.”- Matthew [02:57]

“Investing when done properly it is all about compounding out at a satisfactory rate of return and avoiding the permanent impairment of capital rather than swinging for the fences.”- Matthew [06:01] 

“Growth is only valuable if it is profitable.”- Matthew [10:32]

“A lot of good things in life take time; great artists are often recognized after they have painted the

The information presented in this podcast or available on the website is not intended as and shall not be construed as financial advice. This podcast is produced for entertainment value. Investing is inherently risky. And I encourage you to seek financial advice from a professional who is aware of the facts and circumstances of your individual situation.


Templeton & Phillips Capital Management Podcast featuring Matt McLennan


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Hi, my name is Lauren Templeton and you are listening to investing the Templeton Way.



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This podcast is for anyone interested in learning more about investing.



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In this podcast I will be interviewing some of the greatest minds from the investment community



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and exploring topics ranging from international markets to behavioral finance.



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To learn more, please visit us at investingtheTempletonWay.com.



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Any information presented in this podcast or available on the website is not intended



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ads and shall not be construed as financial advice.



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This podcast is produced for entertainment value.



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Investing is inherently risky.



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And I encourage you to seek financial advice from a professional who is aware of the facts



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and circumstances of your individual situation.



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Thanks for listening.



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Welcome to the Investing the Templeton Way podcast.



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I'm your host Lauren Templeton.



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And I'm your co-host Scott Phillips.



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And this podcast we bring you thought provoking conversations with experts and leaders across



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the investment industry.



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And today we're thrilled to have Matt McLennan as our guest who is portfolio manager



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and head of global value at First Eagle investment management.



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I personally have been an investor in First Eagle for many years.[EC1] 



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With over three decades of experience in the finance industry, Matt has been recognized as one



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of the top investment managers in the world[NM2] .[EC3] 



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He has been with First Eagle since 2008 and has been responsible for managing the firm's global



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value strategies overseeing over 80 billion in assets and management.[EC4] 



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First Eagle itself manages a hundred and twenty-four billion.[EC5] 



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Throughout his career, Matt has been a vocal advocate for value investing, a philosophy that



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seeks to identify undervalued stocks that have the potential to outperform the broader market



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over the long term.



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He's a sought-after speaker and has been featured in numerous publications including the Wall Street



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Journal, CNBC and Barron's.



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In today's episode, we'll dive deep into Matt's investment philosophy, his approach to managing



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risk and volatile market and his outlook for the global economy.



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So without further ado, let's welcome Matt to the show.



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Welcome Matt.



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Thank you so much, Lauren.



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Thank you, Scott.



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Yeah, so I would like to start these shows just getting to know you a little bit better.



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It sounds like you had an interesting childhood and you grew up in Australia.



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Is that correct?



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That's correct.



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I was actually born in Rabaul, New Guinea.



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The first six years were there and then in Queensland Australia thereafter.



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So how in the world did you become an investor interested in investing and pursuing this career?



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Well, sometimes in life you have to make all the right mistakes before you chart



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a more recent course.



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If I'm honest with myself, and I think back to when I was a teenager in the 1980s, I was kind



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of enticed by what was going on with the corporate readers at the time.



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They appeared to have discovered this magical elixir to create wealth.



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And the stock market, as a teenager, seemed like some stacked game of monopoly to me.



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Of course, we all know later that leverage and the overvaluation of these writers paid and



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their behavioral hubris, all led to some spectacular implosions in later years.



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At the time, it seemed like they were onto something.



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And at the same time, I had a high school math teacher who figured that he had discovered the



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hidden patent in charting the Dow Jones[NM6] .



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And unfortunately, for him, he put his discovery to work and tried to trade futures around



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this discovery and lost it all.



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I sort of reflect back on that period.



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I think to myself, why did I get attracted to get rich quick-type speculation early on in life



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as opposed to what I now think of as investing?



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As we discussed, I was fortunate enough to grow an up in Australia in an incredibly happy house



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in the woods and surrounded by books and a supportive family.



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But it was also a childhood that was very simple.



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And of modest means, we didn't have electricity or running water in our house in the woods.



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And I guess I had some youthfully naive fire in the belly at that stage and that had sort



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of exceeded my wisdom.



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And with the benefit of high tide, I'd say, though, that I was better to have been attracted



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for the wrong reasons early on when I had very little capital to deploy.



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And out of, I guess, the ashes of that period of not so great market history, I took the opportunity



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to devote myself to learning, studying finance, accounting, law, economics, academic literature.



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I basically devoured at all.



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And I was fortunate enough to be hired by my thesis supervisor at the time into an investment



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job in Brisbane, Australia.



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And there I got to meet a range of third party managers and I came to the opportunity to distill



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the threads of continuity amongst their approach.



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And I ultimately joined Goldman (Sachs) in the early 1990s.



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And I was well-mentored there by folks who work for people like Lewis Simpson at Geico 



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or Lew Sanders at Bernstein and continued reading and learning.



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I really just settled on a value approach to investing, really looking for businesses that



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were entrenched and cheap.



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What I took time to learn was that investing done properly is all about compounding out



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at any satisfactory rate of return and avoiding the permanent payment of capital rather than



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swinging for the fences.



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If I look back on my childhood, my mother's approach to gardening was probably a much better metaphor



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for investing than the actions of corporate writers or stock charts speculators.



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That was really what got me involved in investing.



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Yeah, it's so interesting.



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Everybody finds their way to investing, value investing on a different path.



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So it's interesting to learn yours. 



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You have been at First Eagle now for over a decade. 



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Can you talk about the investing landscape and how it's changed over the years?



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And how you've adapted your approach to stay ahead of the curve?



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So yeah, it's coming up on 15 years at First Eagle.



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And it's been a wonderful experience.



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And I think the beauty of the job of being an investor is that the learning curve never stops.



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It's a field that really has sort of knowledge conciliates if you will.



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You're blending science and humanities looking for some sort of asymmetry between price and prospects.



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It's endlessly interesting.



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And I think as I reflect on the last 15 years, I mean, part of the journey for us as a team at First



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Eagle has been really sort of focusing on how to think about the evolving mix of the underlying



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investment opportunities set to businesses that are characterized by more intangible assets as opposed



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to tangible assets.



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And that requires somewhat of an evolution of thinking.



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And that's been an area that we spend a lot of time thinking about in addition to reflecting



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with where we are on some of the imperfections that we see in the financial architecture globally.



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And thinking about how we should navigate potentially troubled waters in the years ahead.



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We've had a similar thing going on in our firm with a focus on those intangibles.




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Yeah, I mean, I think just from a value investing standpoint generally, it was kind of an evolutionary



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process, maybe you share that view, Matt. I'm not sure, but when you're kind of focused on the



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balance sheet and assets, you're dealing with historically, accounting conventions that were made



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close to 100 years ago and have no perception of what we're looking at today.



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And so it creates these kind of interesting perspectives.



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What do you do with capitalized cost?



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You know, are there's intangible assets actually where something should you be valuing



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them? And so I think value investors generally have had to come to grips with that.



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What has been your experience?



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Well, I think you're 100% right. I think when you look at a traditional capital-intensive



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business, a lot of the investment in that business is really only captured in the cash flow



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statement. If you're expanding the railroad network or your steel plant, so you're building



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your buildings, all of that goes through the cash flow statement. And if you're a company



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that's built upon intangible assets, whether it's research and development or advertising or having



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a unique sales network, whatever it might be, if you try to expand that business, you're going



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to be investing through the profit and loss statement. And so one really has to sort of adjust



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for those kinds of differences. And I think just from a balance sheet standpoint, often the



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two most valuable assets don't show up on the asset side of the balance sheet. And by that,



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I mean, for a business, the most valuable assets often a high level of market share that's being



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stable generationally. That kind of entrenchment is a very valuable intangible asset.



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Incumbency, is a very valuable and intangible asset. But it doesn't show up on the balance sheet



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per se, like why the extent to which there's management acumen in allocating capital over time,



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that doesn't show up on the balance sheet. Yes, there's trace elements of it. You might have



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a balance sheet that's not that level or getting high returns on capital. But there's no discrete accounting



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for those assets that are incredibly valuable. And so we spent a lot of time thinking about that.



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And at the end of the day, growth is only valuable if it's profitable. And the precondition for



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profitable growth is really some form of advantaged incumbency and a management team that focuses



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on that core advantage and focuses on efficiency and deploy measured behavior. And so we spent a lot of



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time thinking about those variables that are kind of hard to capture in just financial statement analysis.



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Well, now that we're talking about growth, I mean, we have been through just the most incredible



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period with low interest rates and a misallocation of capital, of course, the extreme valuations



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of growth stocks, which have somewhat corrected. I mean, Scott and I were counting over 700 stocks in the



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US at the beginning of 2021 trading at a price sales multiple of over 20 times, just some really



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extraordinary valuations. How have you experienced sort of the rationalization of the market and



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this higher interest rate environment? Have you done anything in your portfolio to reposition or how do you



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think about that? Well, you're right, 2021 was a pretty extreme year in markets and I think it'll



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probably go down as a generational low in the cost of capital, you know, sovereign interest rates were



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low, below 2% credits credits were low you know, high yield credit spreads were only for 250-260



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basis points. And as you point out, earnings multiples will high, revenue multiples will high price per



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human was high, you know, and the capital markets will wide open, you had spacs, you have all of these



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high growth ideas and in fact, I hadn't seen anything really like it since 1999. And obviously



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that generational low in the cost of capital, when combined with exceptionally accommodated fiscal policy,



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produced inflation. And what we saw over 2022 was somewhat of a normalization of the cost of



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capital, interest rates went up to levels more consistent with the historical averages,



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high yield credits blew out to a little bit in excess of the historical averages and earnings



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multiples on the market came down to levels more consistent with the last couple of decades averages. Albeit



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not cheap. And you know, we fortunately weathered that storm reasonably well in the sense that we



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hadn't really participated in those pockets of the market that were pricing excessive optionality. We



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would sort of stuck to our knitting, stuck to situations where the investing arithmetic



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made sense between the free cash flow yield today and the measured pace of growth and intrinsic value[NM7] .



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And you know, people would often ask, how do you know how a time value of growth, I say you don't



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know, but I do know that arithmetic ultimately works. And so there wasn't a lot that we had to do



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differently. We had during the proceeding years been positioning the portfolio for more resilience,



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so leaning into the wind a little bit. And I think that that position does to sort of endure



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last year and to be able to put a little bit of capital to work in the summer. But I think that



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place that we're at now is a little tricky. I know markets have recovered some and perhaps looking



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forward to lower inflation and interest rates. But as I reflect on the current environment,



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I feel that the increase in the cost of capital that we've seen,



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has not fully flowed through to the economic reality. And I think the bond market is flashing



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some warning signals here. Whether it's the yield curve inversion, whether it's the Fed



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fund rate[NM8] itself bursting out on the upside of a 40 year downtrend, whether it's how your credit



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spreads been wider. And I think we're also starting to see some signs of slowing economic momentum



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in some of the expectation surveys, now orders by an ISM services and manufacturing orders or



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the conference board consumer expectations. There's signs of a labor market



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softening at the margin. And so, unfortunately, when the momentum shifts negatively,



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it tends to run for some time. And so I think this is a moment in time where we might have seen



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the early stage of the adjustment of repricing, but there may be more challenges that lie ahead.



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The tell me why you're portfolio at First Eagle is well positioned to weather that market[NM9] ,



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if we have a hard landing recession, etc. Let me say up front, but we have enough humility to



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recognize that if we have a hard landing, no one's going to be immune from that in totality.



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You know, we are a long-owned, we manage our own, and we have about 70% of the portfolio invested in



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equities. But I hope we would be to avoid the worst of potential permanent negative impairments



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of capital during a downdraft. And we have an a ballast in the portfolio between our cash and our



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gold holdings to not only be able to sort of weather a storm, but to be a selective purchaser of securities



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that offer a deeper margin of safety[NM10] in a more distressed environment. And the one thing that



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is kind of weighing on me here is I sort of think about markets and the issues that we went through



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with the recent sort-of banking crises. What we might be seeing here is the opening stages of a



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more of a sovereign credibility crisis in the United States. If you think about the last few



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cycles that we've been through in the late 90s that we talked about before, the credit problems



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emerged in the corporate sector. You'll remember the Enron's, the World Coms,



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those situations. And then in the mid 2000s people had moved credit-wise into housing credit,



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more than just low risk credit, house prices never go down. And I think where is the



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where is the excess stack of debt today? It's in the sovereign sector. Especially following the



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large fiscal stimulus with COVID, there was a huge amount of sovereign debt issuance. And



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one of the things that strikes me is a very meaningful difference between what we saw in the most recent



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year and what we saw in 1999 is that you'll call back in 1999, the last time we had about



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below 4% of unemployment, that there was a budget surplus in the United States. In the last year



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with 3.5% unemployment, we had close to a 6% deficit. And so we're not on a



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fiscally sustainable course. And if you think about where the problem surfaced in the banking sector,



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it was losses on sovereign securities, whether they long-dated treasuries or whether they were



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mortgage-backed securities[NM11] with the implicit backing of the state. And I think one of the ironies



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of our financial architecture is that for banks, sovereign assets have close either zero or low



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risk waiting depending on the nature of them. Yet we know that sovereign debt is not risk-free. If you have



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unsustainable fiscal policy or you have sort of inappropriate monetary policy, you can suffer meaningful



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capital losses. And so I think we're maybe at a moment where the confidence in the sustainability



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of our fiscal picture could come into question. And I think that presents a whole host of



00:18:35,240 --> 00:18:44,200

different challenges for investors. And shared eyes, it's very interesting time to be an investor and



00:18:44,200 --> 00:18:50,760

to think about positioning the portfolio for that. So First Eagle has a great history of preserving



00:18:50,760 --> 00:18:55,800

capital on the downside. That's what we like about First Eagle. When we're looking at putting



00:18:55,800 --> 00:19:02,360

First Eagle in our personal portfolio or talking to clients about First Eagle, we like the history



00:19:02,360 --> 00:19:09,640

of preserving capital on the downside. How as a company do you have the culture? How do you keep your



00:19:09,640 --> 00:19:16,120

wits about you? And these crazy irrational markets, like the one we've had over the past 10 years.



00:19:16,120 --> 00:19:22,760

How is that so preserved into the culture at First Eagle? It's very challenging psychologically



00:19:22,760 --> 00:19:30,200

because in an environment like 2021 or 1999, you have to be willing to be short social acceptance.



00:19:31,480 --> 00:19:39,640

Ultimately, people will view what you're doing as sort of static and not keeping up with the times in



00:19:39,640 --> 00:19:47,800

a moment of inexuberance like we saw in 2021. And part of what we do is spend a lot of time



00:19:47,800 --> 00:19:53,640

being frank with our clients about who we are and who we're not. Setting realistic



00:19:53,640 --> 00:19:58,040

expectations. And I think that's important because if you promise to be all things to all people,



00:19:58,040 --> 00:20:04,120

then you're almost forced to change with the times rather than the charter city course. The second thing is that



00:20:04,120 --> 00:20:10,840

we have, I guess, the benefit of an approach that's been time-tested, the global strategy



00:20:10,840 --> 00:20:18,440

traces it's roots back to 1979. And so I think the fact that you're acting as custodians



00:20:18,440 --> 00:20:25,080

of an approach that's been time-tested gives you some staying power, then if you're experimenting



00:20:25,800 --> 00:20:35,560

with a new approach, then it comes down to the simple fact that when we look at the portfolios bottom-up,



00:20:35,560 --> 00:20:42,280

we invest in what makes sense. If we're worried about fiscal issues and monetary policy,



00:20:42,280 --> 00:20:47,720

then it makes sense that we hold some goal as a potential hedge. In fact, when I look at the last



00:20:47,720 --> 00:20:53,240

century of investing history, when equities have had their lost decades of often being when



00:20:53,240 --> 00:21:02,680

gold is had its best decades. And so having some anchor in a potential hedge like gold gives us the patience



00:21:02,680 --> 00:21:09,560

to endure extremes in markets. And I think just seeing opportunity bottom-up even though the market



00:21:09,560 --> 00:21:16,520

itself got pretty expensive, the international stock universe was at a 50-year-low relative to the



00:21:16,520 --> 00:21:22,840

US. If you just looked at the ratio of the MSGIE[NM12] for the compared to the S&P 500, it was at a 50-year-low



00:21:22,840 --> 00:21:30,680

and so for a long-term investor for whom the arithmetic matters, the combination of cheap currencies and



00:21:30,680 --> 00:21:37,160

higher-free cash flow yields gives you the conviction if you will to stay the course. And then



00:21:37,160 --> 00:21:43,240

when we look at what we own bottom-up, we'd see that we weren't just like



00:21:43,240 --> 00:21:50,200

skewed towards things that were statistically cheap, but we're trying to focus on businesses



00:21:50,200 --> 00:21:57,400

that have scarcity value and that have innate persistence whether if we're in the world of



00:21:57,400 --> 00:22:02,040

newer companies we have in trend software, but more mature companies that aren't excessively valued



00:22:02,040 --> 00:22:11,000

locally advantaged scarce real assets or companies that have local market services density,



00:22:11,000 --> 00:22:16,920

50 or 60% market sharing local markets or companies that have generational brand equity or



00:22:16,920 --> 00:22:23,240

heritage as like honing precision products. When you look at the nature of the businesses we own,



00:22:23,240 --> 00:22:30,360

you just start to get more comfortable at these businesses that should grow in a measured pace over time



00:22:30,360 --> 00:22:35,560

and if they offer a attractive free cash flow yields give you the ability[NM13] to generate sound



00:22:35,560 --> 00:22:42,040

real returns. And so it's keeping centered and it's these crazy times is really a function of



00:22:43,880 --> 00:22:49,800

having a clear philosophy, a clear sense of true north, but also feeling comfortable with what you



00:22:49,800 --> 00:22:56,520

own bottom-up and it's a combination of those two variables. You know, one of the things that I think



00:22:56,520 --> 00:23:01,960

is a little bit unusual about First Eagle is your gold position. I mean that's what I always think of when



00:23:01,960 --> 00:23:06,680

I think of First Eagle. I think about you know there's going to be some exposure to gold and



00:23:06,680 --> 00:23:11,800

gold mining stocks. The other thing I think about when I think about First Eagle as a manager



00:23:11,800 --> 00:23:16,520

and please correct me if I'm wrong about any of this because I certainly could be. But I think that



00:23:16,520 --> 00:23:23,560

compared to most managers in the industry you will sometimes have at First Eagle,



00:23:23,560 --> 00:23:31,000

larger cash balances in the portfolio than that average manager. Maybe as much as 30% in the past you



00:23:31,000 --> 00:23:37,800

want to comment on the use of gold and the use of cash in the portfolio is in the strategy behind that.



00:23:37,800 --> 00:23:49,080

Sure, so I think that our philosophy is one where we're almost better thought of as business gardeners



00:23:49,080 --> 00:23:58,520

or business collectors then we are stock traders and that means that when we approach the task of



00:23:58,520 --> 00:24:07,080

investing we tend to have a more absolute mindset and the reason I mention that is that we only put cash



00:24:07,080 --> 00:24:12,360

to work if we find a business we like at a price we like and there are some environments where it's



00:24:12,360 --> 00:24:17,320

harder to do that and we might be trimming names that become more fully valued and so the cash



00:24:17,320 --> 00:24:25,960

will build as a residual of that discipline approach to investing and then in windows of distress



00:24:25,960 --> 00:24:31,400

all of a sudden there's fewer stocks that we want to sell because they're trading with a wider



00:24:31,400 --> 00:24:36,280

margin of safety and price and there are businesses that may have been on our wishlist that are all of



00:24:36,280 --> 00:24:42,680

sudden attractive to us and so we put that cash to work and if you look over the last 15 years our



00:24:42,680 --> 00:24:51,480

largest cash drawdowns were in Q1 2019 and the way could global financial crisis and in Q1 2020



00:24:51,480 --> 00:24:58,440

joining the COVID-19. The cash is really thought of as a sort of deferred purchasing power.



00:24:59,400 --> 00:25:06,360

We want to be primarily owners of business but we only want to do so on sensible terms and so the cash



00:25:06,360 --> 00:25:14,040

will ebb and flow throughout the business cycle. The gold is in some ways a longer term



00:25:14,040 --> 00:25:20,200

a form of deferred purchasing power. The problem with cash is that over the last fifty years the



00:25:20,200 --> 00:25:24,360

yield on cash has been less than the rate of money supply growth and the economy and so while it



00:25:24,360 --> 00:25:31,560

provides for a nominal stability in the short term it's a different form of wealth destruction over the



00:25:31,560 --> 00:25:38,600

long term because you're not keeping pace with the rate of monetary creation. Now gold is a little



00:25:38,600 --> 00:25:47,880

different from cash because it offers no yield but it's constrained supply and in a way it's



00:25:47,880 --> 00:25:54,760

perhaps not surprising that because we broke the link between our currency and gold in the early 1970s



00:25:54,760 --> 00:25:58,840

because we didn't want the discipline of gold is perhaps not a surprise that gold has outperformed



00:25:58,840 --> 00:26:05,800

our money over time and so you know over the last 50 years money supplies compounded out at 6



00:26:05,800 --> 00:26:15,400

or 7% cash has been closer to 5% and gold has been north of 8% and gold ironically is



00:26:15,400 --> 00:26:21,000

interesting for us as a potential hedge and people say why would you hold this useless lump of



00:26:21,000 --> 00:26:27,960

yellow metal and I like the little paradox is that its utility as a potential hedge is its



00:26:27,960 --> 00:26:33,960

uselessness as a commodity anything that's useful has its price being very sensitive to the business



00:26:33,960 --> 00:26:44,120

and so on. You know land prices whatever it may be gold is chemically a note which means that



00:26:44,120 --> 00:26:51,960

it tends to be more inversely related to the business cycle in fact it's a note that means



00:26:51,960 --> 00:26:57,160

that it lasts indefinitely and it means that it has a more steady supply because the gold



00:26:57,160 --> 00:27:02,200

mine in a year is only one and a half percent of the total amount of gold outstanding and so



00:27:02,200 --> 00:27:08,440

it's very predictable supply and it means that gold's price tends to to be inversely correlated with real



00:27:08,440 --> 00:27:16,280

interest rates and over time because of its scarcity it tends to go up in line with money supply



00:27:16,280 --> 00:27:23,400

and nominal activity and so you know as far as hedge assets go with we found it more attractive than



00:27:23,400 --> 00:27:27,160

say buying put options because they cost a lot to buy and put options you have to be right on the



00:27:27,160 --> 00:27:34,920

timing and we're humble enough to know that we can't time markets and it's had a better risk-reward



00:27:34,920 --> 00:27:41,800

than owning sovereign paper you know given the sovereign challenges that we've outlined earlier in



00:27:41,800 --> 00:27:47,720

the discussion so we've settled on goal as a sort of long-term potential hedge or longer term form



00:27:47,720 --> 00:27:54,280

of deferred purchasing power if we were to go through a lost decade in stocks or something worse like



00:27:54,280 --> 00:28:01,960

the 1930s or the 1970s then I would imagine that you'd see us progressively start first to deploy the



00:28:01,960 --> 00:28:07,880

cash and then ultimately to deploy some of the gold in the ownership of business and I'm much more



00:28:07,880 --> 00:28:15,480

advantageous terms than today. Yeah you bring up some really interesting topics



00:28:16,520 --> 00:28:23,160

there Matt in relation to gold and in particular you know this this idea that gold can offset



00:28:23,160 --> 00:28:29,320

geopolitical events but really it's utility comes in the negative real interest rates and some wondering



00:28:29,320 --> 00:28:35,160

you know what the Fed funds futures almost unanimously saying that the Fed is going to be cutting



00:28:35,160 --> 00:28:42,360

rates soon this is set up for one of those dynamics where the Fed, as you pointed out in your annual



00:28:42,360 --> 00:28:48,920

letter missed an opportunity in 2021 maybe they make another mistake and inflation and wage rates are just



00:28:48,920 --> 00:28:55,160

too sticky. Yeah no it's it's such a great question you know I think we've seen a number of policy



00:28:55,160 --> 00:28:59,720

mistakes unfortunately over the last few years I mean I think the biggest of which was the second



00:28:59,720 --> 00:29:08,120

fiscal package because if you think back to the beginning of 2021 we'd already started rolling out the



00:29:08,120 --> 00:29:15,880

vaccine you know we had business confidence at or you recovered that's the time where you



00:29:15,880 --> 00:29:21,720

start to dial back the stimulus typically but we had a kind of trillion dollar type stimulus program



00:29:21,720 --> 00:29:28,360

and now we're in a fiscalian sustainable situation and then the Fed also changed its approach



00:29:28,360 --> 00:29:32,840

to say you know what we're not going to target inflation we're going to do average inflation rate



00:29:32,840 --> 00:29:37,960

timing so we're going to wait till we see inflation and what that meant is by the time inflation was upon us



00:29:37,960 --> 00:29:42,760

the genie was out of the bottle and they could no longer tap the brake it had to pull you know it had to pull



00:29:42,760 --> 00:29:51,320

the hand brake and so the Fed you know may now be just as a sort of missed inflation risk maybe missing



00:29:51,320 --> 00:30:00,600

financial stability risk the fact that we had a 40 year downtrend in policy rates and we've just



00:30:00,600 --> 00:30:07,000

broken out on the upside means that we're going to test the vulnerable points of the debt stack in the



00:30:07,000 --> 00:30:14,280

economy you know in the coming quarters of economic activity softens and so you know when you



00:30:14,280 --> 00:30:20,280

own something like gold which is a perpetual asset what matters is not just what's happening now but



00:30:20,280 --> 00:30:25,880

what happens on the next roll and it's interesting to me that you know gold had had some of a peak back



00:30:25,880 --> 00:30:33,160

in 2020 and it started to soften ahead of two year rates and Fed policy rates moving up so it's almost



00:30:33,160 --> 00:30:40,600

a gold market anticipated the need for a tightening and more recently the gold markets had a pretty



00:30:40,600 --> 00:30:47,160

fun bit to it and I think probably because of what you're saying that the Fed is going to force



00:30:47,160 --> 00:30:52,440

themselves into a tricky situation where we have a financial stability issue that means they have



00:30:52,440 --> 00:30:59,960

to ease policy ahead of solving the inflation problem or that we end up in a recession and there are pockets



00:30:59,960 --> 00:31:04,920

of debt vulnerability and they have to ease policy to address that and so I think gold might be sniffing out



00:31:04,920 --> 00:31:10,200

the prospect of lower real interest rates in the fact that even though the nominal level of interest



00:31:10,200 --> 00:31:14,920

rates went up this cycle quite a lot it's still below the year of the year rate of inflation



00:31:14,920 --> 00:31:21,080

and so if we get into worse state of the world from here rates could move into more deeply



00:31:21,080 --> 00:31:28,120

negative territory particularly if the sovereign debt dynamics are not that attractive you know it tends to



00:31:28,120 --> 00:31:34,680

be an element of financial repression used to solve sovereign debt problems and so I think the gold



00:31:34,680 --> 00:31:40,680

markets might be smelling something and you know if we look at the last couple of cycles gold typically



00:31:40,680 --> 00:31:45,960

hasn't peaked out until the forward curve for interest rates has troughed and I think we're probably



00:31:45,960 --> 00:31:49,720

some ways away from that we don't try to predict where it's going to go we're not smart enough to



00:31:49,720 --> 00:31:56,760

do that but I do think that the behavior of gold is telling us something about vulnerable is in the system



00:31:56,760 --> 00:32:02,760

and the final thing I'll mention is that and this is a hard thing to gauge but the dollar is let's say



00:32:02,760 --> 00:32:09,880

60% of world currency reserves there's a game changer when Russia made a Ukraine we sanction the



00:32:09,880 --> 00:32:15,320

ability of the Russians to access their dollar reserves and you have to think if you're a China or



00:32:15,320 --> 00:32:22,120

a Saudi Arabia or someone else who is a reserve accumulator are you less incentivized to acquire dollars



00:32:22,120 --> 00:32:28,840

as reserves now than you work before and so that's just a provocative question that's out there and



00:32:28,840 --> 00:32:33,960

we know from the world gold council that there's been more foreign central bank buying of gold in the



00:32:33,960 --> 00:32:40,680

last year than that has been for quite some time. These are great comments. There's one other



00:32:40,680 --> 00:32:46,200

question that I've always been curious about and I think this is really neat that you all do this.



00:32:46,200 --> 00:32:53,000

You own bullion but then you'll go and look at the miners as well and so there's a value



00:32:53,000 --> 00:32:57,800

investing play within that now I'm wondering just how you kind of go through that decision making process



00:32:57,800 --> 00:33:03,160

like what's more attractive than the others just valuation. You know it's a big question we and we we



00:33:03,160 --> 00:33:08,520

don't try too much but I guess how feeling is if we were going to hold gold in a



00:33:08,520 --> 00:33:15,560

vault we should be willing to hold it in the dirt via the miners if there's a margin of safety and price and



00:33:15,560 --> 00:33:20,840

and so our approach when we look at the gold miners is that we we look at the existing mine plans



00:33:20,840 --> 00:33:26,600

for those miners and we look at their cost structure and what the runoff value of those



00:33:26,600 --> 00:33:32,600

producing reserves would be a current spot prices and if we can get a meaningful discount in the public



00:33:32,600 --> 00:33:39,400

markets we'll take that and then we get the opportunity of their resource optionality at a very low price



00:33:39,400 --> 00:33:45,960

you know if prices go up resources that they have can be converted to producing reserves and so



00:33:45,960 --> 00:33:53,800

there's some incremental optionality that we hopefully get at low price through some of the miners and



00:33:53,800 --> 00:34:00,680

one of the things I would say is that there've been environments in the past where the miners were



00:34:00,680 --> 00:34:08,200

at a hedge on the potential hedge of gold such as the 1930s where Roosevelt compulsorily acquired gold



00:34:08,200 --> 00:34:14,920

and one way you could own it was through the miners and so there've been states of the world where



00:34:14,920 --> 00:34:24,280

the miners have ironically been a safe way to access gold. Yeah it's so interesting. Well first



00:34:24,280 --> 00:34:31,640

you go you're ahead of globe the global portfolio at first you go tell me your thoughts on the different



00:34:31,640 --> 00:34:37,880

regions of the world I think I read that currently you have about 50% in the United States but what



00:34:37,880 --> 00:34:43,480

do your thoughts on China and Europe and different areas of the world right now? Where are you seeing



00:34:43,480 --> 00:34:51,960

opportunities? Yes so we're right believe us in diversification. If you accept uncertainty



00:34:52,680 --> 00:34:58,360

as a fact of life it means that the tales of reality are going to be far better than what you would



00:34:58,360 --> 00:35:03,320

predict with a statistical distribution and that leads us to be open minded to diversify 



00:35:03,320 --> 00:35:07,720

across industries and across the globe and so our portfolio has been quite balanced you know roughly



00:35:07,720 --> 00:35:12,520

half of our equity to being in the US as you point out and the other half have been outside the United



00:35:12,520 --> 00:35:19,160

States and the United States obviously have been a very strong equity market but the United States



00:35:19,160 --> 00:35:24,600

does not have a monopoly on good businesses and so it pays to be open minded to opportunities that you



00:35:24,600 --> 00:35:31,720

see outside the United States and so you know in Europe you know what's been appealing to us has been



00:35:31,720 --> 00:35:39,240

some of the consumer branded goods companies that really have very strong brands that have been around



00:35:39,240 --> 00:35:45,560

for a long time in many cases have strong emerging market footprints and that offer free cash flow



00:35:45,560 --> 00:35:51,640

yields that are closer to 6% than you know the 4% you get on similar companies in the United States



00:35:51,640 --> 00:35:56,680

you know what the other things that's interesting in Europe is there's a range of investment



00:35:56,680 --> 00:36:06,280

holding companies where again these are often stewed by families or founders where you know you



00:36:06,280 --> 00:36:12,760

can essentially get exposure to the stops that they own at a meaningful discount to the sum of the



00:36:12,760 --> 00:36:18,840

parts and so you can get a double discount through some of these holding companies and again it's harder to find



00:36:18,840 --> 00:36:26,920

these situations in the United States throughout Asia we see some interesting situations in Japan



00:36:26,920 --> 00:36:32,040

one of the areas that we've focused on over the years has been the factory automation space there've been



00:36:32,040 --> 00:36:40,200

some you know Japan has the world leaders in CNCs robotics, pneumatics, electrical sensors



00:36:40,200 --> 00:36:47,240

all the things that are needed to automate the factory of tomorrow and if we ever see a de-globalization



00:36:47,240 --> 00:36:53,400

of factory supply chains we're sure going to need the technology that resides in those Japanese companies



00:36:53,400 --> 00:37:00,760

you know in places like Latin America where valuations got quite depressed during COVID



00:37:00,760 --> 00:37:06,680

there's even though those economies can be wildly cyclical there are some very cash flow generative



00:37:06,680 --> 00:37:12,520

businesses that are quite stable, think of the brewing and beverages industry in Latin America and some



00:37:12,520 --> 00:37:19,000

of these companies have 60-70% market share positions where you know we were able to build positions



00:37:19,000 --> 00:37:25,480

of single-digit cash flow multiples and you know these are just very attractive businesses and the



00:37:25,480 --> 00:37:32,600

last thing I sort of mentioned in Europe is some of the luxury products companies over the years again



00:37:33,320 --> 00:37:40,280

Tiffany doesn't exist anymore it was acquired so my point being that one of the motivations for us to



00:37:40,280 --> 00:37:46,600

go overseas is not that we're making a tactical call on valuations albeit multiples are about a third



00:37:46,600 --> 00:37:52,120

lower overseas and currencies have been depressed versus the dollar but it's for the simple reason that



00:37:52,120 --> 00:38:00,040

as business collectors there are some great businesses outside the United States and yeah I guess we have



00:38:00,040 --> 00:38:06,440

a lot of institutional memory having been invested globally since the late 70s is an organization.



00:38:06,440 --> 00:38:14,520

It brings up a really interesting question to me at least Matt. I completely understand what you're



00:38:14,520 --> 00:38:20,440

saying with the bottom-up analysis and but at the same time I also thinking that you guys are



00:38:20,440 --> 00:38:25,560

also finally tuned into risk and I would assume that includes geopolitical of course.



00:38:26,440 --> 00:38:32,120

Where do you kind of draw the line in terms of well that's more institutional risk and I want to take in



00:38:32,120 --> 00:38:36,680

terms of things like property rights and some of these other factors that are more difficult for



00:38:36,680 --> 00:38:41,800

an analyst or bottom-up analyst to see where do they filter into your picture? I like just for



00:38:41,800 --> 00:38:47,480

instance like China and some of the... It is a great question. We had no direct



00:38:47,480 --> 00:38:53,560

investments in Russia for example you know in in the strategies that we've discussed today



00:38:54,920 --> 00:39:00,920

and I think that's a reflection of some concerns around things like property rights and China's been



00:39:00,920 --> 00:39:08,120

a little more complex and nuanced because it is so much larger than Russia and I think one of the



00:39:08,120 --> 00:39:14,360

things that's been interesting about China is that because of the geopolitics it's been marching



00:39:14,360 --> 00:39:20,360

to a very different business cycle than the United States. The Chinese market was going down and



00:39:20,360 --> 00:39:26,520

we were having the bubble that we were talking about and so you know we have seen you know one or two



00:39:26,520 --> 00:39:32,040

opportunities over the years in like for example a Hong Kong property holding list of property



00:39:32,040 --> 00:39:38,680

holding companies where the holding companies trade at very large discounts to the private market



00:39:38,680 --> 00:39:44,440

valuations of the underlying real estate and typically hold much less leverage than say a REIT[NM14] in the



00:39:44,440 --> 00:39:51,400

United States you know we've also seen some opportunities for there's one holding company we own



00:39:51,400 --> 00:39:59,400

in Europe that owns a stake in a Chinese company that is a very strong underlying business and



00:39:59,400 --> 00:40:04,600

the valuation margin of safety is wide and the European company is doing a stock repurchase and so



00:40:04,600 --> 00:40:12,600

you know you have these situations where you feel there's enough of a margin of safety and price



00:40:13,160 --> 00:40:19,800

to make an investment you know we've had some investments in Taiwan over the years and so you know



00:40:19,800 --> 00:40:25,400

I think the reality is that you cannot avoid all geopolitical risk in that as we sort of started



00:40:25,400 --> 00:40:30,600

this conversation earlier on unfortunately there's sovereign and geopolitical risk in the United



00:40:30,600 --> 00:40:38,440

States as well and so part of our solution is just to be diversified[NM15] there are some markets we haven't



00:40:38,440 --> 00:40:44,280

gone into as discussed otherwise it's to be diversified to have a margin of safety and price and to look at



00:40:44,280 --> 00:40:49,640

the underlying business character and the history of management doing rational things with the cash flow



00:40:49,640 --> 00:40:59,000

yeah well it is you have so many similarities to first of all has so many similarities to John



00:40:59,000 --> 00:41:04,440

Templeton's philosophy on investing which is global in nature and I've heard you talk a lot about



00:41:05,560 --> 00:41:12,520

the mistakes of temperament and how important it is to exercise patience, humility and flexibility



00:41:12,520 --> 00:41:18,840

I see that so much and then investment philosophy at First Eagle you can see the patience,



00:41:18,840 --> 00:41:26,520

the humility, the flexibility built into the strategy do you have any tips or comments for investors



00:41:26,520 --> 00:41:35,400

and cultivating that right temperament? Well I think you know I would just make the point that when it



00:41:35,400 --> 00:41:41,560

comes to investing I think to be a whole investor there's an analytical toolkit you need but the



00:41:41,560 --> 00:41:47,400

temperament needs to be weighed against that I remember when I went to Egypt at the end of 2019



00:41:47,400 --> 00:41:53,720

and I took the family through some some pyramids and some tombs and things like this and



00:41:54,440 --> 00:41:59,160

there was interesting hieroglyphics where they weigh the heart against a feather to determine the



00:41:59,160 --> 00:42:07,240

soul. Humility stems from just recognition of uncertainty and I think in some ways you know



00:42:07,240 --> 00:42:11,480

people come to investors they're like well we want you to have the crystal ball we want you to tell



00:42:11,480 --> 00:42:17,320

exact what's going to happen in the world but it's it's far more powerful to accept that you don't know



00:42:17,320 --> 00:42:27,320

for sure because you end up investing in each situation with more of a margin of safety you expose yourself



00:42:27,320 --> 00:42:35,720

to a wider sea of opportunities and the consequences of making a mistake are more absorbable



00:42:35,720 --> 00:42:41,960

if you have an error tolerance approach and so just accepting it is really important and I



00:42:41,960 --> 00:42:47,160

take the same thing on patience you know I think back to the gardening discussion we were having it earlier today



00:42:47,160 --> 00:42:53,320

that you know there were many things that my mother planted that took many years to come to fruition



00:42:53,320 --> 00:43:02,040

but it was worth the weight and a lot of good things in life take time I mean you know great artists



00:43:02,040 --> 00:43:08,520

is only often recognized a generation or two after they painted their work and it survived the test of time



00:43:09,480 --> 00:43:17,880

and in investing to us the most predictable sources of outperformance in a world that's largely unpredictable



00:43:17,880 --> 00:43:23,320

and things to take time to play out like for valuation discounts to correct it's a passage of



00:43:23,320 --> 00:43:28,760

years if you've got a really strong business that can generate more free cash flow that accretes slowly



00:43:28,760 --> 00:43:33,960

to your benefit over years if management are doing sensible things with that cash flow the benefits of



00:43:33,960 --> 00:43:41,000

that tend to accretes slowly over time and ironically when people look for rapid growth or they're often



00:43:41,000 --> 00:43:45,640

in industries that are characterized by rapid change and your ability to be certain of what a company



00:43:45,640 --> 00:43:51,640

will be worth in five or seven years time is often lower in those industries with rapid change and so



00:43:51,640 --> 00:43:57,000

you know we think temperament is incredibly important we want to surround ourselves at First Eagle



00:43:57,000 --> 00:44:05,880

even with people with smart and nice and willing to sort of think long term yeah I've heard



00:44:05,880 --> 00:44:13,080

you come in a lot about that long term focus and avoiding short-term thinking and that has been



00:44:13,080 --> 00:44:20,360

a bit unusual in this past market over the past decade I feel like investors are getting more short



00:44:20,360 --> 00:44:26,520

term in their thinking and that benefits will accrue to having a long-term 



00:44:26,520 --> 00:44:32,600

investing time horizon. What is your investment time horizon? Well if you look at our portfolio's turnover it's just a



00:44:32,600 --> 00:44:39,000

little bit above 10% so if you invert that it implies that we have about a decade horizon which is



00:44:39,000 --> 00:44:45,000

longer than most private equity investing there are a number of investments we've held for a decade so



00:44:45,000 --> 00:44:54,040

it's it's truly long term in nature and I think that's a distinguishing feature of the way we invest and I



00:44:54,840 --> 00:45:00,120

think it it's clarifying for people to know that if they're going to invest they're going to own something



00:45:00,120 --> 00:45:05,400

for the long term and it makes you think twice about the kind of business you want to put money into



00:45:05,400 --> 00:45:11,880

and the price point which you want to do that and and I'm a great believer that there should be



00:45:11,880 --> 00:45:18,280

aggressive reflection but only selective action in portfolio management and I think what I see a lot



00:45:18,280 --> 00:45:25,000

out in the marketplace is aggressive action and selective reflection and so that's the the paradox of the



00:45:25,000 --> 00:45:34,920

investing world and so what are you how does that work in at First Eagle as a portfolio manager are



00:45:34,920 --> 00:45:40,680

you making investment decisions or you sitting down with a committee or talking about different stocks you have



00:45:40,680 --> 00:45:49,320

about a hundred stocks in the portfolio and global universe so probably the MSCI[NM16] equity would be your



00:45:49,320 --> 00:45:56,840

universe yes so if you if you think about First Eagle, one of the secrets of First Eagle is



00:45:56,840 --> 00:46:05,240

there's really a team of teams as opposed to you know being about anyone individual and if you look at



00:46:05,240 --> 00:46:12,200

each of our strategies there tends to be you know two to four portfolio managers sometimes they're a little



00:46:12,200 --> 00:46:17,800

bit more on the strategy and and we don't divide up the portfolios between the portfolio managers



00:46:17,800 --> 00:46:23,800

but what we've done is with intentionality we've we've typically had thought of the job of managing



00:46:23,800 --> 00:46:30,040

portfolios as kind of a partnership exercise where you acknowledge as a portfolio manager that no one



00:46:30,040 --> 00:46:37,400

on the team has them are not fully on the truth and and you know it encourages a very sort of open



00:46:37,400 --> 00:46:43,480

discussion of ideas before we we make them and to be extent that one person on the team is not comfortable



00:46:43,480 --> 00:46:49,000

with an investment we tend to be to that more conservative perspective so it's a high hurdle for an



00:46:49,000 --> 00:46:53,720

idea to come into the portfolios and if we've owned something for five or ten years and one of the



00:46:53,720 --> 00:47:00,280

portfolio managers starts to be wary again we tend to sort of be to that perspective so it tends to be a



00:47:00,280 --> 00:47:07,800

lower hurdle to exit the purpose of having teams of the portfolio managers is to make sure that we're



00:47:07,800 --> 00:47:17,480

allocating capital prudently and to make sure that we're really stewarding a philosophy and an approach



00:47:18,200 --> 00:47:24,440

as opposed to relying on the pressience of any single individual to pick stocks. What are the other aspects



00:47:24,440 --> 00:47:30,280

of your sell discipline? I mean you just commented on it a little bit that if somebody is weary but



00:47:30,280 --> 00:47:38,600

I'll almost find that it's more worrisome if no one has any concerns about any of the



00:47:38,600 --> 00:47:45,160

positions how do you make that sell decision? It's a great question in fact one of the things



00:47:45,160 --> 00:47:50,040

that always provides me with discomfort is when someone says what are your favorite ideas and I say well I



00:47:50,040 --> 00:47:56,920

am just every idea has its imperfections and I think it's important to understand that when you invest



00:47:56,920 --> 00:48:04,440

that every idea has ways that it can go wrong and so just thinking through the ways in which things



00:48:04,440 --> 00:48:12,040

could go wrong is a good place to start. In terms of the sell discipline one of the paradox of our



00:48:12,040 --> 00:48:19,160

business as well and it's often hardest to sell something when it's most expensive because in the revision mirror



00:48:19,160 --> 00:48:25,400

the business is likely performed very well. Revenue is might have exceeded expectations,



00:48:25,400 --> 00:48:30,520

margins might have gone up, management might have done a few smart things and people feel good



00:48:30,520 --> 00:48:36,120

about the business but as an objective check will sometimes stand back and we'll say look at the



00:48:36,120 --> 00:48:43,400

20 year cumulative log returns of a star pool. We'll look at where the enterprise value of that business has



00:48:43,400 --> 00:48:47,720

been relative to revenues over the last couple of decades and if we're really at a high point



00:48:47,720 --> 00:48:55,960

it's a good point to reassess have we lost our valuation margin of safety should be at least shrinking



00:48:55,960 --> 00:49:02,520

this position and then the other kind of difficult thing about selling is that if something hasn't



00:49:02,520 --> 00:49:08,280

worked out usually the market has derated the security so you're in this sort of angst quadrant where



00:49:08,280 --> 00:49:14,600

the business is not as good as you thought it was but the price is lower so what do you do and



00:49:14,600 --> 00:49:20,920

one of the problems in more concentrated portfolios is people tend to sort of double down because they



00:49:20,920 --> 00:49:26,120

have behavioral commitment to their concentrated portfolio it's one of the things we're very conscious



00:49:26,120 --> 00:49:30,600

of not doing it First Eagle is not just reflexively doubling down and it's stopped it's down



00:49:31,880 --> 00:49:37,240

we really like to sort of ask ourselves is there something about the market position that's subject to



00:49:37,240 --> 00:49:42,040

fade at the moment or is there something about management's behavior that's highly likely to



00:49:42,040 --> 00:49:47,800

guide with us? One question I just to follow up on that Matt is how do you determine like let's just say



00:49:47,800 --> 00:49:54,360

3% position from a 1% do they start at the same size or do you have more conviction and some versus others?



00:49:54,360 --> 00:50:02,600

You know it's position sizing is a really important discussion here at First Eagle we you know



00:50:02,600 --> 00:50:07,880

in fact I had a meeting with the other portfolio manager over the last week where we sort of talked about



00:50:07,880 --> 00:50:14,360

Let's continue to think through our philosophy of position sizing and if I could sort of summarize it



00:50:14,360 --> 00:50:22,600

you know it's a combination of the investing arithmetic you know the margin of safety and price but also



00:50:23,080 --> 00:50:30,920

the degree to which we are comfortable that we fully understand the business's prospects



00:50:30,920 --> 00:50:38,120

and so it's not just alpha[NM17] it's it's a certainty equivalent that that matters and so one of the



00:50:38,120 --> 00:50:42,840

 mistakes that investors often make is that they'll have huge ratings and stocks they think



00:50:42,840 --> 00:50:50,920

are a big discount or have large growth prospects but they may not have paid as much attention to



00:50:50,920 --> 00:50:59,720

the stability of the business and and so for for us for a position to be a decent size a tends to need



00:50:59,720 --> 00:51:06,600

both a valuation of safety and a degree of entrenchment that we feel comfortable with or a



00:51:06,600 --> 00:51:13,080

competency that gives us the sense that the business is going to have a clear terminal value in five or



00:51:13,080 --> 00:51:22,040

ten years time that makes a lot of sense yeah well I guess my last question for you would just be



00:51:22,040 --> 00:51:27,400

 what's keeping you up at night right now, what are what should investors be



00:51:27,400 --> 00:51:34,440

most worried about right now I would ask about the opportunities but I think you're going to say that



00:51:34,440 --> 00:51:38,920

international markets present opportunities we've already commented on that a little bit



00:51:40,040 --> 00:51:47,480

what's keeping you up at night Matt? What's keeping me up at night is some of the fiscal and sovereign



00:51:47,480 --> 00:51:53,480

debt issues that it costs you know earlier in the podcast the fact that we're you know we're running



00:51:53,480 --> 00:52:01,240

the sort of deficits we are at the peak of the economic cycle you know worries me because if there's



00:52:01,240 --> 00:52:08,920

not a credible fiscal outlook then that internal affects inflation expectations long term and it



00:52:08,920 --> 00:52:15,400

increases the risk of us entering into a window that's that's more stagnationary in nature and



00:52:15,400 --> 00:52:24,760

the 1970s was not a pretty period for investing and so you know and we've we've there's not a lot of



00:52:24,760 --> 00:52:30,840

political will on either side of the spectrum here to address fiscal challenges and and



00:52:33,400 --> 00:52:41,160

that's the case sometimes markets force the issue and and so that's just one thing that's



00:52:41,160 --> 00:52:50,680

back in my reflections right now you know we try to invest in a way such that those sorts of worries



00:52:50,680 --> 00:52:59,480

don't keep us up at night but at the end of the day you know if the asset that's seen as



00:52:59,480 --> 00:53:08,360

risk free is all of a sudden not seen as risk free that upends a lot of things in markets and and so



00:53:08,360 --> 00:53:14,360

let's hope it doesn't come to pass but you ask me the questions I'm answering on this



00:53:14,360 --> 00:53:22,760

thank you I really appreciate your time today and where can investors who have an interest in



00:53:22,760 --> 00:53:29,320

First Eagle go to learn more about your company your strategies or read your annual letter



00:53:29,320 --> 00:53:37,560

I think it's pretty much all available on the website for the website and you know obviously



00:53:37,560 --> 00:53:43,960

you know if investors are dealing with their own wealth advisors there wealth advisors probably



00:53:43,960 --> 00:53:51,240

have access to a range of different resources as I would relate to First Eagle but you know I will say



00:53:51,240 --> 00:53:56,600

that if I look at the team members of First Eagle one thing that characterised the team members is they'd



00:53:56,600 --> 00:54:02,520

largely bought into our investment philosophy before even joining and and I noticed at about



00:54:02,520 --> 00:54:11,720

our clients too that you know it's always a source source of joy for me in some ways when I get to meet



00:54:11,720 --> 00:54:18,200

with clients and many of whom have been invested with us for decades and they've really sort of



00:54:18,200 --> 00:54:26,520

internalized the mindset and and I think if you if you have that amongst your employees and your customers



00:54:26,520 --> 00:54:32,360

you know hopefully you create a business that has sustainability as well yeah well we've enjoyed being



00:54:32,360 --> 00:54:38,280

at  First Eagle investor and big believer and everything you do and really appreciate the time you've



00:54:38,280 --> 00:54:42,840

spent with us today and I know our listeners will enjoy learning more about your strategy in your



00:54:42,840 --> 00:54:48,120

thoughts on global markets so thank you Matt thank you so much for giving me the opportunity.



00:54:48,120 --> 00:54:54,120

to have the discussion I've enjoyed the two and fro and look forward to seeing you both soon.



00:54:54,120 --> 00:55:02,680

Thank you for listening to investing the Templeton Way please be sure to subscribe on your favorite podcast



00:55:02,680 --> 00:55:10,520

player to view the show notes and resources mentioned in today's show head to 



00:55:10,520 --> 00:55:20,920






The Dow Jones Industrial Average, Dow Jones, or simply the Dow, is a stock market index of 30 prominent companies listed on stock exchanges in the United States. The DJIA is one of the oldest and most commonly followed equity indexes.

Intrinsic value is based on First Eagle’s judgment of what a prudent and rational business buyer would pay in cash for all of the company in normal markets.

Federal Fund Rate: In the United States, the federal funds rate is the interest rate at which depository institutions lend reserve balances to other depository institutions overnight on an uncollateralized basis. Reserve balances are amounts held at the Federal Reserve to maintain depository institutions' reserve requirements.

First Eagle defines “margin of safety” as the difference between a company’s market price and our estimate of its intrinsic value. An investment made with a margin of safety is no guarantee against loss.

A mortgage-backed security is a type of asset-backed security which is secured by a mortgage or collection of mortgages. The mortgages are aggregated and sold to a group of individuals that securitizes, or packages, the loans together into a security that investors can buy.

The Standard and Poor's 500, or simply the S&P 500, is a stock market index tracking the stock performance of 500 of the largest companies listed on stock exchanges in the United States. It is one of the most commonly followed equity indices.

A real estate investment trust (REIT) is a company that owns, and in most cases operates, income-producing real estate. REITs own many types of commercial real estate, including office and apartment buildings, warehouses, hospitals, shopping centers, hotels and commercial forests. Some REITs engage in financing real estate.

MSCI is a global provider of equity, fixed income, real estate indexes, multi-asset portfolio analysis tools, ESG and climate products. It operates the MSCI World, MSCI All Country World Index and MSCI Emerging Markets Indexes among others. 

Alpha is a measure of the active return on an investment, the performance of that investment compared with a suitable market index. 

The opinions expressed are not necessarily those of the firm. These materials are provided for informational purposes only. These opinions are not intended to be a forecast of future events, a guarantee of future results or investment advice. Any statistics contained herein have been obtained from sources believed to be reliable, but the accuracy of this information cannot be guaranteed. The views expressed herein may change at any time subsequent to the date of issue hereof. The information provided is not to be construed as a recommendation to buy, hold or sell, or the solicitation or an offer to buy or sell any fund or security.

Diversification does not guarantee investment returns and does not eliminate the risk of loss.

FEF Distributors, LLC (Member SIPC) distributes certain First Eagle products; it does not provide services to investors. As such, when FEF Distributors, LLC presents a strategy or product to an investor, FEF Distributors, LLC does not determine whether the investment is in the best interests of, or is suitable for, the investor. Investors should exercise their own judgment and/or consult with a financial professional prior to investing in any First Eagle strategy or product.

First Eagle Investments is the brand name for First Eagle Investment Management, LLC and its subsidiary investment advisers. 

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