Paul Faulkner interviews Tom Coutts.
PF: So Nestlé has decided that now is the time to jump into the Chinese market?
TC: No, not at all. Nestlé has been in China since 1908, it’s been in Malaysia since 1912, in Brazil since 1921. So it has been committed to these markets for a very long time and that’s allowed it to build up this strong brand position. And that’s a situation we see replicated across our portfolio of holdings, companies that from a very early stage in their history have invested overseas and have now built up strong positions in tomorrows growth markets. And that makes us very excited about their growth prospects.
PF: So what you are saying is you get round the lacklustre economic prospects in Europe by investing in companies that are exposed to global growth opportunities?
TC: That’s true to some extent but as I said some of the companies can have growth opportunities within Europe as well. On the whole it is more the case that the best growth opportunities will be outside Europe. But if you look at a business like Handelsbanken, which is a Swedish bank, it is entirely focussed on northern Europe.
Those aren’t necessarily fast growing economies but yet the business has been able to grow very quickly. So here in the UK Handelsbanken has gone from having 50 branches five years ago to having 150 now. It’s expanded very rapidly at a time which has been pretty tough for banks generally and for British banks in particular. So if you have a strong business model and management who take a long-term view we think companies really can take advantage of tough economic times to out-compete their peers and that’s something that very much interests us.
PF: So you have mentioned a long-term view there. Is that important?
TC: It’s critical, yes. When we are investing our clients money we’re typically taking a five or ten year view and we want to be sure that the managers of the companies in which we invest are also taking a long-term perspective. So that alignment of interests is absolutely vital to us.
PF: So, do you end up investing a lot of family owned or family run businesses as a result?
TC: Yes, we can do. It doesn’t have to be a family owned business but a lot of the companies we invest in will have a long-term shareholder, whether it is a family or an institution or a foundation, that sort of thing. And again these are people who then do think about the business over multi-generational periods. They are interested in handing it over to the next generation in better shape than they found it in themselves and we think that is pretty powerful.
Jacob Wallenberg who is the fifth generation of the Wallenberg family, they control Investor and Atlas Copco, two of our bigger holdings, he said recently ‘we take a very long-term view and when I say long-term I mean 50 years or more’. That’s exactly the sort of thing we like to hear and more importantly we like to see put into action as well.
This interview continues...
