Kennox’s Core Principles

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Kennox Asset Management is an independent company with the directors owning 97% of the shares.  This independence is important to us as it allows us to focus on what is important to build an excellent investment company.  There are three core principles that will ensure success for the long term for Kennox and our clients:  a strong culture aligned to our investment style; clients who clearly understand what we do; and time.

Kennox Asset Management was established with the goal of providing the best possible environment for our investment style.  These have not and will not change.

It is imperative for the culture to have a team with absolute belief in the style. First and foremost, we need to know exactly what we are looking for.  We have developed the process over the years to identify these opportunities in the most efficient way possible, which allows a small team to be very effective.  This is vitally important, as this philosophy is best practiced by a small team. For this style, having tight communication lines between the individuals more than offsets any benefit of having a bigger team–a large team exponentially increases the complexity of communication.  A large team also exacerbates problems caused by egos, with lots of individualists trying to prove themselves by having their ideas in the Fund.  This creates conflict and noise, and not necessarily great investments.  We will remain focussed on running money and not on running people.

Kennox understands that the best chance of success for the Fund is to have a loyal, knowledgeable and stable client base.  This has the dual benefit of creating an excellent business and of providing well-informed and interested parties to engage and challenge us on our investment decisions and process.

We will keep clients by providing excellent investment performance, which we take to mean attractive absolute returns in the long term with lower volatility with smaller drawdowns than the market.  Alongside this, we will invest time in regularly meeting with clients so that they can fully appreciate what we are attempting to achieve.  It is only by spending time with all our clients that we can build the understanding and trust on which this business is built.  Kennox Asset Management will ensure that this client focus stays at the core of our culture.

The last key ingredient for success is time.  A reading of history and our experience as a team and as individuals all show that the stock market continually presents investment ideas for a style like ours.  However, opportunities such as those we seek do not appear every day and in obvious places.  We need time to be patient and wait for the right opportunities.  In the longer term, we are convinced our style will continue to provide good absolute returns with limited drawdowns.  In the short term, we see little more of the future than anyone else.  We will achieve our goals by sticking to our style and being patient.

These principles drive our strategic business decisions.  For instance, take new products. Kennox has no intention of launching new products.  The investment style as we practice it is the best way we believe we can run money.  To do anything else would be to dilute our beliefs and our style.  We will not launch new products.

Another example is capacity.  We are confident that, if we stick to our chosen investment style with loyal clients and over time, the Fund can grow in size without affecting performance.  However, we will close the Fund if we ever feel that size is hindering investment performance.  This is best for the culture of Kennox and our clients.

It is by constantly focusing on these three principles that Kennox will achieve long term performance for our clients, and build a successful and sustainable business.  It is in this way, with these strong foundations, that the Fund and Kennox will continue to grow.

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