First Eagle: “Passive Investing Could Prove to be an Expensive Mistake”

First Eagle’s Global Fund (SGENX) is its flagship fund, with over $55 billion in assets. Its mission is to seek long-term growth of capital by investing in a range of asset classes from markets in the United States and around the world.



As of April 30, 2018, since inception (1/1/79), the Fund has returned 13.15% annually, versus 9.67% for the MSCI World Index. Over the last 15 years, it has been in the top 2% of its peer group, as well as in the top 4% for 10 years and the top 10% for 5 years, based on Morningstar data. It was the winner of the Lipper Best Flexible Portfolio Fund Award for 2015. It is rated 5-stars by Morningstar. Its managers are Matthew B. McLennan and Kimball Brooker, Jr.

I spoke with Matt and Kimball on May 1.

The First Eagle Global Fund is described as a go-anywhere, multi-asset fund. Tell me more about its flexibility and the key tenets of your investment philosophy.

Kimball: Our investment philosophy centers on the notion that the protection of wealth is the most important ingredient to the long-term creation of wealth. We are bottom-up investors, so we underwrite each investment on its own with the primary objective of avoiding permanent impairment of capital.

We focus on two criteria when we select investments for the Fund.

The first is price. When we think about investing in a security, we are always looking to do so at a discount from what we estimate the business’s intrinsic value to be. That is a very important part of what we consider to be risk management, because we realize that bad things can happen to companies or the economy, or we can make analytical errors. We always want to have a buffer between what we pay for a security and what we think it is worth.

The second criterion is the persistency of the business – the durability of a company. We review things like its market position, its balance sheet and the quality of its management to satisfy ourselves that, if and when trouble comes, the business is likely durable enough to survive and hopefully thrive.