Staley Cates: Southeastern’s Advantage as a Value Investor

David Swensen, the manager of Yale’s endowment who passed away on May 5, 2021, wrote the following in his 2005 book, Unconventional Success:

Southeastern Asset Management (sponsor of the Longleaf Partners mutual-fund family) exemplifies every fundamentally important, investor-friendly characteristic conducive to active-management success. Portfolio managers exhibit the courage to hold concentrated portfolios, to commit substantial funds side by side with shareholders, to limit assets under management, to show sensitivity to tax consequence, to set fees at reasonable levels, and to shut down funds in the face of diminished investment opportunity.

Southeastern Asset Management is a Memphis-based, employee-owned global investment management firm founded in 1975 by O. Mason Hawkins. It is the investment advisor to the Longleaf Partners Funds. Longleaf’s flagship fund, Longleaf Partners Fund (LLPFX), was launched in 1987. It was followed by Longleaf Partners Small-Cap Fund (LLSCX) in 1989, Longleaf Partners International Fund (LLINX) in 1998 and Longleaf Partners Global Fund (LLGLX) in 2012.

Here is a link to the interview I did with Staley in 2015, when described Southeastern’s approach to value investing and the criteria it looks for in a potential investment. Here is a link to an interview I did last year with Staley and his partner, Ross Glotzbach, about Southeastern’s small-cap fund.

I spoke with Staley Cates, the vice chairman of Southeastern, on May 18, 2021. To listen to this interview as a podcast, go here.

Did you know David Swensen? If so, what influence did he have on the way you invest?

I did know him and he very much changed our business life. But he did not affect how we invest.

Let me put some context around that quote. When he wrote that in 2005, we had a great track record, but Mason and I were still Gomer and Huckleberry from Memphis, and nobody really cared. I think that gave us credibility that was unbelievable, and it helped us grow and prosper. There is a reason that we wouldn't take that snippet and put it on our website, even though we're not allowed to do so. The context of why he wrote that in the book was he could not stand active management in the mutual fund industry. That was not a straight-up plug for us.