perform global benchmarks and their peer
group by a significant margin, Babineau
said.
“We’ve been able to do it without taking
much risk,” he explained. “We don’t be-
lieve greater returns require greater risk
and to some extent that is because we de-
fine risk differently than the market does.”
BUILDING IN A MARGIN
OF SAFETY
Much of the industry defines risk as volatil-
ity, which doesn’t take into consideration
the underlying value of the investment.
How much a particular stock price fluctu-
ates on any given day is less relevant than
the changes in underlying fundamentals of
the company, Babineau said. IBV instead
defines risk as the probability of a perma-
nent loss in capital. They also build in a
margin of safety by only investing when a
security is trading significantly lower than
what they believe is its true value. This mit-
igates risk on the downside and increases
profits on the upswing. “That’s why we’re
able to earn excellent returns without tak-
ing significant risk.”
Managing a fund takes more than a little
patience and discipline, and Babineau’s
unique background prepared him for navi-
gating the markets over the last five years.
While working in the real estate industry
through the heart of the 2008 financial cri-
sis, Babineau saw first-hand the impact
the crisis had on firms that were overlev-
eraged. This experience stayed with him
over the years and has helped shape his
conservative investment approach.
Before Babineau’s career in finance and in-
vesting was underway, he worked as a pro-
fessional umpire in the Gulf Coast League.
“A lot of the discipline in being a profes-
sional umpire applies to what I do today.
“We do a substantial amount of research in each individual position we take which
gives us the comfort to only hold 10 to 20 investments. It’s a concentrated portfolio
that allows us to know each individual company very intimately and it’s proven to
work very, very well.”
NOVEMBER 2015
H
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