Investor's manual

“If you aren’t willing to own a stock for ten years, don’t even think about owning it for ten minutes”

- Warren Buffett -


Before making any decision about investing in our funds, you might be interested in reading our “Investor’s manual”, and notably the questionnaire you can find in part II of this document. Your answers to the questionnaire should make it easier for you to decide whether the way we manage our funds and report to investors and your own experience and expectations as an investor are consistent with each other. Only then, will you be in a position whether to invest or not to invest in our funds. Because your answers are not supposed to be read by anyone but yourself, please be as candid and honest as you can in expressing them.

This document is the direct result of more than twenty years’ experience dealing with investors. In turn, this experience has helped us form some distinct opinions about investing and how to manage a fund and deal with potential and existing investors. Here are some of our insights:

  • Pastel & Associés would rather have a limited but stable base of assets under management than manage a larger but more volatile pot of money. By choosing this path, the company aims to make it easier to stay true to its long-term and value approach (see “Our investments principles” on our website), and to manage its funds serenely. To further its goal, Pastel & Associés strives to build long-term relationships with investors who are already familiar with the value investing universe and who embrace this philosophy. This is also why the company is neither looking to actively enroll new investors through conventional sales techniques based on arguments that can only be biased, nor to incite current holders to maintain or increase their holdings of our funds’ shares. It is the investor’s sole responsibility, or his adviser’s, to decide, with no interference from us, whether or not to subscribe to the funds managed by Pastel & Associés.

  • When investing into a fund, some investors tend to trade into and out of their position. Such a behavior could severely disrupt the management of a fund and divert its managers from their task. Other investors tend to put themselves in the managers’ shoes and base their decision to subscribe or redeem their shares upon a fund’s make-up at a given moment, rather than upon lasting features such as the methodology being applied by the managers and the trust they can have in them. Such a behavior is most often counterproductive and often leads such investors to take wrong turns at inopportune times. Pastel & Associés strives, through all the tools available to it, including through the nature of its communication, to deter those two types of investors to enter its funds.

  • By trying to optimize the timing of their investment operations rather than subscribing gradually and staying invested as long as possible, a lot of investors don’t benefit fully from the performance of the funds they are invested in. To quote a well-known saying by Warren Buffett, which applies to equities as well as to funds: “the stock market is a wonderfully efficient mechanism for transferring wealth from the impatient to the patient”.

  • Pastel & Associés favors focusing its resources, including its managers’ workload, on managing its funds, doing financial analysis and going on study trips over interacting too often with its investors, be it during meetings or through sending documents. By so doing, the pace at which we communicate with our investors is better aligned with the timeframe of our own investing of the funds ‘assets.

  • Because many fund managers have the tendency to publicly discuss at length, if not promote, some of their funds’ positions, they, then, find it difficult to dispose of them when the time has come. To reduce the negative impact of this behavioral bias on performance, we try to avoid as much as possible to discuss the specifics behind our decision to invest in a given stock. For the same reason, Pastel & Associés’ communication regarding the make-up of our funds’ portfolios as well as their evolution is strictly descriptive and is not meant to convince or reassure.

Questions for the investor:

The following questions and the answers you will give them are meaningful only to the extent that on one hand the managers at Pastel & Associés stay true to their investment philosophy, as described in “Our investments principles”, and on the other hand the fund’s management company, namely Pastel & Associés, doesn’t go through a major change that could threaten its durability or its loyalty to the said philosophy.

  • Do I embrace the value investment approach at the heart of Pastel & Associés’ philosophy? While I may not have read and processed the writings of Benjamin Graham, Warren Buffett or John Templeton, did I take time to go through Pastel & Associes’ investment principles as they appear on their website (see “Our investments principles” on www.pastel.fr)? Did I fully agree with these principles?

  • Will I be patient enough to hold onto my investment in the funds managed by Pastel & Associés for at least five years before considering redeeming my holdings partially or fully? Did I make sure that I won’t be needing for other purposes, before the end of this five-year minimum holding period the capital I intend to invest in the funds managed by Pastel & Associés?

  • Will I be able to withstand potentially long periods of temporary but possibly significant paper losses, regarding my investment in the funds managed by Pastel & Associés, without losing confidence and/or without trading out of my position under the influence of overwhelming stress? Will I be able to watch my stock holding decline potentially by 50% without becoming panic-stricken? Especially if, meanwhile, other funds or other types of assets were to exhibit significant outperformance?

  • Do I fully understand that Pastel & Associés reports on its funds on a quarterly basis only, even if their net asset value can be calculated more frequently? Will I be able to stay confident while, between two quarterly reports, my only source of information on the funds will be their net asset values which, just like equity prices, might vary erratically?

  • Will the information provided by Pastel & Associés fulfill my expectations knowing that no quantitative data such as Sharpe ratio, maximum drawdown, beta or volatility will figure in the funds’ management reports, nor will they be mentioned or discussed by the portfolio managers?

  • Will I be able to keep both my holdings and my confidence intact when the funds managed by Pastel & Associés might see their portfolio make-up significantly diverge from what my own expectations or preferences would favor, be it in regard to a stock, a sector or a geographical location?

  • Have I properly read the funds’ KIIDs and prospectuses before contemplating buying their shares?

Investor's manual