13 Questions for Oakley Capital Investments’ Steven Tredget

In this series, we ask leading fund managers about everything from their investment strategy, to role models, their views on crypto, and what they’d never invest in

Marina Gerner 5 December, 2022 | 10:46AM
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In this series of short profiles, we ask leading fund managers to defend their investment strategies, reveal their views on cryptocurrency, and tell us what they'd never buy.

This week our interviewee is Steven Tredget, manager of the Morningstar 5-star rated Oakley Capital Investments trust (OCI).

Which Sector Shows the Biggest Promise in 2022?

We look at sectors that stand to benefit from the long-term structural changes shaping economies across Europe. Despite the recent sell-off, we think there’s still plenty of opportunity to invest behind the digital disruption curve. We believe low penetration rates particularly across Southern Europe and in sectors such as e-commerce, price comparison websites, cloud computing and enterprise resource planning, still offer significant scope for growth. 

What's the Biggest Economic Risk Today?

There’s a multitude of things to keep investors up at night – inflation, rising rates, geopolitical uncertainty, supply chain disruption and rising energy costs. Our companies tend to have sticky, recuring revenues, asset light business models and low gearing, making them more resilient to these kind of macro shocks. 

Describe Your Investment Strategy

Oakley Capital Investments is a listed investment company that allows retail investors to access the funds managed by private equity firm Oakley Capital – which generates returns through acquiring controlling stakes in medium-sized, high growth companies in Europe.

Oakley Capital sets itself apart in the way that it originates deals. We build very close relationships with the businesses and entrepreneurs we work with, many of whom we have backed multiple times. We’re also fairly unique amongst our peers as c.80% of the time, we are the first institutional investor to back the companies we invest in, providing more opportunities to unlock and create value. We deliver this by applying proven value creation strategies, such as M&A or digitisation, that help deliver annual earnings growth across the portfolio of around 20%. 

Which Famous Investor Do You Admire?

As a young grad, I was first tutored by Terry Smith (founder of Fundsmith), who made me read every published Berkshire Hathaway chairman’s letter. It’s hard not admire Warren Buffett’s success, but the clarity, consistency and simple articulation of his investment process is unrivalled. 

Name Your Favourite "Forever Stock"

The only stock I own, including in my pension and ISAs is OCI. The combination of the quality of the companies, many unrepresented on the stock market and the long-term irreversible trends we invest behind make it an unrivalled investment trust. Long term compounding average annual NAV growth of 23% speaks for itself.

What Would You Never Invest In? 

We focus on investing in technology, education and consumer businesses, making our investment universe relatively narrow. We do not invest in sectors such as tobacco or weapons that are not aligned with the moral compass of Oakley, and which fall outside our ESG policy.

Growth or Value?

We pursue both at Oakley Capital. The average EBITDA growth of the portfolio companies in the last 12 months was c.20%, whilst our origination strategy unearths hidden gems at attractive entry points. 

House or Pension?

Pension. They usually offer diversification across a range of markets, whilst a house only offers exposure to one

Crypto: Brilliant or Bad?

I’d say it’s not so much crypto that excites me as the potential of the underlying technology- blockchain. Blockchain and web 3.0 have the potential to transform financial services to the benefit of consumers and companies alike, increasing accessibility, lowering costs and removing frictions.

What Can be Done to Improve Diversity in Finance?

We know that the industry has a lot of work to do when it comes to diversity. At Oakley, we’re committed to removing the long-standing barriers that hold certain groups back. We do this because it is the right thing to do, but also because we fundamentally believe that diverse teams make better investment decisions and generate better outcomes for all our stakeholders. But we know we’ve got a long way to go, and that to drive lasting change requires cross-industry cooperation, including through initiatives like Level 20.   

Have you Ever Engaged with a Company and Been Particularly Proud (or Disappointed) in the Outcome?

Our central proposition to business founders in Oakley’s network and our investors is that our engagement with investee companies will help create value regardless of the trading environment.

One such recent example is Alessi, the Italian designer homewares group, whose family founders entrusted us with being the company’s first external backers in its 100-year history. Within two years of ownership, we introduced new senior leadership, focused the product offering, digitalised their retail offering with a transformed web presence and helped them achieved B-Corp status. Sales have increased 50%. 

What’s the Best Advice You’ve Ever Been given?

In 2005, during his famous commencement speech at Stanford University, Steve Jobs quoted the farewell message placed on the back cover of the 1974 edition of the Whole Earth Catalog: "Stay hungry. Stay foolish.” I have since thought this was good advice to live by. Never let go of your appetite to pursue new ideas and new experiences and avoid being trapped by dogma, the results of other people’s thinking.

This is the mindset, the entrepreneur’s mindset, that I was fortunate enough to find at Oakley. Some of the fund’s best investments may have been considered foolish in the first instance, a small group of schools in Africa or a software designer in Siberia. The former grew to become the world’s third largest schools’ group and the latter was the foundation of WebPros, which today supports 80 million websites worldwide.

What Would You be if You Weren’t a Fund Manager?

I have tried and failed at many things. The one I most enjoyed was writing a children’s book, with a lifelong friend, about a travelling fish. Narration is still very much at the heart of my role today and I always thought it would be rewarding to tell stories that can help shape the hearts and minds of a new generation, or at least help send them to sleep.

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The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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About Author

Marina Gerner  is a freelance journalist

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