Murray argues that fund managers “obsessed” with managing their money against a benchmark are risking a volatile combination of over and underperformance once fees and human error are subtracted from annual returns.
He believes that investing in companies with naturally high yields provides a solution to this, as such products tend to outperform markets over time.
Castlestone adopts this approach to investment, and adds premium income in order to achieve yields of between four and six percent.
However, Murray says it is important to choose a holding which has the potential to be scaled up to the size needed by asset management companies.
He uses the example of Sydney Airport, which he describes as a “semi-monopolistic” stock because there are few other ways to get to Sydney. It is therefore driven by people coming in and out of the airport, buying things whilst at the airport, and a five percent dividend yield on stocks.
As a result, Murray says he is not worried how the airport performs on the stock market, as he is more concerned with the high probability of a steady source of income.
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