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Holon Global Investments - Active Fund Manager

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Holon Global Investments - Active Fund Manager
Holon Global Investments - Active Fund Manager

Insights

One on one with Heath Behncke

Published 09 Feb 2022

David Fedirchuk : Heath, thank you fitting us in during this very busy time. With everyone back at work for 2022, I wanted to pass on some of the more common questions we get asked through our online channels and in person. Is there a typical Holon customer? Is that even possible to describe?

Heath Behncke: The typical investor for us is long-term in focus – and I think this is the key thing, as, we’ll continue to be in a highly volatile world. I think the important thing is keeping business development timeframes in focus. Things don’t revolve around in a calendar year. They don’t revolve around a quarter. It takes fundamentally, years to build very, very good businesses. And so I think the main thing is to be focused on that. That longer term picture is very important. And that’s the key for me, as always with good investing, is to really put aside the emotional or the near-term stuff and really focus on the medium to longer term. And that’s the challenge, of course, particularly for investors who are not so close to things. It’s just having the patience and the persistence there and really thinking on the lines of how business owners think and not thinking about wiggly, ugly share prices is the view we hold.

David Fedirchuk: It feels like it’s impossible to talk about who a typical investor is anymore, especially today, it feels wide open, like there’s so many people that maybe didn’t used to think of themselves as investors.

Heath Behncke: Yes. We tend to attract people who really are quite, you know, engaged with where things are going. If you look at our portfolio, it’s kind of representative of people’s daily lives in that way. That’s the thing I like to reinforce, and the way we’re structured, our process. We have an awareness of what’s happening, as near term you need to. But it’s really making sure we’re very focused and committed to that medium to long term outcome.

David Fedirchuk: For people that are new to investing, and all the volatility that’s happening right now, I wanted to ask about how you feel about risk and how the best and most successful investors approach risk.

Heath Behncke: So you know, defining risk is always the hardest thing. And, you know, really risk is relative to your aim, your objective. That’s the way I think about it. As an example, a nominal return of like 10 percent per annum for the fund as an illustration, and what I think is achievable. And this is in a world, you know, that is going to struggle to return much at all. But we’re focused on where businesses are very, very unique. Competitive advantage is very global, very scalable. So we think that can be achievable, but we’re always cognizant. I’d rather take a more certain return than a higher, riskier return, and if you think about the way our portfolio is constructed, we have those Mega Cap companies very much in that mould. I would argue that they are actually low risk, high return, which is kind of goes against the grain of what you’re taught in economics and finance at university. But what you realize is that when you look at the global networks and the economics associated with those global networks, you can see why they’ve been so successful in terms of the growth and the cash flow generation and where their balance sheets are today.

You know, if you go back to 2008, and the global financial crisis, you realize the fact that through those periods, you really do find out what’s risky and what’s not. So that’s what our portfolio is really positioned for, to respond to those types of events. And in those sort of situations, you’ll find the Mega Caps will shine, just fall by less.

Sometimes it’s a bit hard for people to understand that, like with Tesla, when we look at the rate, when you’re compounding earnings at 50% per annum, at that kind of level, it really adds up and very quickly. And then suddenly one day, hang on the company is like four or five times the size it is today. How did that happen? People can’t comprehend the exponential growth pattern that actually happens.

But keep in mind, across our portfolio, there’s no debt in the companies. So they’re all cashed. And that’s the difference between the way old world companies and a lot of the highly innovative ones. You know, Apple’s got cash. Microsoft too. Google’s got one hundred and forty billion in cash, Amazon, truckload of cash, Alibaba, truckload of cash.

David Fedirchuk: You and I have talked a lot about the great digital transformation happening today, people are hearing about Web 3.0, but they’re unsure. Can we put any sort of analogy to the transformation that’s happening now? Or is it just too unprecedented?

Heath Behncke: A lot of people today when you ask them about Web 2.0 and they use all these great applications through their phone, but they don’t really know how it’s all driven. And a lot of its driven by compute and cloud storage. Web 3.0 is similar, but there will be a set of infrastructures that allow you to be vastly more self-sovereign in your data. So that’s really what started with the bitcoin conversation, where suddenly you can actually move money globally, where everybody’s got complete transparency. You know, it’s a very, very significant event because, I can’t get on today, log in, and download the number of Aussie dollars that we’ve got circulating in the system. I can’t verify that. You can’t do it. The Prime Minister can’t do it. He’s going to get told by some department that probably doesn’t even know, right? But now suddenly, I can download the Bitcoin blockchain. Look at it all and I can, we can account for everything. Wow. So that transparency, the way we can share information changes. So just think about that. That’s a huge shift that you and I can be again vastly more informed and how things actually operate.

Like the big companies, we all know they’re monopolist, they’re grabbing our data and they’re actually using that, you know, probably to manipulate my behaviour to go out and profit from it. So they’re using that data, for monopolistic purposes. But when you start to go to Web 3.0, hang on, so we can move to data custody away from data capture. And the data custody conversation is, guess what? We’re actually treating that as your asset, not the asset of the big guys. And then you can start to really change things. So that’s very exciting in the Filecoin, NFT and metaverse conversation and really people are starting to realize, alright, so where can I safely store this digital asset in such a way that I have strong guarantees about what that asset is and how it’s being stored, and I can always have access to it.

And that’s very, very powerful, and that’s really the shift in having digital property rights defined and that’s really what bitcoin solved. We’re excited to re-architect that relationship so we can take back our sovereignty.

David Fedirchuk: Back to Holon and the year ahead. What are you launching in 2022?

Heath Behncke: Yeah. So look, we we’re very excited. We’re getting closer to getting the licensing so that we can launch the Holon Bitcoin Fund and the Holon Ethereum Fund. I think it’s a great time to be launching, you know, we want to be buying lower than higher in investing. We’re also looking at reopening up the wholesale Filecoin Fund as well. So that’s another discussion to give people access. The other thing that’s very important is that we’re going to be very pointy on price. These are single digital asset funds. They’re not active. They should be priced accordingly. I’m very cognizant of that for investors in the Holon Photon Fund as well, so our pricing is going to be right at the pointy end of things around that we think that makes sense from what we’ve seen offshore. Like what Canada are doing, we’re following the Canadian model and it’s a sensible approach. You know, the US has only approved a futures ETF, but you know that really benefits the big end of town because they’re taking a lot of fees on those using futures and Ethereum. We don’t think that’s the right way.

David Fedirchuk: Last question, what is one of your favourite pieces of investing advice you ever got?

Heath Behncke: My favourite piece of investing advice is to really put aside the market and just listen to what people are saying. A lot of the best investments have come through sort of those referrals of people saying, you know, that service is just fantastic, that product is great, etcetera. And that tells you a lot about it, even before you go to research it, because a lot of problems, if you come at it from a like a typical spreadsheet jockey, you don’t get it right. What is the value proposition here? What’s driving it? You know, I always say to everybody, if you’ve got a good idea to come and talk to me about it, you know, or if you’ve used a business that’s really good, let us know about it. A lot of my investments have been found that way very organically through that process. So that’s the other thing. We’re different in that way. I’m not trying to be a spreadsheet jockey screening that stuff. No, no, no. We don’t do it that way. We do it in a very organic way.

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