Home Value Investing A Fund Manager Who Refunds Fees? Meet Francis Chou

A Fund Manager Who Refunds Fees? Meet Francis Chou

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I recently met legendary value investor Francis Chou at his office in North York and my trip to get there was an interesting one.

He works at a great distance from the financial centre of Toronto in a neighborhood that’s in transition.

To get to his office, I passed by modest brick bungalows on one side of the street that housed a smattering of small businesses, including a solicitor, a spa and a psychic.

Francis Chou is on the other side of the street and works in one of several mid-sized office towers that are in need of a few more tenants.

His choice of office space is indicative of his thrifty nature, which doesn’t stop at real estate. He runs a lean business and manages the better part of $1-billion in assets with a staff of two – including himself.

Francis Chou’s ability to spot a bargain helped him achieve a stellar long-term record in the stock market. His flagship Chou Associates fund was founded way back in the summer of 1981 as an investment club. After a few years, it became a regular mutual fund and by the end of 2013, it sported average annual returns of 13 per cent. That’s 2.1 percentage points more that the S&P 500 (INDEXSP:.INX), which gained 10.9 per cent per year over the same period including reinvested dividends.

Francis Chou did it via the steady application of value investing principles that would have made Benjamin Graham proud. Even more remarkably, those returns were had without the use of leverage. On the contrary, he often holds large amounts of cash in his funds. For instance, the Associates fund had roughly 33 per cent of its assets in cash in mid-March. The outsized returns came despite the large cash holdings.

Francis Chou climb to the top required a passion for investing and more than a little ambition. He first arrived in Canada as a young man and, inspired by rags to riches stories, forged his own path in a business that wasn’t particularly kind to immigrants.

See full article via The Globe And Mail

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