Christopher Risso-Gill was a director of the Cundill Value Fund for ten years. Christopher is the author of a new book on Peter Cundill, There's Always Something to Do: The Peter Cundill Investment Approach. Christopher lives and works in London.
Can you tell us a little bit about your background?
I was born in Argentina in 1948 and went to school in England. I graduated in Economics from Trinity College Dublin in 1973 and joined the Canadian Investment banking firm of Burns Fry in London as part of their European institutional equities team. I covered French speaking Switzerland, France and Italy as well as some institutions in London. I became a director of Burns Fry International. In !982 I joined Prudential-Bache and ran the London end of their risk arbitrage operation and convertible debt trading. In the early 1990’s I moved into corporate consultancy on my own and from 2003 into the making of corporate television. I began researching for Peter Cundill’s book in April 2009.
There are a lot of great investors, what made you decide to write about Peter Cundill?
I met Peter Cundill in 1978. My wife’s family were the major shareholders in Vancouver’s Yorkshire Trust Company. They also owned a private company in Canada, Norton Investments for which they were wanting to obtain the potential for liquidity without being forced to pay UK capital gains tax immediately. Peter and I structured a deal whereby he issued units in the Cundill Value Fund in exchange for Norton Investments shares and then liquidated the Norton Investments portfolio of equities and real estate, thereby more than doubling the size of his fund. He and I became great friends in the process and have remained so ever since. I joined the Peter’s board, serving on it until the early 90’s.
Two years ago Peter invited me to write his book. He had originally intended to write it himself but when his health began to deteriorate three years ago, he realized that this was not going to be possible. He knew that I had previously written a book about Ernest Hemingway that has sold pretty well. I also wrote a piece about a Cundill board visit to Tokyo which he had liked so much that he circulated it quite widely. I enjoyed the advantage of already having a wealth of knowledge about Peter and his investment principles and was familiar with many of the individual investments of the fund. I also had valuable background knowledge and first-hand experience of the investment business. He didn’t have a lot of explaining to do and this suited him well as his energy levels were dropping.
You emphasize throughout the book how Peter always applied Graham’s principles to his investments, were there any other investors who had a great influence on Peter?
I think that the most influential figure in Peter’s investment thinking whom you have not mentioned was Martin Whitman, the founder of The Third Avenue Value Fund. Peter regarded Marty as being the foremost authority on distressed debt and an inspiring innovator within the value investment framework. Peter was also close to Baron Nathaniel de Rothschild. Nate the Baron, as he called him affectionately, is a through and through deep value man and was influential in Peter’s decision to make some major investments in France. Paribas was the Cundill Value Fund’s largest single holding in the mid 90’s. Alan Kahn, Irving’s son, was also a great friend and sounding board for Peter.
Peter was very close with some famous investors; Prem Watsa, Michael Price, Irving Kahn, and John Templeton. Who was he the closest with?
I think I would have to say John Templeton because it was a relationship that went beyond just investment, touching on spiritual and philosophic matters as well. Templeton wrote Peter a particularly fine letter after his wife died.
People have a lot of trouble finding net nets, since they are so rare nowadays. How was Peter able to find so many net nets and what was his process/method of evaluating liquidation value?
The answer to the first part of your question is that Peter’s view was global which meant that the field of choice was enormous. However, the global perspective required much more hard work than if he had simply focused on economies such as the United States where accounting practises are well regulated and generally reliable. This global principle was one which he inculcated into all his portfolio managers and it still informs the approach of the entire Mackenzie Cundill team. It means quite literally that there is ‘always something to do’.
The process of evaluation invariably started with the balance sheet which Peter and his team would deconstruct and test, as they still do. This was always followed by a ‘sum of the parts’ calculation which meant putting an appraised value, as though for liquidation, on the company’s business and all its assets and then deducting all liabilities. This calculation came to assume far greater importance than Book Value but it is painstaking work.
Peter invested a lot internationally, if he was still young and active where do you think he would be searching for value now?
I suspect he would be looking at Spanish and Portuguese banks and perhaps some of their bigger industrial companies – maybe conglomerates. I know he would also be keeping a very close eye on all the Islamic countries. He always regarded revolution and political chaos as a potential opportunity. In fact he visited Egypt last December and I know that this was not just as a tourist whim. He was planning to return this Spring and he had reached the conclusion in December that Moubarak would not survive long.
Do you think he would be investing in Japan? On the one hand the country has been in a bear market for over 20 years, on the other hand the country is facing a huge demographic problem?
Peter thought about Japan a great deal but he regarded the numbers as intriguing rather than compelling. Not yet at the kind of levels he had seen in the early 1990’s when he had shifted half the fund’s assets into Japan. It was, in his view, not nearly cheap enough to offset the demographic problem of the aging population.
Peter had some very good macro calls; including his predictions of the rise of China and Japan in the late 60s, and the decline of Japan in 1987. Did Peter take macro considerations into his investments?
Peter never deviated from making individual balance sheets his departure point. He had first to be satisfied that the margin of safety was there. How great that margin of safety needed to be would then to some extent depend on his macro view but a decision to invest or not to do so was never based on a macro view although that might have a small influence on timing.
Peter had some interesting investments including debt issued by the Government of Panama. How did these investments conform with Graham’s principles?
Peter’s interventions in defaulted sovereign debt were one of the innovations that he brought to the value investment world. He took the view that although countries do not specifically produce balance sheets, it is still possible to make an informed, numbers based, critical assessment of a country’s eventual ability to make a settlement on its debt and to make a calculated judgement as to what that would amount to in relation to the present cost of purchasing its discounted paper. In the case of Panama the country’s entire outstanding debt was fully covered by its dollar deposits frozen in US banks and there was the canal on top.
Peter helped Fairfax make a lot of money by purchasing CDSs on various bond insurers and mortgage lenders? Can you elaborate? Also did Peter see the subprime crisis coming?
I think it would be wrong to say that Peter helped Fairfax in this. As a substantial and influential shareholder he encouraged Prem at every juncture to initiate and continue with the CDS programme. Peter tried very hard to do this for the Value Fund directly but found it to be impossible for a mutual fund so he increased his position in Fairfax as a proxy.
He did foresee the subprime crisis as did Prem but neither of them foresaw the extraordinary ineptitude of the Bush administration in allowing Lehmann to go under having bailed out the much less important Bear Sterns.
What type of readers do you think would benefit from the book?
It seems clear to me that Peter’s comments about investment and the characteristics which need to be acquired or developed to be successful at it would benefit just about anyone who is engaged in financial markets, or planning to be so – not just value investors. I think it would offer valuable background reading to students in business studies and economics.
Peter recently passed away. As a close friend of his, what do you think Peter would want people to remember him for?
There are approximately 1.5 million shareholders of Cundill investment products most of whom are not wealthy. Peter received letters of thanks from many of these people with accounts of how their investment with him had enabled them to send a child to university, buy the holiday home they’d dreamed of, or simply enjoy a more comfortable retirement. He was a humble man but I do know that he was immensely proud that he had been able to make a difference. This motivated him and I firmly believe that it still motivates the Mackenzie Cundill team and all of those whom Peter so generously mentored over the years and who have gone out to run investment practises of their own.
To purchase the book on Amazon.com click on the following link- There's Always Something to Do: The Peter Cundill Investment Approach
http://www.valuewalk.com/
Disclosure: I receive a small commission if you click on the above link and buy the book (or anything else) from Amazon.com. However, it does not cost you a penny more.
Can you tell us a little bit about your background?
I was born in Argentina in 1948 and went to school in England. I graduated in Economics from Trinity College Dublin in 1973 and joined the Canadian Investment banking firm of Burns Fry in London as part of their European institutional equities team. I covered French speaking Switzerland, France and Italy as well as some institutions in London. I became a director of Burns Fry International. In !982 I joined Prudential-Bache and ran the London end of their risk arbitrage operation and convertible debt trading. In the early 1990’s I moved into corporate consultancy on my own and from 2003 into the making of corporate television. I began researching for Peter Cundill’s book in April 2009.
There are a lot of great investors, what made you decide to write about Peter Cundill?
I met Peter Cundill in 1978. My wife’s family were the major shareholders in Vancouver’s Yorkshire Trust Company. They also owned a private company in Canada, Norton Investments for which they were wanting to obtain the potential for liquidity without being forced to pay UK capital gains tax immediately. Peter and I structured a deal whereby he issued units in the Cundill Value Fund in exchange for Norton Investments shares and then liquidated the Norton Investments portfolio of equities and real estate, thereby more than doubling the size of his fund. He and I became great friends in the process and have remained so ever since. I joined the Peter’s board, serving on it until the early 90’s.
Two years ago Peter invited me to write his book. He had originally intended to write it himself but when his health began to deteriorate three years ago, he realized that this was not going to be possible. He knew that I had previously written a book about Ernest Hemingway that has sold pretty well. I also wrote a piece about a Cundill board visit to Tokyo which he had liked so much that he circulated it quite widely. I enjoyed the advantage of already having a wealth of knowledge about Peter and his investment principles and was familiar with many of the individual investments of the fund. I also had valuable background knowledge and first-hand experience of the investment business. He didn’t have a lot of explaining to do and this suited him well as his energy levels were dropping.
You emphasize throughout the book how Peter always applied Graham’s principles to his investments, were there any other investors who had a great influence on Peter?
I think that the most influential figure in Peter’s investment thinking whom you have not mentioned was Martin Whitman, the founder of The Third Avenue Value Fund. Peter regarded Marty as being the foremost authority on distressed debt and an inspiring innovator within the value investment framework. Peter was also close to Baron Nathaniel de Rothschild. Nate the Baron, as he called him affectionately, is a through and through deep value man and was influential in Peter’s decision to make some major investments in France. Paribas was the Cundill Value Fund’s largest single holding in the mid 90’s. Alan Kahn, Irving’s son, was also a great friend and sounding board for Peter.
Peter was very close with some famous investors; Prem Watsa, Michael Price, Irving Kahn, and John Templeton. Who was he the closest with?
I think I would have to say John Templeton because it was a relationship that went beyond just investment, touching on spiritual and philosophic matters as well. Templeton wrote Peter a particularly fine letter after his wife died.
People have a lot of trouble finding net nets, since they are so rare nowadays. How was Peter able to find so many net nets and what was his process/method of evaluating liquidation value?
The answer to the first part of your question is that Peter’s view was global which meant that the field of choice was enormous. However, the global perspective required much more hard work than if he had simply focused on economies such as the United States where accounting practises are well regulated and generally reliable. This global principle was one which he inculcated into all his portfolio managers and it still informs the approach of the entire Mackenzie Cundill team. It means quite literally that there is ‘always something to do’.
The process of evaluation invariably started with the balance sheet which Peter and his team would deconstruct and test, as they still do. This was always followed by a ‘sum of the parts’ calculation which meant putting an appraised value, as though for liquidation, on the company’s business and all its assets and then deducting all liabilities. This calculation came to assume far greater importance than Book Value but it is painstaking work.
Peter invested a lot internationally, if he was still young and active where do you think he would be searching for value now?
I suspect he would be looking at Spanish and Portuguese banks and perhaps some of their bigger industrial companies – maybe conglomerates. I know he would also be keeping a very close eye on all the Islamic countries. He always regarded revolution and political chaos as a potential opportunity. In fact he visited Egypt last December and I know that this was not just as a tourist whim. He was planning to return this Spring and he had reached the conclusion in December that Moubarak would not survive long.
Do you think he would be investing in Japan? On the one hand the country has been in a bear market for over 20 years, on the other hand the country is facing a huge demographic problem?
Peter thought about Japan a great deal but he regarded the numbers as intriguing rather than compelling. Not yet at the kind of levels he had seen in the early 1990’s when he had shifted half the fund’s assets into Japan. It was, in his view, not nearly cheap enough to offset the demographic problem of the aging population.
Peter had some very good macro calls; including his predictions of the rise of China and Japan in the late 60s, and the decline of Japan in 1987. Did Peter take macro considerations into his investments?
Peter never deviated from making individual balance sheets his departure point. He had first to be satisfied that the margin of safety was there. How great that margin of safety needed to be would then to some extent depend on his macro view but a decision to invest or not to do so was never based on a macro view although that might have a small influence on timing.
Peter had some interesting investments including debt issued by the Government of Panama. How did these investments conform with Graham’s principles?
Peter’s interventions in defaulted sovereign debt were one of the innovations that he brought to the value investment world. He took the view that although countries do not specifically produce balance sheets, it is still possible to make an informed, numbers based, critical assessment of a country’s eventual ability to make a settlement on its debt and to make a calculated judgement as to what that would amount to in relation to the present cost of purchasing its discounted paper. In the case of Panama the country’s entire outstanding debt was fully covered by its dollar deposits frozen in US banks and there was the canal on top.
Peter helped Fairfax make a lot of money by purchasing CDSs on various bond insurers and mortgage lenders? Can you elaborate? Also did Peter see the subprime crisis coming?
I think it would be wrong to say that Peter helped Fairfax in this. As a substantial and influential shareholder he encouraged Prem at every juncture to initiate and continue with the CDS programme. Peter tried very hard to do this for the Value Fund directly but found it to be impossible for a mutual fund so he increased his position in Fairfax as a proxy.
He did foresee the subprime crisis as did Prem but neither of them foresaw the extraordinary ineptitude of the Bush administration in allowing Lehmann to go under having bailed out the much less important Bear Sterns.
What type of readers do you think would benefit from the book?
It seems clear to me that Peter’s comments about investment and the characteristics which need to be acquired or developed to be successful at it would benefit just about anyone who is engaged in financial markets, or planning to be so – not just value investors. I think it would offer valuable background reading to students in business studies and economics.
Peter recently passed away. As a close friend of his, what do you think Peter would want people to remember him for?
There are approximately 1.5 million shareholders of Cundill investment products most of whom are not wealthy. Peter received letters of thanks from many of these people with accounts of how their investment with him had enabled them to send a child to university, buy the holiday home they’d dreamed of, or simply enjoy a more comfortable retirement. He was a humble man but I do know that he was immensely proud that he had been able to make a difference. This motivated him and I firmly believe that it still motivates the Mackenzie Cundill team and all of those whom Peter so generously mentored over the years and who have gone out to run investment practises of their own.
To purchase the book on Amazon.com click on the following link- There's Always Something to Do: The Peter Cundill Investment Approach
http://www.valuewalk.com/
Disclosure: I receive a small commission if you click on the above link and buy the book (or anything else) from Amazon.com. However, it does not cost you a penny more.
