After a rewarding career at AFIC spanning more than 30 years - including the last 8 years as Managing Director and CEO - the time has come for me to step back. Before I do, I wanted to take a moment to write to you directly.
To the investors who have placed your trust in AFIC over the years: thank you. It has been one of the great privileges of my career to help steward this portfolio on your behalf, and I leave with enormous pride in what this team has built.
With our incoming CEO, Alison Gibson, commencing on 13 July, it feels like the right moment to reflect on the investment philosophy that has defined AFIC, and to share why I believe it will continue to serve you well long into the future.
Patient investing: Focusing on quality companies
When people ask me what makes AFIC different, my answer has always been the same: we take a genuinely long-term view. We are not in the business of trying to punt share prices or chase short-term momentum. From the beginning, our focus has been on identifying quality companies: businesses with sustainable models and the genuine ability to grow profits over time. As active managers, we monitor our holdings closely and then accumulate them when we see value.
That might sound simple, but it requires real discipline. Markets move up and down, sentiment shifts, and there is always pressure to react. What we have tried to do is stick to our investment framework: hunt for value among quality stocks, back companies that can grow their earnings, and stay close to the businesses and the people running them.
The reason that matters so much comes back to a fundamental truth about investing. In the long run, share prices follow profits – as do franked dividends. For AFIC investors, that dividend income is a meaningful part of your total return, and it is something we have always taken seriously. Understanding the value of fully franked dividends has been central to how we think about portfolio construction.
We have also never been afraid to retest our thesis. Holding for the long term does not mean holding forever. If the outlook for a company changes, we will act. But if the long-term case remains intact, our strong preference is to stay invested, stay patient, and let the compounding do its work.
Managing through cycles — the role of diversification
One of the questions I get asked most often is how we think about market volatility. My honest answer is that diversification is our most important tool.
The future is always uncertain. The world moves quickly, and even the most careful analysis cannot predict every disruption or shift. What diversification gives us is the ability to stay invested through different market environments without painting ourselves into a corner by taking too concentrated a view on any one stock or sector.
Our resources holdings are a good illustration of this thinking. The mining and energy sectors are both cyclical parts of the market but within that space, we have focused on companies with low-cost, long-life assets: BHP, Rio Tinto and Woodside. These are businesses that, even when commodity prices soften, tend to continue generating profits and dividends. They fit our framework, and they have proven to be strong long-term holdings.
Beyond resources, that same diversification lens applies across the entire portfolio. We want exposure to companies and sectors that can perform across different conditions, so that no single outcome - however unexpected - defines the result for our investors.
Looking ahead
AFIC is in excellent hands. Our new CEO brings fresh energy and deep capability to the role, and the investment philosophy that has guided this fund will remain firmly intact. The discipline, the long-term view, the focus on quality and value — these are not mine alone. They belong to the whole team, and they will continue to shape every decision made on your behalf.
To our shareholders, I’d like to thank you for your continued support of AFIC and our investment philosophy. Over the course of my career, I’ve had the opportunity to engage directly with many AFIC investors, which is a part of my job I’ve thoroughly enjoyed. It’s my sincere hope that AFIC shares continue to contribute to value creation as part of your investment portfolio.