investment philosophy

At the Alfred I. duPont Testamentary Trust, we …

…drive to be a best-in-class investment organization capable of consistently generating superior risk-adjusted returns in support of The Nemours Foundation.

We use an endowment style investment approach to positively impact our ultimate beneficiary, one of the largest integrated pediatric health systems in the United States. We seek opportunities to create lasting partnerships with like-minded investment managers to drive return and create value for Nemours. The cornerstone of our approach rests in a consistent investment philosophy and our ability to persistently apply it, even under the most challenging market conditions.

…focus on obtaining excellent long-term returns and preserving capital.

Our core competency is our research process, which combines independent thought and thorough analysis. We seek to take appropriate amounts of risk while not subjecting the Trust to undue levels of permanent capital loss. This is crucial because loss of capital results in less funding to our beneficiary. Additionally, we do not receive gift inflows like similar institutions, so we must ensure the current capital lasts perpetually while outpacing inflation. This does not mean we are risk averse, rather we look to design portfolios that can achieve absolute real returns over a full market cycle.

…are value investors.

Our investment approach is most commonly associated with classic value investing. We look for opportunities across the globe where markets price opportunities below their intrinsic value or where liquidity is in short supply relative to opportunity. We believe that value realization can come from manager skill or the mean reversion of a market dislocation. Our long-term horizon gives us and our partners the opportunity to create value in a disciplined manner that spans decades. Being a value investor does not preclude us from investing in high growth businesses. In fact, a significant portion of the portfolio is allocated to high growth opportunities in the Venture Capital space. Our value bias requires us to find high growth opportunities where there is an attractive risk-reward scenario and/or where our partners can add significant value to the underlying investments.

…believe people are just as important as numbers.

In an industry focused on quantitative insights, we strive to put equal focus on the qualitative. We partner with great firms that, through skill and craftsmanship, create value that would not otherwise exist. We realize and appreciate that there is no cookie cutter mold for what makes a superior manager. That being said, we are attracted to firms with small decision making teams, strong financial alignment with their investors, sustainable competitive advantages, and a lasting business model capable of delivering repeatable results. Our approach strives to significantly outperform over longer time horizons, and we accept that it does not lend itself to performing in the top decile in any single year.

…focus on microanalysis instead of macro forecasting.

Correctly forecasting macroeconomic events is tough. In fact, we do not know anyone who can do it consistently. From the thousands of microeconomic situations in the world, we choose those in which our analysis can make a difference. We understand that at times the macroeconomic environment will take control, and we remain patient in these times. As long as we are right on the micro events, we are fine with disciplined inactivity in times of macroeconomic uncertainty.

…concentrate the portfolio in our best ideas and like managers that do the same.

While diversification is a key tenet of portfolio management, over diversification destroys alpha generating opportunities. We focus on allocating capital to our best ideas while considering the overall portfolio’s diversification. We believe concentration is important for the overall portfolio and for our individual managers’ portfolios. We look for managers with strong fundamental views and confidence in running a more concentrated portfolio.

…have a long term perspective.

The Trust has the longest possible time horizon – perpetuity. The corpus of the Trust is expected to last forever, allowing us to invest our capital in our best ideas, regardless of time horizon. When we partner with managers, we look to build relationships that can last decades. Our perpetual capital allows us to invest with a long-term perspective and to build lasting partnerships with some of the best investors in the world.

Trust vs Inflation

Although Alfred I. duPont passed away in 1935, it wasn’t until 1939 that his estate passed through probate and the actual trust structure that exists today was fully in place. Since that time, his Trust has grown from roughly $40 million to over $5 billion today. This chart compares Trust results to an inflation adjusted portfolio; over time the Trust has maintained and indeed enhanced overall purchasing power.

Targets & Policy

The duPont portfolio is well diversified and invested in a broad range of asset classes and strategies. In addition to investments in global public equities and fixed income, the Trust has a significant allocation to alternative investments, including marketable alternatives, private equity, venture capital, energy, and real estate.

Asset Allocation Changes