EC The Chandler Brothers: The Greatest Investors You’ve Never Heard Of

Two secretive brothers from New Zealand have perhaps THE best long-term track record in the investing world. Starting in 1986, the two turned $10 million of family money into over $5 billion just 20-years later. That’s an astounding 36% CAGR.

Compare that with Buffett (19% over 50 years), Klarman (20% over 34 years), Lynch (29% over 13 years),  Soros and Druckenmiller (both around 30% over 30 years).

Yet, hardly anybody has ever heard of these guys. I live and breathe markets and I just came across them for the first time this year.

This is by design.

The two brothers have gone to great lengths over the years to maintain a low profile and keep their faces out of the news. It wasn’t until 2006 that they chose to give their first and only substantial interview. It was with Institutional Investor (link here), and they only agreed to the interview so they could counteract bad press they were receiving from Korean media over a failed activist push by the two to unseat management at a Korean Chaebol.

They were among the first investors to plunge into emerging markets like Russia, Brazil, and the Czech Republic. They are sons of a WWII veteran who ran a beekeeping business with Edmund Hillary (yes, that Edmund Hillary), before starting what became New Zealand’s most upscale department store.

They are perhaps THE MOST INTERESTING INVESTORS IN THE WORLD.

They are the Chandler brothers: Richard and Christopher. They ran the Sovereign Global Fund for 20 years (the two have since split off to manage their own money with Legatum and Clermont Capital).

To follow is a profile of the brothers along with some of the secrets they’ve shared in how they look at and invest in markets — also, some commentary and case studies of their investments by me. (All quotes are from the Institutional Investor interview unless otherwise noted).

First, some quick background on the brothers and their unusual origin story (emphasis by me).

The Chandler’s investing background is anything but conventional. The brothers grew up in Matangi, a rural town outside the provincial city of Hamilton in the dairy farming country of New Zealand’s north island. Their Chicago-born grandfather had emigrated to New Zealand in the early 1900's, gone into advertising and married his secretary. He died of an allergic reaction when his third son, Robert, was just one year old.

Although he never knew his father, Robert was profoundly marked by the American success literature he had left behind, notably the books of Orison Swett Marden, an early-20th-century American journalist and author who inspired such proponents of “positive thinking” as Dale Carnegie and Norman Vincent Peale. Robert’s sons were deeply influenced by this worldview as well. “We are great believers in the idea of having audacious goals, breaking out and doing something out of the ordinary,” says Richard. “It’s helped us turn what most people consider a mere profession into a vocation and, beyond that, an art, where we frequently put ourselves in harm’s way.”

In 1972, Robert and his wife, Marija, started a department store called the Chandler House which quickly became a booming business. This is where the two brothers, Richard and Christopher, began learning the skills of business and investing.

Richard and Marija employed their two sons at the store when not away at boarding school. The two worked sales and helped their father balance the books on the weekend. They also accompanied their mother on buying trips where they learned the key principles on how to buy right (more on this below).

Richard referred to his mother as “the most brilliant business person I’ve ever met who taught us many of the key principles we follow as investors”. Two of these key principles were, “Never buy something unless you know to whom you can sell it” and “Buy as much as possible in a narrow range of hot items.” Richard said his mother “was able to identify the best opportunities and be the master of narrow and deep and that, with stocks, we do the same thing. We back our beliefs to the hilt.”

The two brothers were essentially getting an MBA when they were only kids. This undoubtedly helped shaped them into the two market masters they are today.

After college, Richard and Christopher took over the family business and rapidly expanded its size. And in 1986 they sold it for $10 million which they then used to launch their fund Sovereign Global. Richard remarked on the decision to the sell the family business that, “Basically, we said, ‘Let’s do something that we love to do, not just something that we are good at.” That something they loved, was investing.  

The fund’s first investment serves as a perfect example of the style that would typify the brother’s approach. And that’s contrarian to the extreme and highly concentrated. Narrow and deep just like their mother taught them.

The two poured nearly the entire family fortune into just four Hong Kong office buildings in 1987.

That year the property market in Hong Kong was in dire straits. Real estate prices were down roughly 70% from their '81 peaks. Britain’s lease on the territory was due to lapse in the coming decade and according to Richard, “The feeling was that China was going to take over Hong Kong, so most investors said, ‘Who cares?”.

The sentiment at the time was that the island was uninvestible. Here’s a few Newspaper headlines from the year.

This pervasive negative sentiment and over extrapolation of recent trends is what drew the two brothers to the place.

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Disclaimer: All statements are solely opinions and are for educational purposes only.

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Alpha Stockman 4 months ago Member's comment

Amazing, how have I never heard of these guys?