Book Review | Capital Returns by Edward Chancellor
July 9, 2020
By Ben Rundle | Portfolio Manager at NAOS Asset Management
I have recently taken to re-reading some of my favourite investment books with the idea being that as you grow as an investor, you value different elements. One of those books for me is Capital Returns, by Edward Chancellor.
This book is an edited account of Marathon Asset Management’s investment letters over a 10-year period. It is the second book in the series after Capital Account, which now sells on Amazon for over $1,500. My copy has numerous highlighted pages and underlined sentences from the first time I read it, but I took away even more from the second read.
Marathon Asset Management have an incredible track record of picking stocks over a greater than 30-year period and have spawned other great investors from inside their firm. Over the 30-year period, you can see how their investment philosophy has evolved and matured, however two simple ideas about capitalism works have always been paramount to them.
The first is that high returns attract capital, just as low returns repel it. The resulting flow of money they refer to as the capital cycle which they analyse and base investment decisions from.
The second guiding idea is that management skill in allocating capital is vital. Picking managers who excel at capital allocation is crucial in their eyes to long term investment success.
I believe every investor would find value from this book.