The quiet power of patient capital

Last week, the financial world stood once again in the sign of extremes. Gold hit a new historic peak around 4,446 dollars per ounce, US equity markets closed at record levels, and the oil price rose and then fell back in rhythm with the geopolitics around Iran. In Washington, the new chair of the Federal Reserve took the reins, while investors watched the inflation figures closely. For anyone who tracks the markets every morning, it can feel as though an enormous amount is happening.

And yet this is precisely the moment to take a step back. Because alongside that noise, there is another part of the markets that does not let itself be rushed by quarterly figures or news flashes. The part where the money lies still. Or rather, where it works patiently.

In Stockholm, Toronto, Rotterdam and Omaha there are family businesses and holding companies that have managed capital for generations. Investor AB of the Wallenberg family, Brookfield in Canada, HAL Trust in the Netherlands and Berkshire Hathaway of Warren Buffett share a trait that is rare in the modern financial world. Their horizon is not measured in months or years, but in decades. The Wallenbergs founded Investor in 1916. Since its listing in 1919, the company has multiplied its invested capital roughly one hundred and fifty thousand times. That works out to around thirteen percent return per year, compounded through two world wars, inflationary periods, oil crises, internet bubbles and pandemics.

What distinguishes these companies? The answer is simpler than is often thought. They do not have to do anything. A hedge fund is judged every month. An asset manager who lags the index for three quarters loses clients. An analyst who fails to produce new ideas drops out of view. But the family behind a holding company does not have that pressure. It can buy a share, then wait fifteen years, and in the meantime quietly reinvest the profits. When others are forced to sell at the bottom, that family can actually buy more. That structural difference in time horizon is the source of a large part of the return.

It is sometimes forgotten, but doing nothing is one of the most underestimated skills in investing. Most mistakes in a portfolio do not come from poor choices, but from the feeling that something has to be done. A family that has owned businesses for generations does not feel that pressure. And the private investor who can muster that patience, or who invests through managers who can, benefits from it as well.

The second distinguishing feature is what is known as the permanence of capital. An investor who finances a portfolio with borrowed money can be forced to sell at the worst possible moment. A family that carries its wealth across generations can simply sit through a deep two- or three-year drawdown. That capacity to survive is the precondition for the miracle of compound interest. Whoever survives the market benefits from it. Whoever is flushed out loses the miracle.

The third element is what is called, in industry circles, active ownership. These families sit on supervisory boards, help select top executives, steer strategy and maintain discipline on capital allocation. That is something fundamentally different from what a passive index investor or an active fund manager does. It is closer to entrepreneurship than to trading. And it explains why the returns of these holdings have beaten the index for more than a century.

What does this mean for the private investor on Curaçao? The message is not that every family should build its own Investor AB. It is that, with every investment decision, it is worth asking a simple question. What would a family that has to carry this capital through three generations do with it? The answer is often quieter and more ordinary than the market suggests in the moment. It is more selective, longer in stamina, and less fashion-driven.

Patient capital is not a buzzword. It is a structural property that pays off again every decade. In a week when gold reaches new highs and bond yields continue to swing, it remains worth studying the companies that do not let themselves be guided by all of that. That is precisely where durable wealth is built.

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Disclaimer. This article is published by Lunar Asset Management N.V. for general informational and educational purposes only. It reflects the personal views of the author at the time of writing and does not constitute investment advice, a recommendation, an offer, or a solicitation to buy or sell any security or financial instrument. References to specific companies are illustrative and should not be interpreted as buy or sell recommendations. Investing involves risk, including the possible loss of principal. Past performance is not a reliable indicator of future results. Readers should consult a qualified financial advisor before making any investment decision based on their personal circumstances. Lunar Asset Management N.V. is supervised by the Centrale Bank van Curaçao en Sint Maarten (CBCS).