Episode 76 | A Conversation with Evan Vanderveer on Global, Long-Term Investment Strategy

In Episode 76 of “Market News with Rodney Lake,” Professor Lake, director of the GW Investment Institute, invites Evan Vanderveer, GW alum and Managing Partner at Vanshap Capital, to begin season 4 of the podcast. Their conversation traces Vanderveer’s path from graduating during the 2009 financial crisis to co-founding Vanshap Capital. They discuss Vanshap’s investment strategy, emphasizing high-quality, founder-led, and customer-centric businesses. Vanderveer explains the firm’s global approach while also addressing building relationships with management teams and investing with a long-term time horizon. He notes the growing role of AI in investment analysis alongside the enduring importance of human judgment, and closes with career advice encouraging curiosity, niche expertise, and an open mindset.

Transcript

Thank you for joining Market News with Rodney Lake. This is a regular program for the GW Investment Institute where we talk about timely market topics. I'm Rodney Lake, the director of the GW Investment Institute. Let's get started.
Welcome back to Market News at Rodney Lake. I'm your host, Rodney Lake. This is the new season, and we're kicking off with a very special guest, Mr. Evan Vanderveer. Mr. Vanderveer, welcome.
Thank you very much. Pleasure to be here.
We're so happy that you're here. I'm going to give a little bit of a brief intro and then and maybe we'll give you some time to introduce yourself, then we’re gonna jump into questions.
Perfect.
So number one, Mr. Vanderveer is a GW alum, which we're super proud of
Thank you.
And has been a great friend and and to be clear, and not to disparage any of the other schools that GW business school alum, finance major, super excited about that and obviously very proud of you number one and long time friend of the Investments Institute also just want to mention that.
And so thank you for always being a friend to us, being a consistent guest lecture for us over the years. It's been more than a decade now. So we're very appreciative of all the time, effort, energy that you have put into the Investment Institute to help make it what it is today. That said. Let's move on to, to you a little bit more specifically.
So, you were at Aegis Financial after you left GW School of Business. And then you founded your own firm, Vanshap Capital. And you are looking for high quality businesses all over the world. And we're going to jump into some of that really interesting businesses, really interesting fund. Backed in part by Markel, which is a publicly traded company, multibillion dollar, a publicly traded company.
So very exciting. Very proud of you. As a GW alum. And then certainly somebody in the investment world, somebody in finance. Could you maybe shed a little bit of light for all of us and introduce yourself a little more fully about, you know, how you know your journey from School of Business? Since we're we're here at the School of Business.
This is the GW Investment Institute podcast. School of Business, Aegis, and then Vanshap.
Sure. Well, first of all, thank you very much for having me. It's a pleasure to be here. I'm glad it worked out. Thank you. Thank you for happy New Year. Thank you. Same for you. And thank you for letting me speak and, participate it for all these years.
It's been a real pleasure and an honor. So thank you. As it relates to the background, as you mentioned, I graduated in 2009 from the business school. And, some of you may remember it was an interesting time to to graduate, when when Lehman had just gone down, the world was blowing up. So, I do remember there was a ticker.
I don't know if it's still there down in the lobby that had to where everyone was working after school. And, some of those, needless to say, changed, unfortunately, after the crisis. But, I was lucky enough to get an internship during that year with a good friend of ours named Scott Barbee, who was introduced by a friend.
Shout out to Mr. Barbee. Yes. And, he was kind enough to give me an internship as I said at that time, and I was going in during that very tumultuous period, helping them analyze stocks. And, it was a fantastic experience. And at the end of the year, Scott said, you know, I'm going to give you an offer, but you're more than welcome.
It's a tumultuous time. So if you want to go around and find whatever opportunity you can, go and, I did that for a bit and quickly concluded that working with Scott would be the best, opportunity. So, I was there for a great two and a half years, and, to, to get on to the current topic, then, I met my partner, David Shapiro.
He had been there for some time before. Shout out to Shapiro. Yes. And, so we were working together, having a, a nice time working with Scott. And, if we wanted to make, I would say a few small differences. One was that we were very interested in international security. So, Scott, still today is mostly in the US, but but does some international.
But we were on our spare time at night looking at South Korean preferred and other interesting securities overseas and thought it'd be really cool to create a fund that was maybe a bit more concentrated with more institutional investors focused on these, higher quality businesses outside the US. And so that that was basically the genesis of the of the firm.
Excellent. And you've been in business now more than a decade. Yeah. Congratulations on that. Thank you. Great success and great honor to both of you and Mr. Shapiro. Wonderful work there. Thank you. Let's, let's now maybe jump into some of, you don't have to give any specific ideas here, but maybe talk about first, you know, when we talk about the GW Investment Institute and on the fundamental side, we talk about business, management, price valuation and balance sheet.
So maybe we can use that if our audience, welcome back to anybody that's coming back and, and welcome any new people. But they're familiar with that framework. So we're going to use that to maybe help describe some of the ideas that that you work on at Vanshap with you and Mr. Shapiro. So maybe from Vanshap standpoint, how would you identify and describe a high quality business that something that you would be interested in?
Yeah. I'm going to answer your question first. I think it's important to point out that we've sort of had two phases of our fund, that the first phase was more focused on valuation. We could get more into that. So it was looking, let's say, for decent quality businesses at a very cheap price. Right. And then the second phase, which we, has been, sort of implemented over the last six years or so, is much more focused on finding exceptional founders and therefore having to pay a somewhat higher price, but hopefully still a fair price.
So, in terms of high quality businesses, basically we're looking for, what we call sort of fanatics. People focus on the customer, that are typically owning that have founded the business. And we can get more into why we think being a sort of owner operator is so important. But effectively we want someone that has a stake in the business that built the business and is continuing to build a business over the next, say, 20 years.
And so there's all the normal metrics that you would look for that go along with that in terms of return on capital and growth and right, and so on and so forth. But effectively, that's what we're looking for, just someone who is truly exceptional and is building something, you know, as I said, that can be they can be proud of over the next 20 years or so.
And so obviously, that's a long time to be invested in some of these things. Yeah. Well, for companies like that, is there any, you know, market cap that, you know, would be okay? We're out at a certain point, you know, a billion, 10 billion, 100 billion, whatever it happens to be. Are you happy to be along for the ride as long as the founder is in place with that type of philosophy?
Yeah, we're happy to be along for the ride. You know, years ago, if you to asked me, I would have said at some point, well, these two companies can't get any bigger, right? This is crazy. $1 trillion or whatever. And obviously, it's been proven that, you know, not not very few companies continue to grow after that point, but they clearly they do.
So if you find something that's exceptional, selling it just because it's 100 billion or 200 billion doesn't make a lot of sense. Assuming again, obviously, that the growth potential remains, in our opinion. And so some of these qualities of the management and management team and, and particularly the founder, what are some common elements that you found for the companies where you've had success?
Are there are there similarities? Yeah, I would say the main thing is really, as I said, focusing on the customer and therefore product, providing them things that they want. I mean, it sounds, pretty elementary, but the reality is that most companies, I would say, in the market are not focused on providing a product, or a solution to the customer that they actually want.
And so, one of the things that we spend a lot of time focused on is net promoter score. Okay. Which is, sort of a concept, that that comes from sort of asking the customer if they would recommend a product to someone else. And it turns out, not surprisingly, that when you have people that are recommending your product, to others very highly, that, that generally leads to good results over time.
And so, that would be, an example of something that we're, you know, looking for and then sort of related things along along those lines. And I think we're going to come back to this, but I just want to take a quick, dart down the path of the international piece. Yeah. So you mentioned, that you're working internationally.
Are there other places that you tend to end up in investing in, there are the places that you avoid? When people say international, it can mean a lot of different things. But what does it mean for Vanshap? We've tried not to have a black list or do not-invest list, because, you know, obviously, it's been proven out even over recent times.
Things can go from one category, the other. Historically we've we've not done anything in, we're not done much at all, really, in Asia. Our view is that you really need to be on the ground or have sort of particularly language specific skills there, particularly China and even Japan and so on. The rest of the world is mostly fair game.
Okay. One of our larger investments today is in Kazakhstan. Nice. So we try to open our mind to, you know, Kazakhstan. Obviously not a lot of people are familiar with, but so we, we, you know, so, so we don't say, oh, we're never going to invest there because of XYZ is generally the rule. So anything outside the US, is really, we try to make at least generally fair game.
Excellent. And staying on this path when you're doing due diligence for these, these, you know, ideas. So obviously for a company based in Kazakhstan versus a company based in the US, you know, you have lots of different disclosures that are common here. How do you do the due diligence and how is it different than maybe if the company were based here? I would say all again, comes back to the people.
So, there are obviously accounting differences in some of these countries, their disclosures that are maybe reporting only half the year or it's framed in a totally different way, although at the end of the day, the numbers are the numbers. Our view over time has been that if you can find an exceptional person, whether it's one kind of depreciation or another kind of amortization, that that's not really what's important.
What's important is the person building the business. So I would say that, it's been interesting when you go from Kazakhstan to the UK or whatever market. The reality is, if you can find an, you know, an exceptional individual, the sort of rest of it doesn't really matter where they're from or where they were born. I would say also today, and it's increasingly the case where many of these businesses are going into other countries, maybe the the founder is from a different country themselves.
They ended up in a certain place. And, are building a business there. And then go into ten other countries. So I would say increasingly, in my opinion, the geographic lines are continuing to blur. And is it difficult to invest in these places? So obviously people that are familiar with investing in the US, you know, you open up a standard brokerage account, you find it with dollars and you buy away.
Yeah. Are there challenges on the operational side, or are there ways around, to make it easy for you to, to allocate capital to these places? It's becoming easier there, there when we started there were challenges. And there still are, particularly in local markets. If you want to invest on a local stock exchange, that that's a whole nother conversation because many in our opinion, that many of these local exchanges are, don't make challenging to deal with, the challenging to deal with and don't make a lot of sense anymore.
The other interesting thing that we've seen is that a lot of the all star companies, the fantastic businesses are listing in the US, right on Nasdaq or whatnot. And so I would say, again, similar to the geographic lines, those lines have started to blur. But there was an element at the beginning, or early on in the fund's life where, for instance, investing in Greece required some work to do or something like that.
But but, that's a I would say another benefit of of technology. So barriers to entry are reducing for allocating capital to those places. I think that's right. There's still exceptions. But I think generally that's becoming the case. So speaking of allocation of capital and talking about management. So what are the things when you're looking at a management team and in particular CEO for allocation of capital.
Are there are there hallmarks that you would say, look this really stands out and it's pretty consistent across great allocators. And that's what you look for. Or is it really you know, each company, each management team has a different allocation strategy that works for them. There's nothing that's all it none of them are the same. Obviously. But I would say there are definitely elements.
I would say one thing that we look for is sort of a contrarian nature. We love to see managers that have, you know, make purchases. For instance, one of our holdings is Jet2, which is, package holiday operator in the UK and consistently over is, I guess roughly 40 year career. Philip Meeson and, his team have sort of, you know, made a contrarian move going into an area when someone else pulled out or, or, most recently they made a huge, aircraft order, during the Covid period where they could get a huge discount on the price because everyone else was out of out of money.
So that would be, I would say, one good element of, of, or one particular variable of things or trait maybe is a better word that we like to see other people sort of acting in a contrary way. The same would go for repurchasing shares. Quite a few of the investments, that we have are the companies are buying back stock.
And so you'd want to see that obviously when the prices are low, not high. So obviously it would be a warning sign when the the valuation is high and they're they're buying back stock. So things like that being thoughtful and you know obviously I guess at the end of the day, the track record is quite important here because over short periods it's very difficult to tell about capital allocation.
Sometimes something can look right, completely silly in the short term, but in the long run work out very well. And sticking again with the management team here. So people have different approaches here. Some some you know, investors say, hey, I don't want to talk to anyone in the management team. And I want to be a distant observer and I want to invest that way.
Other people want to, you know, the other extreme is, you know, maybe being an activist, for a public company, maybe more attuned is you're a private equity company. But speaking about public companies, what what types of relationship, if any, do you at Vanshap, have with, management or you would like to have or not have?
Yeah. We try to have a very respectful, I would say collaborative relationship. We, earlier our kind of, career attempted I wouldn't say activism, but I would say, polite suggestions. You get letters and communication and, we never got very far with that. Some maybe it was because they were in other countries or so on.
There's some good stories about that. But yeah, we never, I would say, made any real progress on on that. So I would say we, we try to, we do talk to the management. We, we try to talk to as many people in the organization as we can. We could get and do, the due diligence part, but we spent a lot of time talking to competitors and former employees and customers and so on, trying to really understand what's going on in the business, because obviously the manager can tell you one story, but that doesn't mean that that's necessarily what's going on.
So, yeah, that's that's we try to get to them, the know them over the very long term and build a long term relationship with them. That's, that's, you know, mutually respectful. And maybe they're listening to some of what we have to say. Sometimes they'll come to us and say, what do you think about returning capital this way versus that way or so on and so forth.
But, confrontation has never been our, our big thing. Yeah. So when you're speaking to the teams, what are some of the maybe surprising or interesting or thoughtful questions that they have for you? Yeah. Sometimes they don't ask at all that which maybe is that a sign in itself? We love, obviously people that are curious. I would say, most of them, many of the companies obviously are more used to traditional large funds, maybe, you know, large institutional funds that that, operate in a totally different way.
So, for instance, the fact that we only have seven investments or something along those lines is, is, very unusual. Right. Exactly. When maybe the normal fund has 80 or something like that. So, also, I would say that the long term nature of, what we're doing is many people know that the market has become extremely short term with a tremendous amount of trading.
And so the fact that we may own an investment for 5 or 10 years is, is, in some cases perplexing. And now moving on to the time horizon. So thanks for mentioned that there. You know, for the Investment Institute, we're very focused on long term. And we've held, for example, Apple since the first, you know, trade you know, 21 years ago.
So for us and that's, you know, not unique to some endowments and some endowments have shorter time frames. But, you know, we certainly try to be long term investors. How do you square your outlook with I'm sure you have investors. And sometimes they think like, well, is it a is it a good moment to sell whether it's up or it's down.
How do you think about that? How do you communicate that to your investors? And how do you and, and, David, think about that at the fund? I think, you know, you know, what's the right time horizon for this, for this opportunity, you had mentioned that look, we're looking at what's the potential growth is, is is it really just fully dependent on that, like, we think like, this has another years to go because this management team, so it's not artificial in any way or how do you all think about that?
Yeah. I would say, generally we're, we're trying to make sure that there's no asset liability mismatch, which I think is, has been a pitfall of other funds over time or other investment products. So, one of the things we do to your question about how do we communicate to our, investors is that we want to speak in a very long term.
Obviously, everything is is framed and discussed, over the very long term. So, for instance, even quarterly commentary, generally speaking, is, is, not so important to us. And I think in many ways that self-selecting that the folks who read, or to speak with us understand that, we're thinking about the long term. And therefore, if they're interested in what that quarterly earnings are going to be or something, is that not not a good fit.
On that. So I would say that that's the element of that in terms of the companies themselves, obviously want to make sure that, you know, that the, the runway is there, for instance, that the person you know, is a certain age and profile or if, if, if they're going to retire, then that there's a suitable, replacement and so on and so forth.
And so it's basically trying to make sure that everything is in alignment of the very long term. And I think when, when you do that, it all sort of come together. And as I say, you're self-selecting both on the investor and the, the manager side. Now, you may not be able to say too much about the future of Vanshap and where you're headed, but anything that you can offer about, you know, do you think that your strategy will change from here?
You think it will be even more international and you know more than you are now? Any any differences that you foresee moving forward based on what's happened and what's the general outlook for Vansharp at the moment? Yeah, the the general outlook is to keep doing what we're doing. We're we're, quite confident in the strategy of over the last six years of focusing on very few, very, very high quality companies with these, owner operators in place.
And, I think it's, it's been borne out over time that that's a, a great strategy. Not necessarily every year or whatever, or in the short term, but over the long term, it's a great way to, to operate and to manage money. And, that's what we, our, you know, we believe, works over the long term.
So therefore we are going to continue to do and so not giving maybe anything specific here for this question. But, you know, our listeners and people that watch our YouTube channel might be thinking like, okay, well, you know, finding these owner operators, how do you go about doing that? Yeah, we used to, as I mentioned earlier, screen and over time and I think with increasingly, you know, everyone having a screener now in, in AI, in technology, making it very, very easy to find these anomalies.
I think the better way to do that is just to try to learn as much as you possibly can. Ask, there's, it can come from any direction. Sometimes we've had luck, asking some of our companies if they have other peer companies that are friends with, for instance, the company in Kazakhstan, that he's good friends with a company in Latin America.
Okay. And so they share ideas and so you sometimes can say who is your best, you know, competitor or competitor or peer in a different region or so. There's all kinds of ways, that we go about doing that. Not surprisingly, like many other things, the, the exceptional managers tend to to know each other, to know each other or learn from or invest in or something like that.
So the ecosystem of exceptional people is pretty small, I would say. So it's, it takes time. But, it's not so difficult to identify, but one can come from the other. Absolutely. And so, on that so you mentioned AI, one of the things that we've been talking a lot about, one of our, our largest position right now remains is, Nvidia for, for the Investment Institute.
So I think we talked about quite a lot. How do you think that's going to change your business? And how do you think that's changing the investment business overall? It's incredible. Just, you know, I'm sure you've and everyone else has, you can put it now to whatever AI tool you want to ask you to write an investment memo.
You know, on a certain company, and, well, they're not perfect. It's, they're pretty good. Yeah, they're pretty pretty good. And, so that's just incredible to think that, you know, over the last 13 years that, when we started and now all of a sudden, you just hit a button and 20 minutes later, you get a, you know, an investment memo, I'm sure those will continue to improve.
Obviously. I think, therefore, that the, the skill set of having someone who fortunately or unfortunately at a very entry level, putting those memos together, is, is probably no longer necessary. Although, again, there's errors and so on. I think most is still important and will be continue to be important for the long time is the judgment about that people.
Right. At the end of the day, you can look at a track record and maybe that track record is exceptional, but it doesn't necessarily mean it will continue to be the case. And, and I think that, you know, having, for instance, a chatbot sit down with the CEO or the founder of a company and have dinner there still, at least for hopefully some time, that that will not be easily, replicated.
Right. So that that's we'll see. But it's it's an amazing thing for sure. What I think that it's a good segue, to start asking about some questions that are advice. So for some of our viewers and listeners, you know, they could be students or people that recently graduated, obviously. Shout out to any of our alums. What advice do you have for them for either getting into the investment business or excelling in the investment business?
Yeah, I would just say, be curious. Right. So try to learn as much as you can. Obviously the Investment Institute and GW generally provides a very good background, but I would suggest try to find a specific niche, maybe from school or or just from, you know, maybe the country or from the region or whatever it is, find it, find a niche and and just try to learn as much as you can nowadays.
It's just obviously with all the, the podcasts and material videos, you could, you know, I'm sure there's a lot out there. There's a lot out there. And just trying to listen to thoughtful, content and, you know, try to, incorporate I would say, that's basically, the, the main thing. And then secondarily, I would say try to find people that you want to work for.
I would suggest, you know, maybe making a list of 5 or 10 firms that you want to work for, focus on those, those groups and then try to get to know them and see what opportunities arise. But, yeah, just just keep at it that that's something any book or podcast specific recommendations that you can think of.
Well, I'm sure like others, this, Patrick O'Shaughnessy's "Invest Like the Best” and then, David Senra’s, that's the, Founder’s podcast. Yeah. Yes. Well, I knew an interview, but yes, the interviews are I think you just call it Senra. Senra, I think. Yes. It's just been incredible. There's just very good. I hear so many, out there now “Acquired” would be a great. “Acquired” is,
another fantastic one. But, yeah, those are the some of the, the companies that's I think those are super helpful. And I think, and if you watch those, especially around, you know, understanding businesses and companies and founders, to your point, I think that's very important. Yeah. So now to wrap up, you know, what worldly wisdom would you like to share with the audience or what do you think is important?
It could be for an investor. It could be for a student thinking about investing or finance. You know, you mentioned being curious. It could be an elaboration of that point. But, you know, what would you like to leave us with? What worldly wisdom, Charlie Munger style, would you have for us today? Yeah, I thank you. I would say maybe in addition to that curious point would be keeping an open mind.
Right? So so being able to be curious and having that desire to learn would be to, keep an open mind. I would say, looking back, you know, I was here at school and then afterwards I had a very, predefined, let's say pathway forward and goal in, in, in my career. And things are constantly evolving and changing and maybe accelerating.
So, so I think, just because you have some goal in mind or some specific task that you want to accomplish, I would say, try to keep an open mind as possible and don't just say no. Just always try to learn. And even if it's not a good fit or it doesn't make sense to you or whatever, just try to learn about it and then make the conclusion.
Don't jump to the conclusion. All right. You know, so I would say an open mind. And across here let me be curious. Open mind, continuous learner. Yeah I think that's wonderful advice. I think that's a great place to end the episode on. I want to say thank you, Mr. Vanderveer. So thank you very much for joining us today.
We're thrilled that you joined the podcast. We hope you'll come back. I will be back. Thank you for this. This episode. It's been wonderful.
And we'll hope you'll be back on another episode. So that's it for “Market News with Rodney Lake.” We'll see you back on the next episode. Thank you.