Book review: “Capital Returns” – Edward Chancelor / Marathon Asset Mgt.


“Capital Returns” is an edited collection of investor letters from UK based Marathon Asset Management. Before reading the book,I actually didn’t know much about Marathon.

On their website, they summarize their strategy as follows:

At the heart of Marathon’s investment philosophy is the capital cycle approach to investment.  It is based on the idea that the prospect of high returns will attract excessive capital (and hence competition), and vice versa.  In addition, an assessment of how management responds to the forces of the capital cycle and how they are incentivised are critical to the investment outcome.

This capital cycle approach is very interesting. As mentioned above, the book has no direct narrative. The investor letters are however clustered together in chapters with similar main topics:

  • Capital cycle, sectors (automoblie, commodity, cod fishing, beer, oil)
  • Growth (Colgate, Geberit, Intertek, Amazon, digital moats, Rightmove, Baidu)
  • Management (incentives,  pro cyclicality, capital allocation, Sampo, Scandinavia, family ownership, Richemont, management meetings, culture)
  • Crisis (Anglo Irish, securitizations, private equity, Spanish property, German banking, Northern Rock, Handelsbanken)
  • After the crash (Spanish construction, Bank of Ireland, PIIGS, low interest rates
  • China
  • Funny “Greedspin” Christmas letters

The book is not so easy to read because the letters themselves, despite very well written, are very condensed with a lot of deep insights. I always had to take a kind of a mental break after one or two letters in order to digest everything

Overall, I would characterize their approach as follows:

  • International with an European focus
  • generalist approach, all sectors, differenent business models
  • transformation from “cheap” to “quality” over the years
  • they also invest into financials
  • the invest relatively diversified


Essential personal learning experience

The main take away for me was that their supply focused capital cycle model enabled them to see and avoid many of the problems (CDOs, housing, commodities, PIIGS, China) well in advance. Most analysts focus on the demand side only and forget about supply.

This is something to keep in mind for the future. As a bottom up investor, I think their approach can improve decision making without going into useless macro analysis. If you just look at single companies, one might miss some of the overarching issues in the sector (TGS Nopec…..).

Marathon Track record

The question always is: Talk is cheap, how about their returns ? At least from their website, it seems that their funds made 3-5% outperformance p.a.  constantly  on a 3, 5, 10 and 20 year basis. This is very remarkable for a manager with a couple of billion under management.

For me it was also interesting to see that they not only share many of my personal opinions about investing, but that there is also a nice overlap of companies I find interesting and what they found interesting, for instance Lloyds Banking, Admiral, Handelsbanken and Koc as a well managed family owned company. Clearly there is some “confirmation bias” at work from my side, but still interesting.


Overall, the book is an essential”MUST READ” for any investor. The major drawback is that it is currently only available as hard cover at around 37 EUR.

The “value option” is to be found on their webpage where they published some of their investor letters for free.

There is also a similar book on the time period from 1993-2002 called “Capital Acocunt” which costs around 80 EUR on Amazon.

Overall, for me Marathon is clearly one of the “Gurus” in investing and it makes a lot of sense to pay attention to what they are doing. Especially if and when they re-enter oil and commodities.

P.S.: the editor, Edward Chancelor has also written one of my all time favourite financial books: “The Devil took the hindmost” from 2000. If you like financial history, this is also a “must read”:








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