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Aziz Hamzaogullari |
Loomis Sayles’ Aziz Hamzaogullari explains what makes founder-driven businesses so special
For local governments, a major challenge is to identify those portfolio managers who are most likely to deliver superior risk-adjusted returns in the future. Understanding how an investment philosophy informs a manager’s decision-making can provide meaningful insights into how and why a particular manager generates alpha. The search for alpha is the search for skill. The Growth Equity Strategies Team (GES) believes their alpha thesis, and ability to consistently implement its tenets, constitutes a differentiated approach.
Aziz Hamzaogullari has followed the same investment philosophy since he launched his first growth equity strategy back in 2006. At the crux of this philosophy, his alpha thesis, is a “long-term, private equity approach to investing” and a seven-step research framework which looks for businesses that are able to sustain their competitive advantages and profitable growth for longer than a decade. Aziz and Loomis Sayles’ Growth Equities Strategies Team believe that less than 1% of businesses around the world meet these criteria.
While the businesses that Aziz invests in have great diversity, there is a common thread running through many of them – around half of the businesses he invests in are led by their founders. Here, Aziz explains why he backs so many founder-driven businesses and talks through how some of the businesses he invests in have enjoyed such phenomenal growth.
Founders not only have a vision, but also a very clear understanding of how to actualise that vision into the commercialisation of their products and services. And they do this in a way that is unique, with evidence showing that whatever they do, competitors catch up much later, if they are able to at all.
One of the key things we look at as part of any business is quality, there are four drivers:
When we are looking at management, roughly half of our companies are founder-driven, with founders still involved. What these founders provide is a unique vision and understanding of their businesses that is different to 99% of the population. If I were to advertise for a professional CEO to manage these businesses, I think it would be very difficult to find managers with the same depth of understanding as the founders.
With Oracle, Larry Ellison’s first big insight was the architecture of the database Oracle created, which was very different from what was in the marketplace at the time. He understood the unique advantages of a database architecture focused on distributed computing rather than mainframes. That insight, which may seem simple, was so unique that it took competitors like Microsoft and IBM more than a decade to catch up.
But by the time competitors wake up, you don’t wait for them to catch up. You add to that innovation. It is in the uniqueness of these quality businesses that time becomes your friend. With that head start and differentiated view, you create a business that compounds its advantages over time. Ellison built applications, added cloud services, and now Oracle is building AI infrastructure.
Amazon offers another example. Jeff Bezos started with e-commerce, then added AWS, logistics, and advertising. It began with a strong core business that was very difficult to replicate. With the cash generated, Bezos had the vision to build upon it. He also laid out simple principles in his 2006 annual report:
These principles are simple but very difficult to implement. Bezos did it with discipline and vision, building strong businesses over time.
Google is another case. It started with one product and today has 15 with at least half a billion users each – some with more than two billion, like Search, Android, Chrome, Gmail, Google Pay, Maps, and YouTube. When Google invested in YouTube, many thought it wasn’t smart to buy a company with no revenue. But the founders understood where search, media, and advertising were going. With that multi-decade vision, they turned YouTube into one of the most valuable media businesses globally, surpassing Netflix in viewership.
Alpha comes from skill – and skill is rooted in philosophy, discipline, and vision. Founder-led businesses often embody all three. Our role is to identify those rare high-quality companies with sustainable growth – and invest with conviction, only when their stocks sell meaningful discounts to our long-term estimate of intrinsic value. For local governments and institutional investors, aligning with managers who understand this dynamic can be a powerful way to achieve sustainable, risk-adjusted returns.
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