Every month, in our I’m a Fund Manager series, we challenge a senior fund or investment manager with probing questions to uncover how they handle their personal finances.

Our aim is to discover where they would place their money for the upcoming year and decade, as well as which traps they steer clear of. We also delve into their thoughts on Nvidia, gold, bitcoin, and their most significant investment blunder.

This week, we interviewed Joe Bauernfreund, who manages the AVI Global Trust, a fund focused on global equities with assets totaling £1.3 billion.

The trust is known for making substantial investments in undervalued, often neglected companies, while deliberately steering clear of the Magnificent 7 tech stocks.

Among its largest investments are Chrysalis Investments, a prominent investment trust, the telecommunications giant Vivendi, and the media powerhouse News Corp.

Over the past five years, AGT has achieved a total return of 73.2%, and over the last decade, it has delivered an impressive 225.9% return.

In the hot seat: We spoke to Joe Bauernfreund, portfolio manager of AVI Global Trust (AGT).

If you could invest in only one company for the next 10 years, what would it be? 

Investor AB, the Swedish holding company of the Wallenberg family. 

It has shown itself to be one of the best run family-controlled holding companies in Europe and globally, owns high-quality assets and has a track record of tremendous value creation.

What about for the next 12 months?

Vivendi – the French holding company. It perfectly combines the main things I look for. 

First, it has attractive growing assets – through its 10 per cent listed stake in Universal Music Group, the worlds largest record label with strong earnings growth potential.

Second it has a wide discount of close to 50 per cent. There are many moving parts as to what might narrow the discount, but our experience shows that such anomalously wide discounts on quality listed assets do not tend to persist. 

From such wide levels, a narrowing of the discount would provide a powerful boost to high levels of prospective net asset value growth.

Top pick: Bauernfreund likes Vivendi, a French holding company which has a 10% stake in Universal Music Group and trades at a wide discount

What sector would you be avoiding and why? 

The sectors that others are excited about – mega cap tech and AI. 

Mega cap tech generally and AI specifically have been in vogue, and the corollary of this is that other sectors and industries have been overlooked by other investors. 

This applies to the type of companies that investors have focused – and the niche under-researched and more complex parts of the market we focus upon have been overlooked – this makes us excited about prospective returns.

Which country currently offers the best value for investors?

Korea. We are at a fascinating point in time as the government is taking concrete steps to try and unlock value from the very depressed and discounted stock market. It reminds me of Japan 10 years ago.

You have a significant holding in News Corp. Why? 

News Corp is a deeply misunderstood and undervalued company. News Corp has a market cap of $14bn. 

It owns a listed stake in [listed Australian real estate company] REA Group worth $11bn, thereby implying that you are buying the other assets – including Dow Jones – for $3bn or 3.3 times EBITDA (earnings before interest, taxes, depreciation, and amortization).

We think these assets are worth much more than that – Dow Jones alone is likely worth close to $10bn. 

The family and management are aware of this disconnect in value and want to rectify it.

Are we in an AI bubble and what should investors do?

You typically don’t know you are in a bubble until it bursts. Currently there are signs of excess in parts of the market. How long this sustains for remains unknown. 

With hindsight it will all look blindly obvious. As the Queen said of the financial crisis: ‘why did no one see it coming?’

The known risks are rarely things that frighten markets. As such the biggest geo-political threat to markets is probably something no one is thinking about or talking about.

Markets are prone to climbing the wall of worry – and can do so for longer than many anticipate. 

There are areas of the market that are likely overvalued but also many that remain deeply undervalued.

Investors should look to sell expensive assets and buy cheaper assets.

Better days ahead: Joe Bauernfreund thinks News Corp is a deeply misunderstood and undervalued company

Should gold form part of everyone’s portfolio?

As bottom-up fundamental equity investors we do not invest in gold, nor have a house view on it. 

Historically it has worked well as a diversifier but it is interesting to note recently how positively correlated equity and gold returns have become.

What about crypto? 

I do not personally invest in crypto – much the chagrin of my family. 

I warned them all against about a decade ago. Some of the ignored my advice and most certainly had the last laugh – although like everyone else they never bought enough.

What’s your greatest ever investment?

In 2003 I discovered a handful of Belgian holding companies trading at significant discounts to their net asset value. 

The returns these companies delivered in the next few years were great in of themselves, but also really set my career going at AVI.

And what’s your worst ever mistake?

During the financial crisis I bought the US house builders when they had fallen about 50 per cent. 

Low and behold they fell another 50-odd-percent and I didn’t have the stomach to stick with them. If I had the returns would have been very strong.