GreenWood Investors' 2025 annual letter highlights a year of exceptional financial performance, with core separate accounts returning 52.5% net, surpassing the MSCI ACWI net index's 22.1%. This achievement is attributed to strong fundamental performance of portfolio companies, strategic transformations in key holdings like NexGen Energy and International Petroleum Company, and proactive shareholder engagement. The firm’s behavioral framework, which anticipates changes in investor perceptions, played a crucial role in identifying opportunities. GreenWood emphasizes its dedication to improving business quality and advocating for robust governance structures, believing that long-term success is intertwined with effective management and accountability. The letter also details how these principles are applied in practice, from fostering growth in companies like Genus Plc to pushing for governance reforms at Swatch and Jack in the Box, underscoring a commitment to balancing short-term progress with long-term value creation.
Exceptional Performance and Strategic Insights in 2025
In 2025, GreenWood Investors delivered outstanding results for its clients, with core separate accounts achieving an impressive 52.5% net return, significantly outpacing the MSCI ACWI net index, which returned 22.1%. This robust performance was primarily fueled by the strong operational and financial health of the companies within their investment portfolio. The firm's proprietary behavioral framework proved instrumental in this success, enabling them to anticipate shifts in investor sentiment and identify businesses poised for significant revaluation. This framework, which complements their valuation and quality assessments, focuses on understanding how market perceptions evolve, often triggered by improvements in business fundamentals or specific catalysts. The strategic application of this approach allowed GreenWood to capitalize on opportunities where underlying business quality and investor narratives converged positively.
A notable aspect of this outperformance was the contribution from foreign exchange, which positively impacted returns in 2025, offsetting a negative impact from the euro in the prior year. The firm's approach to currency hedging is disciplined, employed only when sentiment is heavily skewed or to balance factor exposure. Beyond macro factors, the weighted average operating profit growth of roughly 21% from their portfolio companies underscored the intrinsic value creation. Moreover, the portfolio's overall returns of 30% exceeded this operating profit growth, indicating that factors beyond traditional earnings, such as behavioral shifts and strategic catalysts, played a significant role. GreenWood's proactive engagement with portfolio companies, collaborating to enhance business quality, drive fundamental performance, and achieve transformational milestones, further demonstrates their hands-on approach to generating alpha.
Driving Value Through Transformation and Governance
GreenWood Investors' strategy extends beyond traditional financial metrics, emphasizing strategic transformations and active governance to unlock shareholder value. For companies like NexGen Energy, a pre-production uranium firm, value creation is measured by progress towards federal approval for its world-class Arrow deposit. NexGen's advancement towards this critical milestone contributed 4% to GreenWood's net returns, further bolstered by positive drill results and a supportive global nuclear narrative. The company’s successful capital raise of nearly $1 billion, at all-time highs, positions it to be "shovel ready" for construction, demonstrating strategic foresight in securing future funding. Similarly, International Petroleum Company (IPCO) showcased strong capital allocation discipline by self-funding its Blackrod oil sands project while simultaneously buying back 10% of its free float annually, significantly reducing its share count and increasing reserves, highlighting the Lundin family's commitment to long-term value optimization.
The firm's influence is also evident in its engagement with Genus Plc, an animal genetics company that delivered a 70% return, contributing nearly 3% to the portfolio. Genus achieved significant milestones, including FDA approval for its gene-editing platform, potentially tripling operating profit within 5-7 years, and strengthening its China presence through a strategic joint venture that deleveraged the company. GreenWood’s active involvement, from governance advocacy at Swatch, where they push for improved management structures despite resistance, to their constructive approach with Jack in the Box, demonstrates a commitment to ensuring shareholder interests are well-represented. By placing experts with ownership mentality on boards, as seen with Jack in the Box's new directors, GreenWood aims to instill accountability and drive both short-term progress and long-term transformational outcomes, reinforcing their belief that ownership creates accountability and fosters balanced decision-making for all stakeholders.