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Capital: The Story of Long-Term Investment Excellence
Go inside the elite investment firm with Capital . The Capital Group is one of the world?s largest investment management organizations, but little is known about it because the company has shunned any type of publicity. This compelling book, for the first time, takes you inside one of the most elite and private investment firms out there?the Capital Group Companies?a value investment firm par excellence. It digs deeps to reveal the corporate culture and long-term investment strategies that have made Capital the one organization where most investment professionals would like to work and would most recommend as long-term investment managers for their family and friends.
368 pages, Paperback
First published January 1, 2004
61 people are currently reading
500 people want to read
About the author
Charles D. Ellis
100 books86 followersCharles “Charley” D. Ellis is an American investment consultant. In 1972, Ellis founded Greenwich Associates, an international strategy consulting firm focused on financial institutions. Ellis is known for his philosophy of passive investing through index funds, as detailed in his book Winning the Loser’s Game.
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Displaying 1 - 15 of 15 reviews
November 14, 2014
Excellent read! I've learned more from reading this book than in the 16+ years I've worked at Capital. It's renewed my commitment to the organization and given me greater appreciation for our current and past associates.
July 14, 2019
Must read for any investment professional
December 2, 2017
SUCCESSFUL FUNDS MANAGEMENT BUSINESSES BALANCE THE INTERESTS OF; CLIENTS, STAFF AND OWNERS.
There is no room for egotistical stars, and hierarchal symbols are removed that would interfere with individuals working effectively together in groups.
Capital sees no benefit to its clients from organisational recognition or individual fame.
Modesty is pervasive at Capital, where people are far more interested in what lies ahead than in past achievements.
Capital avoids tangible indicators of organisational status such as titles, different sized offices and hierarchal reporting.
Diseases of success; complacency, insularity and over-confidence.
Stories are the best way for people to remember.
Administration and service are the keys to earning an investor's trust.
Sequoia Capital was developed as a private equity business of Capital. Initially there was a lot of resistance to PE investing as it was a very different discipline to publicly owned companies.
Capital began investing overseas in the 1960's.
Interviewers for staff probe for personal qualities such as; integrity, work ethic, humour and perspective. We look for; common sense, curiosity, caution without being stubborn, creativity and confidence without arrogance.
Avoiding personal publicity or recognition is deeply entrenched in Capital's culture and important to the organisation.
An investment in Capital has returned 20% pa for 3 decades. 350 staff are owners.
Ownership accumulates with tenure and cumulative contributions made over many years..
The formula for Capital shares values the business at closer to book value than market price. Young members are provided with generous loans for funding.
Ownership is more like stewardship, endowed with more responsibilities than rights.
Capital distances itself from any comprehensive investment philosophy or specific process. They celebrate that every investment decision is made independently on its own merits. Long-term focus however.
There is no room for egotistical stars, and hierarchal symbols are removed that would interfere with individuals working effectively together in groups.
Capital sees no benefit to its clients from organisational recognition or individual fame.
Modesty is pervasive at Capital, where people are far more interested in what lies ahead than in past achievements.
Capital avoids tangible indicators of organisational status such as titles, different sized offices and hierarchal reporting.
Diseases of success; complacency, insularity and over-confidence.
Stories are the best way for people to remember.
Administration and service are the keys to earning an investor's trust.
Sequoia Capital was developed as a private equity business of Capital. Initially there was a lot of resistance to PE investing as it was a very different discipline to publicly owned companies.
Capital began investing overseas in the 1960's.
Interviewers for staff probe for personal qualities such as; integrity, work ethic, humour and perspective. We look for; common sense, curiosity, caution without being stubborn, creativity and confidence without arrogance.
Avoiding personal publicity or recognition is deeply entrenched in Capital's culture and important to the organisation.
An investment in Capital has returned 20% pa for 3 decades. 350 staff are owners.
Ownership accumulates with tenure and cumulative contributions made over many years..
The formula for Capital shares values the business at closer to book value than market price. Young members are provided with generous loans for funding.
Ownership is more like stewardship, endowed with more responsibilities than rights.
Capital distances itself from any comprehensive investment philosophy or specific process. They celebrate that every investment decision is made independently on its own merits. Long-term focus however.
August 29, 2025
Charles D Ellis' "Capital" is both corporate history and analysis of the world's largest unknown investment group. The underlying story is somewhat interesting and showcases the constant reinvention central to Capital Group's strategy but the real value in reading this book lies with Ellis' discussion of their management techniques. This occurs both with regards to a simultaneously hyper-rationalist approach predicated on cautiously sounding out every possible downside risk whilst also taking the occasional leap of faith but also a detailed discussion of their compensation philosophy and how it solved various of the usual issues. The only thing lacking was a more detailed discussion of the multi-counselor model, specifically with regards to when to cut/add capital to individual counselors and how to judge skill. That aside, an easy enough read and quite thought-provoking too.
May 4, 2017
Reference to build a long lasting top of the notch organisation.
July 9, 2017
Very inspiring for someone in the asset management industry, but also insightful for anyone who runs an organization of knowledge workers.
November 27, 2022
Terrible marketing puff-piece
September 18, 2007
Ellis is a master at getting to the heart of his subject matter. In Capital, he shows us the corporate history of one of the world's greatest investment organizations. Tapping into a vast array of inside contacts, former employees, clients, and competitors, Ellis provides the reader with numerous examples of successes and failures that Capital faced on the path to greatness. This is a book full of wisdom around strategy, execution, and organizational design for professionals in any industry.
Strategy/Process notes:
On Economic forecasting, p.237: "Economic statistics are becoming less reliable, so being able to have the macro picture supplemented by the experience of specific companies is helpful."
On Research Process: p.246-247: "Lovelace proposed dual or even triple coverage...[sometimes] having three different and conflicting opinions on the same company."
On Research meetings with companies: p. 280: "Years ago, I learned to focus on the weak aspects of any argument, so I let management spin its web and then I focused on the weak spots."
Organization notes:
On People, p. 204: "The primary management challenge at Capital is not managin investments or serving investors, as important as these two functions obviously are...Capital's main challenge is finding, developing, and organizing talented professionals into an effective team that will continuously achieve superior results...'People like to do what they do well,'...'Very able people like to concentrate on what they do very well'...Associates are cautioned that others may form an opinion of what they do best and give them more and more of only that same kind of work. so continuous change and personal growth are encouraged to help Associates learn more about themselves and about new things they don't know about but migh be right for them."
On Organizational Design, p. 205: "...emphasis always on effectiveness--never on "efficiency."
On Design, p. 240: "Lovelace is admired for having a great understanding of time and force and how to use time to manage or control force -- and for taking a very long-term view."
Strategy/Process notes:
On Economic forecasting, p.237: "Economic statistics are becoming less reliable, so being able to have the macro picture supplemented by the experience of specific companies is helpful."
On Research Process: p.246-247: "Lovelace proposed dual or even triple coverage...[sometimes] having three different and conflicting opinions on the same company."
On Research meetings with companies: p. 280: "Years ago, I learned to focus on the weak aspects of any argument, so I let management spin its web and then I focused on the weak spots."
Organization notes:
On People, p. 204: "The primary management challenge at Capital is not managin investments or serving investors, as important as these two functions obviously are...Capital's main challenge is finding, developing, and organizing talented professionals into an effective team that will continuously achieve superior results...'People like to do what they do well,'...'Very able people like to concentrate on what they do very well'...Associates are cautioned that others may form an opinion of what they do best and give them more and more of only that same kind of work. so continuous change and personal growth are encouraged to help Associates learn more about themselves and about new things they don't know about but migh be right for them."
On Organizational Design, p. 205: "...emphasis always on effectiveness--never on "efficiency."
On Design, p. 240: "Lovelace is admired for having a great understanding of time and force and how to use time to manage or control force -- and for taking a very long-term view."
April 27, 2013
Written by longtime passive-investing advocate Charles Ellis, Capital tells the story of a unique investment firm with remarkable long-term results. Capital Group is responsible for developing the EAFE index (later sold to morgan stanley) as a way to measure international investing performance; 12b-1 fees, which provide incentives for brokers not to churn client portfolios; and was the origin for venture capital giant Sequoia Capital, backer of so many prominent tech companies. Capital was selected to manage the first Emerging Markets closed end fund in 1986 by an arm of the world bank - which had called the fund a "third world" or "underdeveloped countries" fund. A potential investor told them to get a better name, and over a weekend the world bank people coined the term EM.
The company is managed for clients, associates and owners. They have always taken the long view, losing money for years at a time, particularly in international products. The founder and his son were very generous with sharing ownership and providing opportunities for younger associates to become owners. They have reinvested for growth in all areas of their business, claiming "ex mkt appreciation, underlying rate if growth is 7%, and our increase in investment people is also 7%, so there is no leverage."
They are committed to managing people to maximize what they are best at (and enjoy). They keep investing groups and business's units to manageable sizes so everyone knows each other. Turnover of people (and holdings) are the lowest in the industry.
Only in the last chapter is investing discussed ( aside from the multiple-counselor model). I think this reflects Ellis' belief that only after many conditions are met is it even possible to consider outperformance. Investment associates take 10 years to fully develop. Stocks are purchased when they are out of favor, the analyst must bring a new perspective and explain why conventional wisdom is wrong - and managers must have trust in the analyst on a fragile idea.
Highly recommended for people in the investment business, especially the 2nd half of the book.
The company is managed for clients, associates and owners. They have always taken the long view, losing money for years at a time, particularly in international products. The founder and his son were very generous with sharing ownership and providing opportunities for younger associates to become owners. They have reinvested for growth in all areas of their business, claiming "ex mkt appreciation, underlying rate if growth is 7%, and our increase in investment people is also 7%, so there is no leverage."
They are committed to managing people to maximize what they are best at (and enjoy). They keep investing groups and business's units to manageable sizes so everyone knows each other. Turnover of people (and holdings) are the lowest in the industry.
Only in the last chapter is investing discussed ( aside from the multiple-counselor model). I think this reflects Ellis' belief that only after many conditions are met is it even possible to consider outperformance. Investment associates take 10 years to fully develop. Stocks are purchased when they are out of favor, the analyst must bring a new perspective and explain why conventional wisdom is wrong - and managers must have trust in the analyst on a fragile idea.
Highly recommended for people in the investment business, especially the 2nd half of the book.
Read
June 21, 2016Excellent narrative on the best managed company in the world. Reading it was like a review of our own broker Parsonex Securities, Inc.
A couple of thoughts stayed with me:
1. Graham Holloway was an early wholesaler for American Funds & to get the mutual fund business into Edward Jones he agreed to take on Kansas as a territory which he did with gusto: “Everybody needs a story,” he said, “a story that makes sense to them; one they can relate to and remember. Stories are the best way-maybe the only way -people will remember. So I always told stories. Everybody likes to laugh. They listen better and they remember more when they’re enjoying themselves.
Brokers drove 40 or 60 miles to go to his meetings
So AFD wholesalers seek out and build long-term relationships with conservative stockbrokers who will find and work with conservative, long-term investors, not short-term traders.
THAT’S WHY REDEMPTIONS FOR THE AMERICAN FUNDS ARE LESS THAN ALF THE INDUSTRY AVERAGE.
2. Although the clear leader in emerging markets investing, Capital would not introduce a retail mutual fund specializing in emerging markets at the height of broker and investor interest. Its leaders believed – as was later shown to be the case – that individuals would not fully understand the price volatility inherent in emerging markets investments and would be all-to-tempted to sell low-AFTER a market decline – what they had bought high at the peak of public interest or excitement.
They did not create their first money market fund until after the initial hype was over – they didn’t want to give their investors and easy way out.
They were also “late” on some of the international funds for the same reasons. By waiting and buying on value, not hype they have for over 40 years with their New Perspective Fund shown steady and strong growth.
A couple of thoughts stayed with me:
1. Graham Holloway was an early wholesaler for American Funds & to get the mutual fund business into Edward Jones he agreed to take on Kansas as a territory which he did with gusto: “Everybody needs a story,” he said, “a story that makes sense to them; one they can relate to and remember. Stories are the best way-maybe the only way -people will remember. So I always told stories. Everybody likes to laugh. They listen better and they remember more when they’re enjoying themselves.
Brokers drove 40 or 60 miles to go to his meetings
So AFD wholesalers seek out and build long-term relationships with conservative stockbrokers who will find and work with conservative, long-term investors, not short-term traders.
THAT’S WHY REDEMPTIONS FOR THE AMERICAN FUNDS ARE LESS THAN ALF THE INDUSTRY AVERAGE.
2. Although the clear leader in emerging markets investing, Capital would not introduce a retail mutual fund specializing in emerging markets at the height of broker and investor interest. Its leaders believed – as was later shown to be the case – that individuals would not fully understand the price volatility inherent in emerging markets investments and would be all-to-tempted to sell low-AFTER a market decline – what they had bought high at the peak of public interest or excitement.
They did not create their first money market fund until after the initial hype was over – they didn’t want to give their investors and easy way out.
They were also “late” on some of the international funds for the same reasons. By waiting and buying on value, not hype they have for over 40 years with their New Perspective Fund shown steady and strong growth.
Read
February 4, 2016For an active fund manager, there's no greater honor than having indexing supremo Charley Ellis sing your praises. In this masterful corporate biography, Ellis describes the attitudes & processes that make Capital Group the world's most august, admired, and well-run investment manager. Scarcely recall what Capital does? That's by design, but here's a refresher course: while delivering 80 years of superior investment results, the firm also refined ''sticky'' mutual-fund distribution to a science; funded the venture-capital giant, Sequoia; constructed the international-investing benchmark, EAFE; and structured the first ''emerging markets'' fund in concert with the IFC expert who coined the very phrase. (If this roster of achievements, any one of which your average fund manager would kill to claim, doesn't whet your appetite to learn more, I don't know what will.) Anyone who manages money or runs a professional services firm should read this book.
January 2, 2014
This is an excellent vignette of a superior and large investment firm and investment culture. Although Capital Group has endured severe fund outflows in recent periods due to its fees and distribution model, the basics of its investment process remain largely intact and a good reason for future fund performance success. In particular, the author's commentary on how Capital Group tries to align investment personnel incentives with mutual fund shareholders was very enlightening and showed careful attention to balancing risk management and the pursuit of capital returns.
May 20, 2007
This book catalogs the history and success of one of the best mutual fund companies in America, but is more than just a story about a finance company. It is about building an organization for success. Success and great leadership are no accident.
February 7, 2009
Trying to learn about my new employer as well is its industry! Dry but valuable for my purposes at least...
March 8, 2010
just one big advertisement for capital group
Displaying 1 - 15 of 15 reviews