The fund was launched in 2012 and is managed independently of a benchmark. This concentrated strategy invests only in the least volatile businesses that can offer greater resilience than the broader equities market.
High conviction portfolio of 25-30 businesses which are likely to prove more resilient across the cycle
A focus on value opportunities amongst non-cyclical companies, targeting parts of the market that have temporarily fallen out of favour
Investing in companies with high sustainable returns on capital with the aim of delivering CPI +6%
February 2019 - Latest commentary
World markets rose in the low-mid single digits in USD terms, driven by the US and European markets, prolonging the strong January rally. This result was supported by strong job creation in the US, a pause in the Fed’s rate hikes, as well as Donald Trump’s goodwill to conduct trade talks with president Xi. These positive developments were cooled by a prolonged Brexit process in the UK; low growth and IFO figures in Europe; and weak Philly Fed and retail indicators in the US. In this environment the USD strengthened against the main currencies, while the Oil price continued rising, reaching $65 as Saudi Arabia’s largest site ran into production problems and as Nigeria approaches elections. Industrials and IT performed the best with telecoms and discretionary lagging the overall market.
The fund delivered positive absolute returns and beat its CPI benchmark, but lagged the broader equity market which was driven by more cyclical sectors. The fund was also held back by our stock selection in healthcare and IT, where UnitedHealth Group, HP and Cigna Corp all fell in the double digits. On its earnings release HP disclosed a tough pricing environment as well as share losses due to a channel mix shift toward online. While these facts affect our short term estimates they have very little effect on the long term cash generation capabilities of the business. UnitedHealth and Cigna were both victims of political news, as democrats proposed the “Medicare for All” bill aimed at galvanizing the party’s liberal base. Abolishing private healthcare would indeed permanently impair the value of a plethora of companies in the space, but we view this outcome as exceedingly unlikely and therefore any price reaction immensely premature. Conversely, the fund was rewarded by a broad selection of companies – eBay, Zimmer and AON. Notably, eBay rose in the double digits, continuing its meteoric rise since the activist fund Elliot took a 4% stake in the company and addressed the board with a value creation plan. Zimmer performed strongly on not much news, but as is often the case, extreme undervaluation can become its own catalyst. Aon delivered its FY results revealing better than expected organic growth and margins, corroborating its long term transformation into a quasi-consulting business.
Previous months’ commentaries are contained within the fund factsheets.