Latitude Horizon Fund


THE OBJECTIVE OF THE LATITUDE HORIZON FUND IS TO DELIVER CAPITAL APPRECIATION OVER THE LONG TERM BY HOLDING A CONCENTRATED PORTFOLIO OF STOCKS, WHILST LOWERING THE EQUITY RISK THROUGH A SELECTION OF NON-EQUITY INVESTMENTS. 

April 2018 Commentary

Economists know the price of everything and the value of very little. Macroeconomists are particularly guilty. Over recent decades very little has been done to address the fundamental failings of those wishing to predict the direction of market cycles, and shifts in GDP across the world. Accuracy still eludes them. Huge progress, however, has been made in the field of microeconomics, with no greater example than that of behavioural finance.

This study of individual agents within an economy (consumers or CEOs for example) provides great insight into how incentives alter outcomes at an aggregate level. Irrational biases exist in human action, and can be exploited.

Big brands, for example, have poured billions into advertising to drive customers to purchase goods with high perceived value as opposed to demonstrable value. Our holdings in Unilever and Shiseido are obvious examples of where consumers happily pay a premium price for a branded product when a cheaper product of similar quality may exist elsewhere. Should they?

The bear’s argument suggests that this irrational decision making will end, and brands will suffer. The network effect from global distribution platforms such as Amazon, combined with the accessibility of advertising platforms such as Facebook, have lowered barriers to entry to threatening levels.

I disagree. Brands are a hack on choice; a route to curation in a world awash with busy people not wanting to make tiny decisions. Buying brands is rational. Businesses may be under threat from new brands, as they always have been, but not an entirely new business model.

Amazon is a phenomenal brand, and I may buy their batteries as a result. I still wont buy their toothpaste, or beer, or face cream. Start up brands such as Meantime beer and Fever-Tree will chip away at larger businesses’ portfolios but are being bought faster than new entrants are being created. Unilever has faced similar threats for 90 years and on 18x PE with nearly 10% annual earnings growth I believe the shares still offer compelling value.

The incidental beneficiaries in this story may be the supermarkets (like Tesco) who still dominate distribution of food and most household products. With increasing dependency from branded goods companies and an ability to drive private label products, the spread between Unilever’s 18% margin and Tesco’s 3% may begin to narrow. Owning both appears the most rational decision to us.

Fact Sheet
Key info
Fund Launch Date 1st November 2016
Legal Structure Irish Domiciled UCITS V Fund - ICAV
Regulator Central Bank of Ireland
Base Currency Sterling
Regional Exposure Global, primarily developed markets
Benchmark The fund is not benchmarked
Share Classes £ - A/I IE00BDC7CZ89 / IE00BD37NY30
$ - A/I IE00BD37NZ47 / IE00BDC7JY67
€ - A/I IE00BDC7CX65 / IE00BDC7CW58
Management Fee 1% per annum
Performance Fee 0%
Dealing Daily
Administrator SEI Investments – Global Fund Services
Custodian SEI Investments Trustee and Custodial Services (Ireland)
Auditors PriceWaterhouseCoopers
Legal Council Matheson
Firm Compliance Optima Partners
Contact Details Alex Robins - alex.robins@latitudeim.com
12-13 St James’s Place, London, SW1A 1NP
+44 (0) 207 087 9275
Documents
Fund Reports