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.
We live in a world of low returns and high volatility, all we can do is plan accordingly. This was the title of our first note in 2016, and has been the backbone of our portfolio construction since then.
The correction in markets in February was a reminder that still waters run deep. Global stock markets, which had generated an unprecedented period of returns without a fall of more than 5%, fell nearly 10% peak to trough in a matter of days.
Rotations and corrections like this are a common feature of a momentum market, especially where ETF and high frequency trading is increasingly prevalent. This underlying market structure is a clear source of risk in the short term, and opportunity in the long term, but how does one best position a portfolio as a result? To reduce risk we supplement our stocks with uncorrelated nonequity investments, but our risk control process really begins within the equity portfolio itself.
We diversify the portfolio by avoiding biases to specific thematic or macro-economic outcomes, or to any one style of stock (growth or value for example). Value stocks have performed poorly since 2010. Sentiment in the market oscillates between greed and fear; bulls and bears. Value stocks are businesses where uncertainty looms larger than certainty and bulls and bears alike are currently paying a steep premium for certainty. If you're bullish, you pay for failsafe future success of disruptive and innovative technologies, or secular growth themes. If you're bearish you pay for highly recurring earnings streams from defensive consumer staples stocks and other similar businesses. The discount applied to stocks with no catalyst in the near term is excessive, providing opportunities for investors with longer timeframes.
It was principally our decision to build portfolios in this way which has protected the fund this year. We can never time these corrections and are pleased that our value stocks (Nokia, Royal Mail, TDC and Advance Auto Parts) are all up more than 15% since the start of this volatile year. More details on these stocks, and all our holdings, are in our recently published Annual Report.
As volatility continues to rise and corrections become ever more common, many businesses will be shown to have lower levels of certainty than is currently being assumed. Value stocks may begin to surprise positively in this scenario. It’s for this reason that our “wish list” of purchase candidates is comprised mostly of cheaper stocks, with fantastic business models and management but where the current business outlook is uncertain. The rally in growth and defensive stocks is very over extended.
|Fund Launch Date||1st November 2016|
|Legal Structure||Irish Domiciled UCITS V Fund - ICAV|
|Regulator||Central Bank of Ireland|
|Regional Exposure||Global, primarily developed markets|
|Benchmark||The fund is not benchmarked|
£ - A/I IE00BDC7CZ89 / IE00BD37NY30
$ - A/I IE00BD37NZ47 / IE00BDC7JY67
€ - A/I IE00BDC7CX65 / IE00BDC7CW58
|Management Fee||1% per annum|
|Administrator||SEI Investments – Global Fund Services|
|Custodian||SEI Investments Trustee and Custodial Services (Ireland)|
|Firm Compliance||Optima Partners|
Emma Barrat - Emma.Barrat@latitudeim.com 12-13 St James’s Place, London, SW1A 1NP
+44 (0) 207 087 9273