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.
This month Latitude Investment Management completed its first lap of the sun. While blowing out the lonely candle on our anniversary cake I ruminated over the role of patience in equity investing and noticed that this year also marks a very significant milestone for our equity portfolio. The average date of formation for our eighteen companies was exactly 100 years ago. The question is how we ensure our future investments have similar success.
A key conclusion is that frequent trading, tweaking and resizing of positions does more harm than good. Clearly sometimes you generate incremental performance, but doing so repeatedly relies on three assumptions that contradict our investment principles. Namely, that your conviction is still well placed; you can time the trades better than others; and that stock prices mean revert.
Conviction should be focussed on how you think, not what you think, in order to make better decisions. If investment success is the sum of one’s good decisions, then focus should rest on consistent decision making, and a disciplined investment process is the greatest means to that end. It’s often quoted that being right 60% of the time (or any number greater than 50%, however slight) will yield good results in the long term. Investors therefore need humility, and an appreciation that being wrong is a key pillar of success. Reducing winners in favour of losers is likely over time to allocate more of one’s capital to the wrong stocks, and to reduce the performance generated from the right ones. As an example over our first year ten of the eighteen stocks in our portfolio are currently sitting on paper gains and eight on paper losses. The average gainers are up 36% and the average losers are down 15%. Had we trimmed and added then these performance figures would be closer to +/-25% respectively, with far less pleasing results.
With respect to market timing, I have little to add to this worn debate other than there are three types of investors. Those who don’t time markets, those who say they don’t and do, and those who do. The majority of investors are caught in the middle. We are firmly in the former camp, and I advise focusing on those funds with discipline at either end of the spectrum and avoiding those in the middle.
Finally, returning to stock price mean reversion. While this is true for indices, our portfolio of century old stocks (on average!) demonstrates a clear counterfactual. Great business models, in great industries with great management offer a rare and lasting combination, which creates huge value for patient investors. Hopefully our focus on these businesses allows us to look forward to sharing in their success, and many more candles in the future.
|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|
12-13 St James’s Place, London, SW1A 1NP
+44 (0) 207 087 9273