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.
As autumn approaches we thought now was a good time for an update on the fund’s investment allocation. We continue to believe that thematic, style-biased and macro led equity portfolios concentrate risk unnecessarily, leading to sharper drawdowns and lower returns than more diversified portfolios. Despite being concentrated, our single stock portfolio remains diversified, with no discernible pattern for success (or failure) across our various different investments.
Advance Auto Parts (+65%) is up due to strong turnaround progress and a cultural improvement in its stores and management teams, and Shiseido (+44%) is up due to its continuation of high growth rates and increasing success in the EU and US markets. Imperial Brands (-13%) is down due to slower than expected earnings growth from their “investing for growth” plan, and KPN (-24%) has fallen as competition in their local market increases, especially in the mature business segment.
As we know, short term share price moves are often unconnected to underlying operating performance. Strong operating performance at Bank of America (+5%), Nokia (+23%), Tesco (+18%) and Autozone (+8%) has, in our opinion, far exceeded the recent share price moves. The reluctance of the market to reprice recent success implies a continued scepticism, which increases the potential value to the shareholders of the Horizon Fund. This is especially true given that the latter three companies tend to generate earnings which are counter-cyclical to the underlying economy, or at least independent of it. This defensive value is probably the most exciting component of our portfolio as we enter Q4 and 2019.
Beyond the stocks, our non-equity portfolio consists of two main holdings, US TIPS and Gold. US TIPS offer a great hedge on the banking exposure within the portfolio (due to the tight correlation with bond yields) as well as reducing cyclicality in the portfolio. Gold for more than a year now has been very negatively correlated to global stock markets (priced in GBP) making it a fantastic hedge if the markets soften. Moreover, net short positioning is at twice previous record highs and ETF out flows have seen their second worst streak this decade. Gold is a hard thing to own if the USD continues to rise but if the recent rally fades or reverses due to a weaker global outlook then gold will offer some protection.
With a balanced portfolio of investments, and increasing value across our defensive stocks we believe the portfolio is well positioned to face the many possible futures which the current levels of uncertainty may present. Please let us know if you would like to see any more data on any positions mentioned above, or to discuss the fund at more length.
*Equity performance figures YTD
|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|
|Share Classes||£ - 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|
|Contact Details||Alex Robins - firstname.lastname@example.org 12-13 St James’s Place, London, SW1A 1NP +44 (0) 207 087 9275|