Judging a Fund or Fund Manager

As an investor, you want your Fund to perform. As an advisor or wealth manager to your clients, you, of course, want a Fund that has done well and to have a reasonable expectation that this performance will continue. What do we want? We can assure you: we want the same!

Take 2019 as a case in point. Our returns for the 12 calendar months, in sequence, were : 7.86%, -1.10%, -1.76%, 10.89%, -0.59%, -0.66%, -2.18% -3.62%, -0.84%, -0.07%, 5.17%, 7.82%. We lost money in 8 months of 2019 but our overall return for calendar 2019 was 21.56%, with 13.0% of this return being delivered in the last two months of the year.

Of course, we would have preferred a smoother ride but that is not how equity markets work. Churns and turns are integral features of this game and it is necessary to have a strong stomach when investing in equities. In fact, you can almost certainly expect more volatility in 2020. But that shouldn’t bother any long-term investor – markets go up and they go down. If we are mindful, we can use this volatility to our advantage; allowing the market to serve us, rather than being slaves to its senseless daily gyrations. Our task is to invest in good businesses that are growing and providing real solutions to customer needs. If the business does well, we would expect the stock price to take care of itself. Over the long term, stock prices tend to track earnings fairly well – but rarely does this occur in a straight line.

Our cocktail formula is: Buy great businesses at sensible prices. Then hold onto them.

Because the market is inefficient, it takes time for mispricings to correct. However, we are perfectly prepared to wait for this re-rating when we are sitting on a portfolio of high quality businesses. Over the last 10 years, our patience has been well rewarded, as shown in the chart below:


10 Year Returns

  • Our Fund:                  363%
  • FTSE Small Cap:     180%
  • FTSE All Share:        121%

In pounds, shillings and pence……a sum of £1,000  invested on 1st January 2010 would now be worth:

  • Our Fund:                    £4,630
  • FTSE Small Cap:        £2,800
  • FTSE All Share:          £2,210

All return calculations are for the 10 year period from 31-Dec-2009 to 1-Jan-2020

Source: FE Trustnet

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