Report November 2020

During November the Columbus Fund rose by 13.1%, slightly behind the 13.5% increase in the MSCI Mid Cap and 13.8% in the STOXX 600. Over the past six months the Fund has risen by 17.7%, and by +60.31% since the market’s low on March 18th. Year to date Columbus is also comfortably back into positive territory with a return of 1.7%, ahead of the -1.6% decline in the MSCI Mid Cap index and ahead of the -5.8% fall for the STOXX 600. Since inception in June 2008, Columbus’ return has been 121%, comfortably exceeding the broad European equity index.

Going into November most market commentators were focused on the US elections and the potential for instability in the case of a contested outcome. Despite this playing out as many had feared, the period of uncertainty had little or no impact on financial markets and by the end of the month the transition to a Democrat Party presidency had officially begun. For financial markets this news was overshadowed by the raft of positive vaccine news that came out during the month. Earlier in the year there had been genuine scepticism around whether a vaccine could be found at all, and any success being likely 18-24 months away. In this context it is easy to understand the very positive market response to 3 different vaccines being announced in such a short space of time. Clearly a remarkable achievement from the healthcare sector and demonstrates yet again the amazing achievements possible when the human race is faced with a problem. The travel and leisure, retail and even oil and gas sectors which had lagged over the year, rose sharply as investors looked beyond the current lock-downs towards a hopefully more normal 2021.

While there were no new positions started in November, however, we did finish acquiring our new holding in Zooplus, the German listed online pet supplies retailer. The group is the leading ecommerce petfood retailer in Europe with just over 50% of the online market. They sell into 30 countries across the region through two online brands, Zooplus and Bitiba and have shown consistently strong revenue growth. Customer retention rates are high with 91% of sales recurring, but with only ~15% of petfood sales currently online they have considerable scope for further expansion. The recent pandemic is likely to have been a positive environment for the group with both pet ownership and online shopping penetration having risen throughout.

The strongest contributions to performance in the month unsurprisingly coming from some of the more cyclically sensitive holdings. Akka Technology (French listed, engineering consultancy), Edenred (French, business services) and Fraport (German airport operator). We added Fraport to the fund in the early period of the pandemic when the valuation had collapsed in-line with air traffic. In our view the market was taking a very short term perspective towards a key asset in the European transport network which is virtually irreplaceable. Even after the very strong returns we have seen so far there remains significant further upside for the stock to regain the level of trading from before Covid. The most significant detractors, by contrast, were Rentokil (UK listed, pest control) and YouGov (UK, media services), both of which had outperformed in the period before the vaccines were announced and likely suffered some profit taking as investors raced towards the more cyclical sectors.

 

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We thank you for your trust and wish the best to you and your families during these uncertain times.

Since June 14, 2018 both domestic and foreign investors have been able to access the Columbus strategy via the master-feeder structure between the Columbus 75 Sicav in Spain (feeder) and the Luxembourg registered Pareturn GVC Gaesco Columbus European Midcap Equity Fund (master). The Luxembourg vehicle offers both institutional and retail share classes. 

Report October 2020

During October, the Columbus Fund declined by -3.06%, comparing favourably to the -3.62% fall in the MSCI Mid Cap and -5.3% in the STOXX 600. Over the past six months the Fund has risen by +7.84%, and by +41.71% since the market’s low on March 18th. Over the year to date Columbus has also fared relatively well with a fall of -10.1%, beating the closest benchmarks which range from -13% for the MSCI Mid Cap to -32.4% for the Ibex. Since inception in June 2008, Columbus’ return has been 97.3%, far exceeding European equity indices.

European equities largely traded sideways over the month against a backdrop of slightly weaker consumer confidence and a contracting PMI across much of the region. Headlines were once again dominated by Covid 19 as signs of a seasonal rise in cases led to renewed lockdowns in many European countries. The continued government furlough support across many European countries has helped to alleviate the short-term suffering of many workers but has been insufficient to prevent the eurozone unemployment rate form rising above 8%. While clearly necessary to support the many businesses affected by the government lockdowns, the increased debt will be a burden for a long time to come. Given that the result of the US presidential election remained uncertain it is unsurprising that equity markets experienced some weakness during the month.

October and November see the bulk of our third quarter reporting period and gives us a timely update of the operational performances of many of our holdings, as well as related businesses such as competitors or suppliers. Thus far the reports have been largely unsurprising with most companies still cautious regarding the near-term outlook. The unknown duration and further impact of the Coronavirus make forecasting more than usually difficult and so many firms are being purposely vague. What is clear, however, is how much has been achieved over the past months in terms of restructuring and efficiency gains to protect earnings and cash flow. In many cases the achievements are underappreciated by investors in terms of the additional workload and pressures endured across most businesses. Reviewing the relative performances within similar industries gives additional insight into the flexibility and strengths of the different business models. While none of this is to be actively desired it is incrementally useful information for assessing our convictions.

As mentioned in last month’s commentary we took the proceeds of the sale of long term holding in Ingenico and invested in a few new positions. One of these is VGP. VGP is a company we have followed for a long time and took this opportunity to add it to the fund. This Belgian listed company builds and, in some cases, operates logistics centres for industrial and retail clients in 12 countries across Europe. Still led by the founder, Jan Van Geet, the company has grown steadily from nothing to a market cap of €2.5bn over the past 22 years. Their process is consistent and proven to be highly repeatable. Although a real estate business, the company is not a REIT as they reinvest continually for growth rather than paying out to shareholders (but still providing an attractive dividend yield above 2%). A clever joint venture structure with Allianz means that they can quickly crystalise the value of newly built assets and effectively redeploy the capital. The recent acceleration in ecommerce can only be helpful to them over the coming years.

The strongest contributions to performance in the month came from Bodycote (UK listed, industrial heat treatment) and Edenred (French, business services). Edenred stood out for producing better than expected revenues during the third quarter, again demonstrating the strength of the business model. The most significant detractors, by contrast, were the software companies Avast (UK listed, security software) and Software AG (German, business software) which suffered a malware attack during the month.

 

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We thank you for your trust and wish the best to you and your families during these uncertain times.

Since June 14, 2018 both domestic and foreign investors have been able to access the Columbus strategy via the master-feeder structure between the Columbus 75 Sicav in Spain (feeder) and the Luxembourg registered Pareturn GVC Gaesco Columbus European Midcap Equity Fund (master). The Luxembourg vehicle offers both institutional and retail share classes. 

Report September 2020

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During September, the Columbus Fund declined by -1.80%. Over the past three months the Fund has risen by +5.48%, and by +44.62% since the market’s low on March 18th. This increase has brought the 12-month performance to +2.72%, despite the vast human and economic distress seen over this period. Over the year to date Columbus has also fared relatively well with a fall of -7.24%, beating the closest benchmarks which range from -9.70% for the MSCI Mid Cap to -13.01% for the Stoxx 600. Since inception in June 2008, Columbus’ return has been 102.11%, far exceeding European equity indices.

European markets drifted down slightly in September along with much of the rest of the world. However, against the recent trend they outperformed the US S&P500, helped by a hiatus in the strong recent run of the US large cap tech stocks. The positive performance of equity markets we have experienced since March struggled in September against the combined headwinds of Brexit, the looming US election and the ongoing disruption of the coronavirus. Yet despite these issues business confidence across much of Europe remained solid and many countries including Germany, France, Italy and most of Scandinavia registered improving data over the month.

As mid-cap investors we focus more on what the companies are telling us, and after the summer it was a good opportunity to catch up with a number of management teams. In general the tone remains cautiously optimistic but with many firms shy of providing guidance due to the uncertain nature of further government action around Covid-19. As we would expect from the very well managed businesses we prefer to invest in, the responses to the economic turmoil have been swift but measured. In many cases significant operational changes have been made to limit the financial and human impact of the virus and the associated government restrictions. It has clearly been a very challenging time across the board, but we have been impressed by the efforts of most of the companies we hold on the fund.

In September we finally sold our longer term holding in Ingenico after a return of 82%. In our view the recent takeover by Worldline crystalized the majority of the value in the firm at this stage and so we decided to redeploy he capital elsewhere. In this regard we are still in the process of building four new positions which we will outline once they are complete. All four offer substantial upside over the mid-term and are run by extremely competent teams and in three cases are still actively managed by the founders. The strongest contributions to performance in the month came from Neoen (French, renewable energy), Amplifon (Italian, hearing aid retailer) and Bodycote (UK, specialist heat treatment), while the largest detractors were Akka Technologies (Belgian, tech consulting) and Interpump (Italian, high pressure pumps).

Since June 14, 2018 both domestic and foreign investors have been able to access the Columbus strategy via the master-feeder structure between the Columbus 75 Sicav in Spain (feeder) and the Luxembourg registered Pareturn GVC Gaesco Columbus European Midcap Equity Fund (master). The Luxembourg vehicle offers both institutional and retail share classes.

Download monthly factsheet

We thank you for your trust and wish the best to you and your families during these uncertain times.

Since June 14, 2018 both domestic and foreign investors have been able to access the Columbus strategy via the master-feeder structure between the Columbus 75 Sicav in Spain (feeder) and the Luxembourg registered Pareturn GVC Gaesco Columbus European Midcap Equity Fund (master). The Luxembourg vehicle offers both institutional and retail share classes. 

Report August 2020

During August, the Columbus Fund rose by 5.97%, comparing favourably to the +4.97% increase in the MSCI Mid Cap and 2.86% for the STOXX 600. Over the past three months the Fund has risen by +9.27%, and by +48.9% since the market’s low on March 18th. This increase has brought the 12-month performance to +6.01%, despite the vast human and economic distress seen over this period. Over the year to date Columbus has also fared relatively well with a fall of -5.54%, beating the closest benchmarks which range from -8.93% for the MSCI Mid Cap to -27.02% for the Ibex. Since inception in June 2008, Columbus’ return has been 105.97%, far exceeding European equity indices. It is worth noting that the higher returns do not come with higher risk as the volatility of the portfolio over the last twelve months stands at 23% vs. 27% for the STOXX600.

Markets continued their upward trend throughout August, buoyed by the resilient macroeconomic data and the tantalising potential for a breakthrough in one of the multiple Covid vaccine trials. (At present there are 8 vaccines trials underway across Phase II and Phase III). However, European equity markets again lagged the US where the huge technology sector remained the main driver of performance. Like low coupon long dated bonds the long-term growth prospects of the technology companies become ever more valuable as interest rates and inflation expectations slip away. The extreme monetary stance of the central banks shows no sign of tightening with the Federal Reserve now promising low rates for an extended period even in the event of above target inflation.

The Covid-19 situation in Europe also remains extreme and the rise in new cases across many countries in the region has been driving headlines over recent weeks. Spain and France in particular saw infection rates back at levels not seen since the peak of the pandemic in April. This undoubtedly impacted travel and hospitality through the key summer period which will likely weigh on the unemployment figures that had remained surprisingly resilient through June. Looking forward the outlook for business in Europe is uncertain as the threat of renewed lock-downs remains very real in many countries. Within the European markets the UK maintains its lacklustre performance, with global investors still shunning the FTSE as a result of the on-going Brexit situation. This took another painful turn in the past few weeks as the government appeared to be backtracking on its previous agreement with the EU, causing widespread consternation.

Across the Columbus fund the positioning changed little, although we did begin positions in three new holdings which will be discussed once we have reached our target weights. We remain underweight across the more cyclical sectors such as materials, energy, autos and financials, with a continued preference for more stable growth businesses with strong cashflow characteristics and robust balance sheets. With no inkling of inflation as yet we are comfortable to maintain this position. During August the strongest performances came from our two alternative energy suppliers, Voltalia (+30%) and Neoen (+20%); as well as the two Spanish banks, Liberbank (+38%) and Unicaja (+30%) which leapt on the news of a merger of rivals in the space.

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We thank you for your trust and wish the best to you and your families during these uncertain times.

Since June 14, 2018 both domestic and foreign investors have been able to access the Columbus strategy via the master-feeder structure between the Columbus 75 Sicav in Spain (feeder) and the Luxembourg registered Pareturn GVC Gaesco Columbus European Midcap Equity Fund (master). The Luxembourg vehicle offers both institutional and retail share classes. 

Report July 2020

During July, the Columbus Fund continued to recover with +1.37% rise, comparing favourably to the + 0.24% increase in the MSCI Mid Cap and the falls of the STOXX 600 (-1.11%) and IBEX (-4.90%). Over the last three months the Fund rose by +6.91%, and by +41% since the market’s low on March 18th. This increase has brought the 12-month performance back to almost flat (-0.59%), which is remarkable given the devastating human and economic disaster we have all been living through. Over the year to date Columbus has also fared relatively well with a fall of -10.86%, beating the closest benchmarks which range from -13.24% for the MSCI Mid Cap to -27.98% for the Ibex. Since inception in June 2008, Columbus’ return has been 94.57%, far exceeding European equity indices. It is worth noting that the higher returns do not come with higher risk as the volatility of the portfolio over the last twelve months stands at 22.5%. vs. 26.9% for the STOXX600.

July provided yet another historic development along the path to closer political and economic union in Europe with the signing of the region’s Economic Recovery Fund. The aim of the vast €750bn fund is to support and stimulate the most affected of European economies funded through the provision of joint debt. This once again demonstrates the ability of the member-states to pull together just enough when the chips are down. Unsurprisingly the original proposal was diluted by a lower weighting towards grants versus loans, and a greater emphasis on structural reforms, but it was symbolic nevertheless. The agreement helped to support the European equity markets and added to the already significant support seen across most countries in the bloc. The pandemic has revealed a political will to provide aid rapidly and with minimal opposition in the face of adversity. The lessons of the delayed response to the financial crisis in 2008 can be thanked for this, with the longer-term consequences pitched neatly over the horizon.

In the near term the benefits are becoming evident as the Purchasing Managers data (PMI) in Europe revealed a more optimistic sentiment. In order to maintain this momentum, and to drive further improvements in stock prices, we will need to see this trend continue into Q4 after the normal seasonal hiatus. Investors are rationally looking through the very weak first half reporting season and into 2021 and so small incremental improvements in the trend data are highly supportive. The more targeted response of national governments with rapid localised action for any new outbreaks is to be commended and should help to keep the momentum on track. The current consensus assumes a profit reduction this year in the order of 36% for European corporate sector followed by a sharp rebound of 45% in 2021. This generally reflects our own, less precise views and the fund continues to be invested accordingly. We have made very few changes in the month and remain confident in the strong prospects for all our holdings over the next few years.

It is gratifying to see the portfolio continuing to perform better than European markets in general through this difficult period. As usual a few contributors stand out with Amplifon (+ 21% in July) and Borregaard (+ 22%) adding the most this month. Amplifon, a leading global hearing aid retailer benefitted from stronger than expected cash generation through the deepest period of lock down and gave bullish guidance for the remainder of the year, once again demonstrating the resilience of the group. Borregaard, the Norwegian biochemical company experienced strong demand for bioethanol for disinfectants which drove the highest EBITDA in the group’s history. On a less positive note July also brought a significant detractor, with Akka Technologies falling 35% after experiencing a decline in sales of 21% in the first half. The group’s increasing exposure to the digital sector was insufficient to offset the decline in demand across the automotive and aerospace sectors. Akka took on debt to make a significant acquisition before the Covid outbreak and so were unusually leveraged as the slowdown hit. We supported the deal and remain convinced of the strong opportunities for the group over the mid-term.

We continue to be positioned in companies where we see attractive return and risk characteristics, especially in the technology, consumer and services sectors. The fund has very limited exposure to the most cyclical industries (oil, raw materials, autos) and is underweight in financials (with ~2% in banking sector). We took advantage of the fall earlier in the year to move to be fully invested. This was achieved by increasing a number of existing positions and by adding two new names in the infrastructure sector that had fallen to very attractive levels in a longer-term context. The recovery from the lows has not been uniform and has focused on quality companies, with healthy cash generation and strong balance sheets, which in many cases have recovered the prices they had before the crisis. We believe that the initial “V” phase of the rebound has come to an end, but that the likely volatility of the coming months will bring new opportunities for patient and attentive investors.

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We thank you for your trust and wish the best to you and your families during these uncertain times.

Since June 14, 2018 both domestic and foreign investors have been able to access the Columbus strategy via the master-feeder structure between the Columbus 75 Sicav in Spain (feeder) and the Luxembourg registered Pareturn GVC Gaesco Columbus European Midcap Equity Fund (master). The Luxembourg vehicle offers both institutional and retail share classes. 

Report June 2020

During June, Columbus continued to recover with a +1.62% rise. Over the quarter the fund rose 15.22% compared to 12.59% for the STOXX 600, 16.00% for the MSCI Mid Cap Europe and 6.57% for the IBEX. This increase brought the fund performance over the past 12 months to -3.64%. Since the beginning of the year the absolute fall remains -12.38%, which although significant, is lower than the European indices, which range from -13.35% (MSCI Mid Cap) to -25.69% (IBEX). Since the start of Columbus’s management in June 2008, profitability has been 92.8%, far exceeding the European equity indices. The volatility of the portfolio in the last twelve months stands at 22.4% against a 25.2 of the STOXX600 NR.

The first quarter calm this year was shattered by the unprecedented closure of world economies as the global pandemic erupted and stock markets fell sharply. Almost equally abrubtly in the second quarter financial markets rebounded following the massive government and central bank response around the world. The rapid and unconditional support for the economy that came in the form of liquidity injections, rate cuts and fiscal packages is likely to continue well into 2021. Around $6 trillion of quantitative easing is expected globally in the next 12 months, three times greater than the peak of the QE stimulus in 2008. Having learnt their lessons from the financial crisis the central banks acted much more quickly and in a more coordinated fashion to stem the early panic in the markets. The success of this approach was amply demonstrated by the subsequent sharp recovery in asset prices, which has been the best for global equities since 2009, and one of the most profitable in history.

For markets to continue to rise in the short-term investors will need to see evidence of improving activity as economies begin to exit the shut-down phase. This will help to demonstrate the effectiveness of the expansionary policies, and the true extent of the damage to consumer sentiment. However, looking beyond the next few months we have little doubt that investors will continue to favour high quality businesses with the potential to grow, and our attention remains focused here. Therefore, despite the extreme volatility of the price actions the view within Columbus remains consistent. Our baseline scenario remains a rapid and deep recession followed by an equally rapid recovery. We believe that when the pandemic recedes, the market will begin to focus on the expected results of 2021 and beyond. From the lowest point of the crisis on March 18 the Columbus Fund has risen almost 38% and we believe that the initial phase of the “V” bounce is coming to an end. Despite this we expect volatility to remain elevated, which should lead to periodic price dislocations and provide attractive opportunities for active investors.

Regarding the Columbus portfolio, our strategy has not changed; we continue to be positioned in companies where we see attractive return and risk characteristics, especially in technology, consumption and services. We have no exposure to the most cyclical sectors (oil, raw materials, autos), and are underweight financial services with less than 2% of the fund in banks. We took advantage of the fall earlier in the year to move to a fully invested position by adding to existing holdings as well as taking a small number of new positions in the infrastructure sector where the stocks were pricing in no future recovery. The market’s move up from lows has not been uniform and has typically focused on quality companies, with healthy balance sheets and limited debt, which in many cases have recovered, or even exceeded their pre-Covid prices. In the second quarter the companies that contributed the most to performance were Ingenico, Avast, Autotrader, and Software AG and the detractors AKKA, Ageas and Liberbank.

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Since June 14, 2018 both domestic and foreign investors have been able to access the Columbus strategy via the master-feeder structure between the Columbus 75 Sicav in Spain (feeder) and the Luxembourg registered Pareturn GVC Gaesco Columbus European Midcap Equity Fund (master). The Luxembourg vehicle offers both institutional and retail share classes. 

Report May 2020

informe mayo

During the month of May the Columbus Fund continued to recover with a + 3.67% rise, ahead of the STOXX 600 and the IBEX 35 which increased by +3.04% and +2.52%, and lower than the MSCI Mid Cap (+4.76%). This performance helped to reduce the loss over the last 12 months to just -0.8%. Year to date, the fall is -13.56%, which although material, is lower than for the European indices, which range from -15.06% for the MSCI Mid Cap to -25.69% for the IBEX. Since inception in June 2008, Columbus has returned +89%, outperforming the European equity indices.

During May the European Commission released their detailed proposal for the future European Reconstruction Fund. Of the total €750bn, two thirds is expected to in the form of grants with the remaining third provided through loans. Although the agreement is yet to be approved by the member states, the market is hopeful that the debate beginning on the 18th of June will prove fruitful. While some flexibility will be required, having both Germany and France already aligned is a very positive first step.

Central Banks, for their part, have continued their unconditional support for the economy by increasing and lengthening liquidity injections that are likely to continue well into 2021. Central bank balance sheets continue to rise to historically high levels, with the response to Covid being much swifter and more aggressive than was initially seen during the financial crisis of 2008. Our baseline scenario, given both the fiscal and monetary response, remains a rapid and deep recession, followed by an equally rapid recovery. We believe that when the pandemic recedes, the market will begin to focus on the expected results of 2021.

As for the Columbus portfolio, we have spent many months with no positions across the more cyclical sectors (oil, raw materials, autos) and very small positions in financials. We continue to be positioned in companies where we see a better risk/return relationship, notably in technology, industrials and business services. We have taken advantage of the fall to increase a number of our existing holdings, as well as and to take positions in securities in the infrastructure sector (Fraport and Getlink) that have fallen to very attractive levels. This was partially funded through the sale of Biomerieux, the French clinical analysis company, following the recent 40% rise in the share price. We believe that the valuation has become unjustified, despite the fact that company has been a beneficiary of the current crisis. By contrast we have maintained our position in Ingenico despite the recovery of its share price this year (+ 28%). The take-over offer from Wordline is in progress and we believe there are strong prospects for the combined group as the European leader in payment services.

The stock market’s recovery from the lows has not been uniform and has focused on higher quality companies with strong balance sheets. Indeed, many of these companies have recovered to, or even above, levels seen before the pandemic struck. From the lowest point of the crisis on March 18 Columbus has risen by 36.24%, and we believe that the initial phase of the “V” bounce is coming to an end. In the coming months we are likely to see a period of increased volatility within and between sectors which we expect to provide opportunities for those of us prepared to take a slightly longer-term view.

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Since June 14, 2018 both domestic and foreign investors have been able to access the Columbus strategy via the master-feeder structure between the Columbus 75 Sicav in Spain (feeder) and the Luxembourg registered Pareturn GVC Gaesco Columbus European Midcap Equity Fund (master). The Luxembourg vehicle offers both institutional and retail share classes. 

Report April 2020

During the month of April the Columbus fund rose by 9.82%, ahead of the STOXX 600, MSCI Mid Cap and the IBEX 35 indices which increased by 6.24%, 8.65% and 2.01% respectively. This performance helped to reduce the 10.93% loss of the last 12 months, which while significant, was lower than the comparable indices The volatility of the portfolio over this period has increased slightly to 17.28%, but remains low in absolute terms. Since inception in June 2008, Columbus has returned 82.65%, outperforming the European equity indices.

Although markets have rebounded sharply over the past month, we remain cautious regarding the immediate outlook. Our baseline scenario, given the extent of both fiscal and monetary containment measures in many countries, continues to be one of rapid and deep recession, followed by an equally rapid recovery. The first forecasts by the IMF point to very significant declines of around 7.5% of GDP across Europe in 2020, concentrated in the first half of the year, followed by a strong recovery of 4.5% in 2021. Translated into profits for 2020, this supposes falls from 20% to 40% according to the sectors and companies, followed by increases in 2021 of a similar order. Working this through would leave them, over the two years, slightly below the level seen at the end of 2019. While the current focus is rightly on each company’s ability to withstand this period of lockdown, once the pandemic recedes, the market will begin to focus on the expected results of 2021.

As for the Columbus portfolio, we entered the crisis with somewhat higher cash levels than normal (around 13% of NAV), and one of our main positions Ingenico, had received a public offer from Wordline. Both companies have expressed their willingness to continue with the merger that will create a European and indeed global powerhouse in the field of payments.

We have spent several months with no exposure to some of the more cyclical sectors (oil, raw materials, autos), including very little exposure to banks and other financials. We continue to be positioned in companies where we see better returns for lower risk, especially in technology, consumption and services. We have taken advantage of the fall to add to previous holdings and to take positions in securities in the infrastructure sector (Getlink and Fraport) which have seen dramatic falls, but where the longer-term potential remains undiminished. These unique assets have strategic importance which is almost impossible to replicate; and while activity remains low for now the share valuations are reflecting a structural decline which is overly pessimistic in our view. We believe that the recovery will not be uniform across all sectors and that investors will continue to focus on quality companies with healthy balance sheets and controlled levels of debt. The Fund has performed well during the April bounce, comfortably outpacing the indices and we are confident that we are well placed for when the true recovery comes.

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We thank your trust and wish the best to you and your families during these uncertain times.

Since June 14, 2018 both domestic and foreign investors have been able to access the Columbus strategy via the master-feeder structure between the Columbus 75 Sicav in Spain (feeder) and the Luxembourg registered Pareturn GVC Gaesco Columbus European Midcap Equity Fund (master). The Luxembourg vehicle offers both institutional and retail share classes. 

Report March 2020

informe marzo

The sudden fall in equity markets in late February continued over the first two weeks of March driven by the unprecedented global nature of the pandemic and the relatively high valuations of stocks at the beginning of the year. At the low point in the month the European markets had fallen more than 35% in just 4 weeks. The speed of the decline was remarkable compared to previous bear markets with even the ‘Great Financial Crisis’ of 2008 taking almost a year to push markets down a similar amount. However, Europe was by no means exceptional in the recent fall, and as more and more countries put their economies on hold, we saw reactions from investors across all regions and asset classes.

Recently, ex-Fed Chairman Ben Bernanke argued that the virus impact will be more like a “major snowstorm or a natural disaster than …depression”. If he is right, then we should expect a relatively rapid rebound once the outbreak is controlled. Looking back at recent disasters (such as the Japan 2011 earthquake, Haiti hurricane in 2010 and the 2005 Asian tsunami) we find that sharp initial losses were typically made up after a few quarters. The pattern of growth around the 2003 SARS outbreak was similar – a big initial slump then a very strong recovery.

report march

Our baseline scenario, given the extent of both fiscal and monetary containment measures in many countries, is therefore one of rapid and deep recession, followed by an equally rapid recovery. The first forecasts by the IMF point to very significant declines of around 7.5% of GDP across Europe in 2020, concentrated in the first half of the year, followed by a strong recovery of 4.5% in 2021. Translated into profits for 2020, this supposes falls from 20% to 40% according to the sectors and companies, followed by increases in 2021 of a similar order to leave them, over the two years, slightly below the level seen at the end of 2019. While the current focus is rightly on each company’s ability to withstand this period of lockdown, once the pandemic recedes, the market will begin to focus on the expected results of 2021.

As for the Columbus portfolio, we entered the crisis with somewhat higher cash levels than normal (around 13% of NAV). We have spent several months with no exposure to some of the more cyclical sectors (oil, raw materials, autos), including very little exposure to banks and other financials. We continue to be positioned in companies where we see better returns for lower risk, especially in technology, consumption and services. We have taken advantage of the fall to add to previous holdings and to take positions in securities in the infrastructure sector which have seen dramatic falls, but where the longer-term potential remains undiminished. We believe that the recovery will not be uniform across all sectors and that it will continue to focus on quality companies with healthy balance sheets and controlled levels of debt. To the end of March the Columbus Fund fell slightly less than the MSCI Mid Cap and IBEX indices, and slightly more than the STOXX600 as we would expect given the mid-cap focus. The fund performed well during the bounce in markets through the latter half of the month and we are confident that we are well placed for when the true recovery comes.

We thank your trust and wish the best to you and your families during these uncertain times.

Since June 14, 2018 both domestic and foreign investors have been able to access the Columbus strategy via the master-feeder structure between the Columbus 75 Sicav in Spain (feeder) and the Luxembourg registered Pareturn GVC Gaesco Columbus European Midcap Equity Fund (master). The Luxembourg vehicle offers both institutional and retail share classes. 

Report January 2020

During January the Pareturn Columbus Fund fell by -1.50% while the STOXX 600, MSCI Mid Cap and the IBEX 35 declined by -1.23%, -1.00% and -1.90% respectively. For the last 12 months, the return performance is 17.71%. Five and seven year returns are +24.16% and +74.36% respectively and, since the genesis of Columbus in July 2008 the Fund has returned +115.92%, exceeding that of European equity indices. The volatility of the portfolio remains at 11.7%, much lower than the average of recent years and similar to the volatility of the STOXX 600.

The year began well for the financial markets with the signing of the initial trade agreement between the US and China, but unfortunately this positive sentiment quickly reversed as news of the rapidly spreading Corona virus moved to dominate the headlines. Markets are understandably concerned about the potential economic impact of the outbreak, not only in China but across the globe. China maintains a crucial position in global supply chains and their growing levels of domestic consumption are supportive of many international companies. At Columbus our approach is to look through incidents such as this and look for opportunities if stocks are unduly devalued in this process. We know from the history of similar events (SARS, Avian Flu, Ebola etc) that when the situation is contained markets typically recover quickly.

In our domestic European markets the economic picture remains largely unchanged with subdued growth across much of the region. The most notable event during the month was the departure of the United Kingdom from the EU. The 12 month transition period is now underway, although an extension of this period is highly likely.

As with the European economies, the portfolio changed little over the month. We continue to gently reduce our exposure to the more cyclical sectors such as banks, natural resources and energy. We remain positively positioned across the sectors where we see the most attractive mix of risk and reward, namely consumer, business services and technology. The average valuations of the fund remain attractive in our view, particularly as we expect to see above average growth without paying a valuation premium to the market overall. As always our focus remains on owning companies with high capital returns and free cash generation but trading at discounted valuations.

At the time of writing we are at the early stages of the year-end reporting season for the 2019 fiscal year. Our experience so far has been generally positive with most of the early reporting companies meeting or beating expectations. The strongest performers in the month were the renewable energy companies, Solaria and Voltalia, which rose 24.3% and 15.7% respectively. Biomerieux, the French clinical diagnostics business, was an unusual beneficiary of the Corona virus which saw their shares rise 12.7%. The weakest performance came from our long term holding in the cybersecurity business, Avast (-5.3%). The Czech company announced the closure of their ‘Jumpshot’ subsidiary in response to concerns that it was collecting and selling aggregated browsing history data from its huge user base. The company responded swiftly to the allegations and immediately wound down the business in order to avoid any repetitional damage.

On the first day of trading in February one of the Fund’s largest positions, Ingenico (the French listed payment company) received a buy-out offer from their local rival, Worldline. The offer, in stock and cash, was at a 17% premium to the listed price and comes after the shares have risen by 120% over the prior 12 months. We will comment more fully in February’s report but we anticipate that the combination will create a strong global competitor in this space.

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Since June 14, 2018, the Master-Feeder structure between Inversion Columbus 75 Sicav (feeder) and the compartment in Luxembourg, Pareturn GVC Gaesco Columbus European Midcap Equity Fund (Master), has been operational. This structure allows domestic and foreign investors to access Columbus’s strategy from a vehicle established in Luxembourg, with two types of shares according to investment volume.

The creation of this structure does not carry any type of fiscal contingency for current investors. The compartment is available on the AllFunds, Inversis and MFEX fund platforms.