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.
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.