Report February 2023
Pareturn Columbus European equities Class I is up by 1.90% in February 2023 and by 9.66% in the last 3 months, higher than the European equity markets. Since inception in June 2008, Columbus has returned 147.4%, far outperforming the European equity markets.
We maintain our view that the key to the behaviour of the markets is the evolution of inflation. It has now peaked and begun its journey to lower levels and the markets have reacted to the upside. Investors are assuming a longer period of higher interest rates as they begin to accept the message from Central Banks that more time is needed to cool inflation in the face of resilient labour markets.
Market sentiment continues to shift depending on whether participants believe the economy is headed for a hard or soft recession. Expectations of where terminal rates end up in the US continue to rise, standing at 5.5% now and moving higher. Since 2012, Central Banks have committed to a 2% inflation target. The appropriateness of the 2% inflation target itself, could be questioned, and we could see changes over the years to a higher target (3%-4%). For the time being, Central Banks are sticking at least verbally to that target.
As for the quarterly results companies continue to surprise both in sales and profits as they publish their results. Nevertheless, they are moderating their guidance for the coming quarters and the message to control spending is spreading, in anticipation of a slowdown in economic activity.
As for the Columbus portfolio, the main performers during February have been Borregaard (Biochemicals, Norway) up 14.7% after publishing better than expected quarterly results with sales increases of more than 20% and Ebitda up by 38%. Dalata Hotel (Hotels, Ireland) also performed well (+10.9% up in February). The Irish hotel company also announced results that exceed the income of 2019, the last year before the pandemic, by more than 20%. On the negative side, Global Dominion fell on the stock market by -10.8% in February. The Spanish services and projects company surprised the market by increasing its stake in its renewable energy subsidiary from 35% to 98%. The transaction also changes the company’s financial profile by going from a net cash position to having financial debt. We await the presentation of the business plan to obtain more information on the new strategy.
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Since June 14, 2018, both national and foreign investors have been able to access the Columbus strategy through the Master-Feeder structure between Columbus 75 Sicav in Spain and the Luxembourg registered Pareturn Columbus European Equities Fund offers institutional and retail share classes denominated in euros. We have also just set up a sterling share class to facilitate investments from the UK. The Spanish Sicav has been dissolved in December 2022 to adapt to the new Spanish legislation. Total return for the Sicav since inception in June 2008 was 113.32%.