Columbus Report Fourth Quarter 2022

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.

Pareturn Columbus is up by 9.71% in the last quarter of 2022 in line with European markets. During December it fell by -1.09%, less than markets. During 2022, it fell by -23.2%, the worst year since we started in 2008. Since inception in June 2008, Columbus has returned 123%, far outperforming the European equity markets.

Inflation was the dominant economic and financial issue of 2022 for most countries around the world. Three things seem to have changed as we begin 2023. The first is that inflation is starting to come down globally and, in many respects, has come down faster than markets anticipated. In response to falling inflation, markets have begun to price in peak interest rates from central banks in the last part of this year and in 2024 and beyond. Finally, China has reopened following the end of the Covid restrictions, adding to global economic growth.

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. In this new year, investors will also focus on what kind of recession we get, long or short, and how deep, or if it is simply an economic slowdown and recession has been avoided.

A very important development is that Europe has managed to make it through winter so far without severe energy shortages, thanks to above normal temperatures, ample supplies, and reduced consumption. Gas storage sites are around 81% full, some 20 percentage points above the five-year average. The region is on track to end the season with inventories over 50% and more than enough gas to completely replenish its storages by the start of next winter.

We have transitioned into a new investment era over the last 12-18 months. The post-global-financial-crisis “free money era”, which supported outperformance from growth, technology, and US equities, has ended. The brave new world which investors face supports the return of price to the centre of the investment process.

For equity investors, we view Europe as better placed relative to US equities, with support from valuation for similar growth profiles and a soft US dollar. Europe also has greater exposure to China re-opening. We would also consider growth or quality at a reasonable price. It’s an evolution that makes the global economy and investment portfolios subject to a wider range of potential outcomes.

As for the portfolio, the main performers during the quarter have been Durr AG (+49.9%), a German industrial company; Scor SE (+45.8%) reinsurance provider and Elementis (+33.4%) a supplier of raw materials. Detractors were the bus company National Express (-22.9%) and the digital services company Reply (-0.5%). The strong price movements were not reactions to specific company news.

 

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

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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 (feeder) and the registered Pareturn GVC Gaesco Columbus European Midcap Equity Fund in Luxembourg (master). The Luxembourg vehicle offers institutional and retail share classes denominated in euros. We have also just set up a sterling share class to facilitate investment from the UK. The Spanish Sicav was dissolved to adapt to the new Spanish legislation. Total return for the Sicav since inception in June 2008 was 113.32%.