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.
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.
