Report July 2021

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During July the Pareturn Columbus European MidCap Equity Fund rose by 5.93%, well above the 1.96% return of the benchmark STOXX 600 index. Over the past six months the Fund has risen by 17.8%, and by 39.8% over the past 12 months. Since inception in June 2008, Columbus’ return has been 162.9%, comfortably exceeding the broad European equity index.

Financial markets remain in a tug-of-war over the inflation outlook with an increasingly hawkish investment community on one side and an immovable (for now) central banking response on the other. Those on the investment side who see inflation as a more transitory issue generally back the accommodative stance of the central banks and help to cause the sort of swings we are seeing in bond yields. Over the month, despite the current inflationary spike we saw US 10-year yields fall back to as low as 1.16% from 1.7% levels as recently as May. The effect of this fall is to boost the performance of the longer duration ‘growth’ stocks which again outperformed the ‘value’ segment over the month.

From our perspective we can see the transitory nature of the current pressures but are fully alive to the possibility of a more structural return to inflation as governments increasingly shift to fiscal policy to support growth. Our approach, as always, is to focus on what we know and can reasonably predict, and to limit the portfolio risks regardless of the outcome. We continue to invest where we see structural growth potential and advantaged business models, as well as companies with significant upside as the post-Covid recovery progresses.

By far the biggest positive impact over the month was the acquisition of Akka Technologies (one of our top 10 positions, 3% of Columbus AUMs prior to the offer) by the Swiss listed staffing group, Adecco. The bid took the stock price very close to our internal fair value for Akka and represented 100% upside for the month. Akka has been a holding, since 2017, for Columbus, which tested our resolve during the pandemic as the shares endured a period of weakness. However, after spending time (online) with the management team and revisiting our investment case we maintained our commitment and added to the position. So it was gratifying when the value we saw was also identified by an industrial competitor who was able to take advantage of the discount in such a decisive way.

The other very solid performances came from Duerr (+25% for the month), the German listed engineering group, and Borregaard (+22.34%), the Norwegian biomaterials company. Both groups reported strong results for the first half of the year with growth well above consensus expectations, and for Duerr a significant increase in orders.

There were no material detractors from performance this month although the financial holdings (Scor and Unicaja) drifted down in line with the fall in bond yields.

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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.