Report June 2020
During June, Columbus continued to recover with a +1.62% rise. Over the quarter the fund rose 15.22% compared to 12.59% for the STOXX 600, 16.00% for the MSCI Mid Cap Europe and 6.57% for the IBEX. This increase brought the fund performance over the past 12 months to -3.64%. Since the beginning of the year the absolute fall remains -12.38%, which although significant, is lower than the European indices, which range from -13.35% (MSCI Mid Cap) to -25.69% (IBEX). Since the start of Columbus’s management in June 2008, profitability has been 92.8%, far exceeding the European equity indices. The volatility of the portfolio in the last twelve months stands at 22.4% against a 25.2 of the STOXX600 NR.
The first quarter calm this year was shattered by the unprecedented closure of world economies as the global pandemic erupted and stock markets fell sharply. Almost equally abrubtly in the second quarter financial markets rebounded following the massive government and central bank response around the world. The rapid and unconditional support for the economy that came in the form of liquidity injections, rate cuts and fiscal packages is likely to continue well into 2021. Around $6 trillion of quantitative easing is expected globally in the next 12 months, three times greater than the peak of the QE stimulus in 2008. Having learnt their lessons from the financial crisis the central banks acted much more quickly and in a more coordinated fashion to stem the early panic in the markets. The success of this approach was amply demonstrated by the subsequent sharp recovery in asset prices, which has been the best for global equities since 2009, and one of the most profitable in history.
For markets to continue to rise in the short-term investors will need to see evidence of improving activity as economies begin to exit the shut-down phase. This will help to demonstrate the effectiveness of the expansionary policies, and the true extent of the damage to consumer sentiment. However, looking beyond the next few months we have little doubt that investors will continue to favour high quality businesses with the potential to grow, and our attention remains focused here. Therefore, despite the extreme volatility of the price actions the view within Columbus remains consistent. Our baseline scenario remains a rapid and deep recession followed by an equally rapid recovery. We believe that when the pandemic recedes, the market will begin to focus on the expected results of 2021 and beyond. From the lowest point of the crisis on March 18 the Columbus Fund has risen almost 38% and we believe that the initial phase of the “V” bounce is coming to an end. Despite this we expect volatility to remain elevated, which should lead to periodic price dislocations and provide attractive opportunities for active investors.
Regarding the Columbus portfolio, our strategy has not changed; we continue to be positioned in companies where we see attractive return and risk characteristics, especially in technology, consumption and services. We have no exposure to the most cyclical sectors (oil, raw materials, autos), and are underweight financial services with less than 2% of the fund in banks. We took advantage of the fall earlier in the year to move to a fully invested position by adding to existing holdings as well as taking a small number of new positions in the infrastructure sector where the stocks were pricing in no future recovery. The market’s move up from lows has not been uniform and has typically focused on quality companies, with healthy balance sheets and limited debt, which in many cases have recovered, or even exceeded their pre-Covid prices. In the second quarter the companies that contributed the most to performance were Ingenico, Avast, Autotrader, and Software AG and the detractors AKKA, Ageas and Liberbank.
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.
