During October, the Columbus Fund declined by -3.06%, comparing favourably to the -3.62% fall in the MSCI Mid Cap and -5.3% in the STOXX 600. Over the past six months the Fund has risen by +7.84%, and by +41.71% since the market’s low on March 18th. Over the year to date Columbus has also fared relatively well with a fall of -10.1%, beating the closest benchmarks which range from -13% for the MSCI Mid Cap to -32.4% for the Ibex. Since inception in June 2008, Columbus’ return has been 97.3%, far exceeding European equity indices.
European equities largely traded sideways over the month against a backdrop of slightly weaker consumer confidence and a contracting PMI across much of the region. Headlines were once again dominated by Covid 19 as signs of a seasonal rise in cases led to renewed lockdowns in many European countries. The continued government furlough support across many European countries has helped to alleviate the short-term suffering of many workers but has been insufficient to prevent the eurozone unemployment rate form rising above 8%. While clearly necessary to support the many businesses affected by the government lockdowns, the increased debt will be a burden for a long time to come. Given that the result of the US presidential election remained uncertain it is unsurprising that equity markets experienced some weakness during the month.
October and November see the bulk of our third quarter reporting period and gives us a timely update of the operational performances of many of our holdings, as well as related businesses such as competitors or suppliers. Thus far the reports have been largely unsurprising with most companies still cautious regarding the near-term outlook. The unknown duration and further impact of the Coronavirus make forecasting more than usually difficult and so many firms are being purposely vague. What is clear, however, is how much has been achieved over the past months in terms of restructuring and efficiency gains to protect earnings and cash flow. In many cases the achievements are underappreciated by investors in terms of the additional workload and pressures endured across most businesses. Reviewing the relative performances within similar industries gives additional insight into the flexibility and strengths of the different business models. While none of this is to be actively desired it is incrementally useful information for assessing our convictions.
As mentioned in last month’s commentary we took the proceeds of the sale of long term holding in Ingenico and invested in a few new positions. One of these is VGP. VGP is a company we have followed for a long time and took this opportunity to add it to the fund. This Belgian listed company builds and, in some cases, operates logistics centres for industrial and retail clients in 12 countries across Europe. Still led by the founder, Jan Van Geet, the company has grown steadily from nothing to a market cap of €2.5bn over the past 22 years. Their process is consistent and proven to be highly repeatable. Although a real estate business, the company is not a REIT as they reinvest continually for growth rather than paying out to shareholders (but still providing an attractive dividend yield above 2%). A clever joint venture structure with Allianz means that they can quickly crystalise the value of newly built assets and effectively redeploy the capital. The recent acceleration in ecommerce can only be helpful to them over the coming years.
The strongest contributions to performance in the month came from Bodycote (UK listed, industrial heat treatment) and Edenred (French, business services). Edenred stood out for producing better than expected revenues during the third quarter, again demonstrating the strength of the business model. The most significant detractors, by contrast, were the software companies Avast (UK listed, security software) and Software AG (German, business software) which suffered a malware attack during the month.
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.