Pareturn GVC Gaesco Columbus European Equity Fund class I rose by +6.20% in July. In the last twelve months, the Fund fell by -12.65% but its 3-year performance remains strong at +20.21%. Since its inception in June 2008, Columbus has returned +140.93%, far outperforming European equity indices. The volatility in the last 12 months has been 16%.

The European Central Bank’s first interest rate rise in 8 years took place in July. The US Federal Reserve also raised interest rates again by 0.75pp, to 2.5%. These increases in interest rates have pushed down the yield on 10-year government bonds by almost 1pp from the maximum marked last month. The markets have already priced in the belief that these interest rate changes will suppress inflation whilst also causing a recession, which we believe will not be severe.

We continue to believe that the key to the market’s behavior is the future evolution of inflation. The dips we have seen in the price of oil and other raw materials, as well as the easing of supply chain disruptions, such as improvements in freight prices, hint toward inflation drops, which will materialize in the last quarter of this year and especially in 2023. We reiterate what we pointed out last month: we believe there will be a bullish stock market reaction once inflation data begins to improve. Finally, we also note that fixed income markets are anticipating falls in interest rates next year and that mutual funds continue to hold very high levels of cash. Both are positive aspects for future stock market performance.

Listed companies’ first half results had a positive impact on global stock markets, which have now recovered part of the losses suffered in the first half of the year. The published results of the companies show double-digit growth in sales and a narrowing of margins derived from cost increases in some sectors, but which still allow profits to grow. Only a quarter of the companies in the markets have published lower than expected results.

Three companies stood out in the Columbus portfolio this month:

• You Gov (+26.2% in July): The British online data analysis company increased revenues by 28% in the first half of the year whilst establishing healthier margins. The growth of their American business was the principal source of the top-line re-acceleration. Management does not appreciate any changes in customer behavior due to the macroeconomic situation.
• Senior Plc (+23.2% in July): The British industrial components company increased revenues by 21% in the first half of the year, also with healthier margins. Moreover, they announced they will be distributing dividends again.
• Neoen (+18.3% in July): The French renewables company income grew by 36% more and showed a 39% improvement in EBITDA. The company also increased its earnings guidance for this year.

Unfortunately, there was negative news from Scor SE. Due to losses associated with climate change, the French reinsurance company posted worse-than-expected results in its Property & Casualty business. In November, they will present a plan to reduce their exposure to this sector. The stock has a dividend of close to 10% with very attractive valuations. We remain positive on its value given the valuation and upcoming restructuring.

The markets are changing rapidly so we believe it is crucial to mold our portfolio to the new reality. The retreat of globalization, and the return of inflation, economic cycles and volatility will mark the markets in the future. Since the last great crisis, now more than 10 years ago, lower growth has been a signal to buy risky assets since, generally, an increase in liquidity was generated by the Central Banks. Investors got used to an environment in which equity and bond markets were negatively correlated, while Central Banks increased liquidity if economic activity deteriorated. We think this will be less likely going forward, as Central Banks assess the risks of increasing liquidity versus higher inflation. We also believe that equity markets will once again factor in more frequent business cycles. All this will generate opportunities for active management, like ours, to add substantial value to our clients.

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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.

During May, the Pareturn GVC Gaesco Columbus European MidCap Equity Fund Class I fell by -1.02%. In the last twelve months the Fund has fallen by -2.11%, but has risen by 29.82% in the last three years. Since its inception in June 2008, Columbus has returned 152.86%, comfortably outperforming European equity indices. The volatility in the last 12 months has been 13%. The fund has recently received a four-star rating from Morningstar.

May has been a continuation of the situation of recent months. Inflation remains at a four-decade high, with no evidence that it has yet peaked. Recent increases in energy and food prices, coupled with supply chain constraints, continue to affect Western economies. Expectations of interest rate hikes by central banks have increased. For this year, the markets are already discounting hikes by the US Federal Reserve at each of the next four meetings, with rates expected to end up above 3%. In Europe, the Central Bank already changed its tune in March and opened the door to start raising rates in July, with one more increase, at least, expected in September. The growth expectations for this year and next continue to be reduced while those for inflation have increased. Several private institutions predict a recession for next year, both in Europe and in the US that will be brief and relatively mild.

On the positive side, companies are posting better results than expected. In our meetings with companies, they confirm that sales and orders continue to be very strong, with inventories higher than normal, and that customers are accepting inflation-induced price increases. The short-term indicators related to services have improved in the first quarter of the year due to the lifting of travel restrictions, while those related to manufacturing have worsened due to the rising prices of raw materials and the disruptions in supply chains.

Several stocks in the fund have performed positively during the month, after presenting good results. We highlight the following:

• Krones (+17.78% in the month), the German bottling machinery manufacturer announced exceptional results (+12.9% revenue) in the first quarter of the year, while reaffirming its expectations for this year
• Interpump (+10.6%) the Italian company specialized in the production of water pressure pumps and one of the main groups in the hydraulic sector also presented its numbers for the quarter. Revenue increased by 15.5 % while maintaining their very high margins of 23.4%
• Unicaja (+9.05%), the Spanish bank, which has recently completed its merger with Liberbank, has benefitted from interest rate hikes. Its results were unsurprising, with increases in commissions and stable margins.

On the other hand, companies with exposure to the real estate sector such as VGP or Safestore have been heavily penalized by the expected increases in interest rates. Both companies are in growth segments (logistical parks and self-storage) In our conversations with their management, they highlight the strong increase in revenues for the coming years and their confidence in maintaining margins. We believe that the recent price decline is an opportunity to buy these quality companies.

Our portfolio continues to change and adapt to our expectations of the post-covid economic situation. In the Columbus Fund today, industrial and consumer stocks are prominent with a tilt to “economic normalisation stocks” — companies that were affected by the pandemic that are now returning to normal activity, such as tourism and leisure. We have not taken a position in companies related to the energy sector, which have performed well lately, since we do not have visibility on how energy prices will perform in the medium term. In late 2019, we had a sizeable position in stocks related to technology, software, renewable energy, and health (40% of the portfolio). In the intervening period, several of these holdings were sold for valuation reasons whilst some were taken over. Consequently, only 6% of the portfolio is invested in technology consulting businesses. We continue to maintain our renewables position in Neoen.

Value and growth are commonly used terms of distinction among equity investors who are often convinced of one approach or the other, however, we have a more pragmatic vision. We look for companies trading below our calculation of intrinsic value, but to hold these stocks for the long term we also look for significant potential for growth. In some cases, most of our expected return will come from revenue growth, and in other cases from a correction in the company’s undervaluation. By investing in a variety of opportunities, we are less exposed to changes in market sentiment, such as the one currently taking place.

Download monthly factsheet [PDF]

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.

During March, the Pareturn GVC Gaesco Columbus European MidCap Equity Fund class I fell -2.21%. In the last twelve months the Fund has risen by 5.39% and by 32.81% in the last three years. Since its inception in June 2008, Columbus has returned 158.6%, comfortably outperforming European equity indices. The volatility in the last 12 months has been 13%.

The increase in volatility that we have witnessed in equity markets in recent months has continued in March. Inflation remains at record levels for the last four decades, with no evidence that it has yet peaked. The US Federal Reserve has joined those Central Banks who have already begun to raise rates such as the United Kingdom, Brazil, Mexico, among others. In the US, the markets are already pricing in increases at each Fed meeting, and could end the year above 2%. In Europe, the Central Bank changed its tune in March and opened the door to increases in interest rates in the second half of the year. As a consequence, growth expectations for this year and next have been reduced while inflation increases. The interest rate curves of developed countries continue to rise — in Europe, yield curves have started to see some flattening with the German 10yr at 0.7% and 2yr at 0%, while in the US the spread between the 2yr and 10yr is completely flat. The probability of a period of low growth and high inflation, the much feared “stagflation”, begins to increase. The short-term indicators related to the service sector have improved in the first quarter of the year due to the lifting of travel limitations, while those related to manufacturing have worsened due to the rising prices of raw materials and disruptions in supply chains and production. Inflationary tensions in both raw materials and wages remain strong with customers accepting price increases, which has enabled companies to maintain margins. On the positive side, results season has been better than expected. In our meetings with companies, they confirm that both sales and orders continue to be very strong, while inventories are higher than normal.

Several stocks in the fund performed positively during the month, including Getlink (+11.65%), the operator of the tunnel between the UK and France, which benefited from the relaxation of COVID restrictions. Additionally, Unicaja, a Spanish bank with a large mortgage loan portfolio, has appreciated by 12.46% as the market prices in the anticipated increases in interest rates. Finally, due to positive sentiment toward renewables, Neoen, rose by 12.07%. On the contrary, industrial companies with exposure to the automotive sector such as Duerr (-17.07%) or Bodycote (-15.06%) have performed poorly given the ongoing high raw material prices and disruptions in the automotive sector.

Our portfolio continues to change and adapt to our expectations for the post-conflict economic situation. In the Columbus Fund today, industrial and consumer stocks are prominent with a tilt to “economic normalisation stocks” — companies that were affected by the pandemic and that are now returning to normal activity, such as tourism and leisure. We have not taken a position in companies related to the energy sector, which have performed well lately, since we do not have visibility on how energy prices will perform in the medium term. In late 2019, we had a sizeable position in stocks related to technology, software, renewable energy and health (40% of the portfolio). In the intervening period, several of these holdings were sold for valuation reasons whilst some were taken over. Consequently, only 6% of the portfolio is invested in technology consulting businesses. We continue to maintain our renewables position in Neoen.
Value and growth are commonly used terms of distinction among equity investors who are often convinced of one approach or the other, however, we have a more pragmatic vision. We look for companies trading below our calculation of intrinsic value, but to hold these stocks for the long term we also look for significant potential for growth. In some cases, the majority of our expected return will come from revenue growth, and in other cases from a correction in the company’s undervaluation. By investing in a variety of opportunities, we are less exposed to changes in market sentiment, such as the one currently taking place.

Download monthly factsheet [PDF]

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.

During January, Columbus European Equity Fund Class I fell by 5.08%. Over the past 12 months the Fund has risen by 19.23%, and by 47.42% over the past 3 years. Since inception in June 2008, Columbus’ return has been 175.73%, comfortably exceeding the broad European equity index. These results have been achieved with a volatility of 11.74% over the last year, below that of the Stoxx 600 at 13.1%.

The new year began with an increase in volatility and falls across global equity markets. There were several reasons for the correction, with the most important, in our view, being the strong increase in inflation, well above levels seen in recent years, and with little sign of a short-term peak. The reversal in trend for central banks, which have now begun to increase interest rates, was more than enough to spur this concern into action. As a result, markets are now expecting the Federal Reserve to begin steadily increasing rates from March. The inflation picture is partly influenced by the recent increase in energy prices which reached levels not seen since 2014. Prices have been partly impacted by the ongoing geopolitical tension between NATO and Russia over Ukraine and show little sign of abating. On the positive side, the company results have generally surprised positively, and economic activity continues to recover as the restrictions due to Covid are progressively withdrawn.

As for the portfolio, those sectors with positive correlation to higher interest rates and economic recovery have been outperforming, while the most highly valued stocks have seen the biggest declines.  The holdings which contributed most to performance during the month were Unicaja Banco (+4.8% in the month), the Spanish banking group and Dalata Hotels (+14%) in Ireland. Bank stocks in general tend to be beneficiaries in periods of rising interest rates and Unicaja is more sensitive to this impact than many other listed banks across the region. Dalata, by contrast, benefitted from the easing of Covid restrictions which has led to hopes of a more significant recovery in travel. The weaker contributors were two of our Italian holdings, Interpump (-15.7%), specialist engineering group and Reply (-17%) technology consultancy, which saw their valuations fall. Operationally both continue to perform extremely well.

It is interesting to look back on how our portfolio has been changing over the last two years, since before the pandemic hit. In late 2019, we had a sizeable position in technology, software, renewable and health related stocks (40% of the portfolio). In the intervening period several of these holdings were sold on valuation grounds, some were taken over, with now only 6% of the portfolio invested in technology consultancy businesses. In the Columbus fund today, industrials and consumer stocks are prominent with a tilt to “economic normalizations stocks”, which are companies that were hit by the pandemic and are now returning to normal trading conditions. Value and growth are commonly used terms of distinction among equity investors who often have conviction towards one approach or the other. However, as investors in the Columbus fund will be aware, we take a more pragmatic view. Clearly, we look for companies which trade below our calculation of intrinsic value, but in order to hold these companies for the longer term we also look for significant potential to grow. In some cases, most of our expected return will come from growth in revenues, and in other cases from a correction in the under-valuation of the company. By investing in a range of opportunities we are less exposed to shifts in market sentiment such as the change currently underway.

Download monthly factsheet [PDF]

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.