23rd February 2024
5 years ago we wrote an article celebrating our Vanbrugh Fund’s 10th anniversary, which contained 10 things we believed were key to its success back then. It can be found by following this link. With Vanbrugh turning 15 years old last week, we thought it worth highlighting one of those points that seems very appropriate in the current market conditions.
In 2019 we wrote: We are conscious of our fallibility but sufficiently confident to act differently and decisively. As investors we keep in mind the picture of a lion-tamer at the circus, knowing that overconfidence can be deadly. Investing is a humbling, uncertain business, and there will inevitably be times when performance slips. We had a difficult time in 2011, and no doubt there will be times ahead when our strategy is out of step with markets. However, acknowledging this fact instils discipline and self-confidence into our investment process. This is vital because the key reason why Vanbrugh has performed strongly versus its competitors is the way in which we have been prepared to hold a portfolio of investments that looks very different to a majority of our peers.
This paragraph is as relevant today as it has ever been. Vanbrugh’s portfolio is as attractively valued (in absolute and relative terms) as we can recall during Vanbrugh’s life. At the heart of our investment process is the belief that the starting valuation of an asset is the key determinant of future returns, which also provides downside protection in the form of a margin of safety if we are wrong. Unsurprisingly, this process results in a current portfolio that is very light on the most popular asset class in global markets at the moment, US large caps, making us look very different to the peer group and making the performance very different too. In 2022 that resulted in top quartile performance as the US stocks fell, but 4th quartile returns in 2023 as they rallied again. Looking at the 2 year performance (31/12/2021 to 31/12/2023) Vanbrugh is top quartile in its peer group as well as being ahead of the average over 3, 5 and 10 years (don’t get us started on why the industry has more short term performance columns than long term on the standard analytics tables).
In June 2022, the highly respected investor, Howard Marks wrote a memo called ‘I Beg to Differ’ where the broad message is that if you are an active manager, you have to do something different to the consensus if you want to generate above average performance. He says “If you hope to distinguish yourself in terms of performance, you have to depart from the pack. But, having departed, the difference will only be positive if your choice of strategies and tactics is correct and/or you’re able to execute better”, i.e. you can’t just be different for the sake of it, and we are not.
Our investment process has been tried and tested over 15 years of very different market conditions, including more than one type of crisis, and the fund is the 2nd best performer in the IA Mixed Investment 20-60% Shares Sector over that period, with the 7th lowest volatility. We think the performance of the fund is more remarkable when you consider that when Vanbrugh launched there were 153 funds in the Sector (then called the IMA Cautious Managed Sector) but today there are just 59 that have been around for as long as 15 years as funds are merged or closed down due to poor performance or sub-scale assets. This speaks to another of the key points made in the 10th anniversary article that refers to a claim made at its launch in 2009 that Vanbrugh is “A Fund with heritage, designed with flair and built to last.”
15 years in and we remain humbled by the trust placed in us by clients, and as custodians of that wealth we take our responsibilities extremely seriously, but we also share in the ups and downs with our own personal and family money invested in the funds. We are hugely excited by prospective returns and we hope to repay our investors’ faith through the delivery of strong absolute and relative returns over the coming years.
Daniel Lockyer – Senior Fund Manager
For professional advisers only. This article is issued by Hawksmoor Fund Managers which is a trading name of Hawksmoor Investment Management (“Hawksmoor”). Hawksmoor is authorised and regulated by the Financial Conduct Authority. Hawksmoor’s registered office is 2nd Floor Stratus House, Emperor Way, Exeter Business Park, Exeter, Devon EX1 3QS. Company Number: 6307442. This document does not constitute an offer or invitation to any person, nor should its content be interpreted as investment or tax advice for which you should consult your financial adviser and/or accountant. The information and opinions it contains have been compiled or arrived at from sources believed to be reliable at the time and are given in good faith, but no representation is made as to their accuracy, completeness or correctness. Any opinion expressed in this document, whether in general or both on the performance of individual securities and in a wider economic context, represents the views of Hawksmoor at the time of preparation and may be subject to change. Past performance is not a guide to future performance. The value of an investment and any income from it can fall as well as rise as a result of market and currency fluctuations. You may not get back the amount you originally invested. FPC2469.
