Saturday, November 27

A good long-short fund for volatile times

The strengths of Veritas Global Real Return come from high-quality equipment and a proven process. Reasonable commissions also give you an edge over most competitors in the long-short space. ANDThe fund has a Morningstar Analyst Rating of Gold in all its classes.

The main manager is Andrew Headley since its inception. Your old partner Charles Richardson He left day-to-day portfolio management in January 2020 to focus on his role as CEO of the company.

Richardson has been Mike Moore, who joined the firm in 2014 as a technology analyst. Moore is involved in stock selection and portfolio building, while Headley has the final say. The two managers work with seven analysts, strictly following their quality-oriented but value-conscious approach.

Target: inflation plus 4 percent

The strategy has as obtarget profitability inflation plus 4 percent annualized over any five-year period. The focus is to identify quality companies with long-lasting competitive advantages and sustainable cash flows. The ideas are based on themes that they believe will have a great impact in the next three to five years.

In the second phase, in-depth fundamental research is carried out, highlighting the role of the team of analysts.

The rigorous focus on the quality of the companies and the awareness regarding the valuations cleads to an invertible universe of approximately 130 values. The portfolio, which is an exact replica of the long-only strategy, is made up of 25-35 stocks. Turnover remains below 50 percent per annum, consistent with the manager’s long-term focus.

The use of cash

Cash Allocation May Increase When Opportunities Are Few. In this strategy, the team adds a simple and effective hedging layer that is applied mechanically through a basket of short positions in index futures.

The strategy is 25 percent short when the estimated profitability of the candidate list is around 7 percent.

Short exposure increases to around 50 percent when valuations rise, lowering expected returns, and decreases when opportunities abound. We find this proven and disciplined quality-oriented approach highly competitive, for which it deserves a High Process Pillar rating.

Current exhibitions

At the end of September 2021, the fund had a net long exposure of 38 percent, resulting from a 55 percent short position in equity index futures and a 93 percent long position.

Net equity exposure has remained close to 50% during the 2015-2020 period, as a result of relatively high market valuations and low estimated rates of return for the universe of companies covered by the team.

The fund’s long portfolio is a reflection of the firm’s version of the long-only strategy. (Veritas Global Focus), with occasional exceptions.

Benchmark portfolio in 25-35 stocks

The benchmark portfolio is typically concentrated in 25-35 stocks. In September 2021 it was made up of 28 securities. As usual, the portfolio has little resemblance to the global equity index and is therefore highly dependent on the selections of the managers.

What’s more, large sector bets relative to the MSCI World Index are typical for this fund. For example, the healthcare sector (27 percent exposure) is a favorite.

The team also finds several opportunities among industrial companies, while avoiding the most volatile sectors, such as energy and materials.

Investors should be aware of the strong bias towards qualityBut we believe that this disciplined, distinctive and replicable process has a lot of merit.

The results have also been good so far. Overall, this strategy offers a combination of alpha and beta exposure at relatively reasonable costs and, in our opinion, represents a superior option for investors looking for a long-short global equity fund.

● Consult the magazine’s Fund Managers guide Investment to know the who’s who of the sector in Spain.

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