With market volatility high in the first quarter, this concentrated, quality focused global equity fund did what it does best – protect capital better than its benchmark and peer group.
For the three months ending March 31, the fund was down by 1.4%, handily beating the -6.5% showing of the MSCI World Index. Historically, the fund has experienced about half to two-thirds of the drawdowns of the market, as the man-agers place an extraordinary emphasis on preservation of capital.
This outperformance came from a couple areas. First, the fund is carrying a high level of cash, which at the end of March sat at more than a third of the fund. Also helping were the fund’s U.S. and UK stocks, which were net contributors to the performance.
In a recent commentary, managers commented that they continue to find the market valuations extremely rich, and as a result, they are having trouble finding new opportunities. Further, they have needed to trim exposure to a number of existing holdings to reduce risk in the portfolio as many have reached full valuation. The result is a very high cash balance, which at the end of March was nearly a third of the fund. This will help buffer against any downside in the markets, and provide ample dry powder should opportunities arise. It will also be a headwind in a rising market.
Still, this remains one of my favourites, particularly for periods of higher than normal market volatility, which I believe we will continue to experience in the near to medium term. I see this as an excellent core global equity holding for risk averse investors looking for global equity exposure. I expect it to provide average returns and excellent downside protection over the long-term.