As we know, the past two years have been extraordinary. As investors, we have seen remarkable volatility in our funds and their underlying holdings.
The extent of this volatility has been beyond the expectations of ourselves and our clients. In 2020, several of our funds went up by more than 100 per cent. However, in the past six months many of them have gone down by around 25 per cent.
In for the long-term
Does this make us risky or even bad investors? Only time will tell, but historically we have provided our investors with strong returns. We are sticking to our patient approach and tried and tested investment process.
This may be of little consolation to those who invested with us when performance was stellar and have recently endured sobering drawdowns. Yet it may be some comfort to know that volatility and its acceptance is a part of our investment proposition. Hence, we plead for patience, which in turn avoids crystallising loss.
The truth is we were neither heroes in 2020 nor villains more recently. During the pandemic, many of the long-term themes we were enthusing about became central to behaviours during the pandemic. We saw more use of e-commerce, food delivery, online entertainment, online communication for work, school and play. All this required more cloud computing power to make it work.
Many of the companies we had owned for some time such as Netflix, Amazon, Spotify, Zoom and Hello Fresh saw significant operational progress and share-price growth. Allied to this were breakthroughs such as the strides taken forward by Tesla in the manufacturing of electric vehicles and the Covid vaccine success at Moderna. It was a year in which many of the businesses we owned saw increased demand brought forward by necessity speeding up and eventual adoption.
It should not come as a surprise that 2021 was different. Several factors combined to change investor sentiment away from growth companies, especially those that had done so well the year before.
Markets had to contend with multiple unknowns and areas of risk, such as the impact of economies re-opening, prolonged supply-chain disruption, price inflation, tightness in the labour market and wage inflation, emerging variants of Covid, and a regulatory crackdown in China.
While macro-economic analysis is not our area of expertise, these elements have had a pronounced impact on the performance of our trusts and funds. More recently, market sentiment has been fluctuating because of the conflict in Ukraine.
Such factors combine to make investors understandably cautious and myopic and have driven the prices of growth stocks through the floor in the short term. But what of our companies and their actual long-term prospects? Against such a gloomy background, can we expect them to grow their earnings and that eventually this growth will be reflected in share price terms? We believe so.
