With stock markets trading close to highs, rising geopolitical risks and uncertainties over a Trump administration, investors are understandably concerned about increasing stock market volatility.
A great way of playing both the upside and downside potential is to invest in the VT Argonaut Absolute Return Fund (B79NKW0), which aims to deliver absolute returns irrespective of the direction of the stock market.
The fund is managed by Barry Norris who has skilfully navigated difficult markets in the past, while also delivering positive returns in rising markets. For example, during the last six equity market selloffs, which have recorded average losses of 15.9%, the fund has delivered an average total return of 6.9%.
Norris has achieved this by running a concentrated portfolio of high conviction stocks on the long side, betting they will go up in value, as well as a short portfolio of names Norris believes will fall in value.
The fund’s performance has been negatively correlated to equity market returns and the Morningstar long/short peer group.
Since inception in 2009 the fund has achieved a total return of 256.5%, beating the European Stoxx 600 index (the fund is invested mainly in Pan European equities) and the Investment Association peer group return of 97.1%.
A DIFFERENTIATED FUNDAMENTAL APPROACH
Norris combines active bottom-up proprietary fundamental equity analysis with thematic and macro awareness. He invests by applying ‘first principles’ thinking, and he uses but ‘rarely relies on’ external research when conducting research.
Norris believes great ideas are rare and they should count which is why he holds a relatively concentrated portfolio. While his approach is ‘high conviction’ by design, it is also flexible. ‘If we feel the facts have changed, we will change our positioning,’ explains Norris.
The manager sees analysing companies as a completely different skillset to creating a portfolio that reflects positive outcomes and therefore he is cognisant of the role both play in investment success.
Managing risk and avoiding large drawdowns are keys to compounding returns and Norris often finds that rejecting an idea is more important than selecting investments, which speaks to the manager’s disciplined mindset.
Short selling requires a unique and differentiated skill set, according to Norris, which often means many long/short strategies end up being long-only. Norris insists his short book is the greatest source of the fund’s risk adjusted returns.
Finally, he accepts that mistakes and error are part of the territory and represent opportunities to learn. ‘Our investment process is a product of 25 years of learning, refinements, and occasional mistakes. We are always looking to get better,’ states Norris.
HOW IS THE FUND POSITIONED?
The latest factsheet shows the fund was up 9.4% in November comprised of a strong 11% return from the long book and 1.5% decline in the shorts, taking the year-to-date advance to 13.2% and the five-year compound annual growth rate to 14% a year.
November’s performance contrasted with the prior month when the long book lost 1.8% and the shorts made a positive contribution of 3.2%.
Norris is fond of quoting Wristen’s law, which states: ‘Capital will always go where it’s welcome and stay where it’s well treated. Capital is not just money. It’s also talent and ideas.’
Around a year ago Norris started taking a closer look at Argentina following the election of economist Javier Gerardo Milei as president. His policies have completely changed the economic landscape for the better and this is reflected in the country’s stock market which is up 261% in the last year.
Norris has exposure to Argentinian bank Grupo Financiero Galicia (GGAL:BCBA) which is up 47% in the last six months and shale driller YPF (YPFD:BCBA) which was one of the best performing longs in November, gaining 53%.
Other big contributors last month were music and podcast streamer Spotify (SPOT:NYSE) which gained 25% and Anglo-Iberian airline and British Airways owner International Consolidated Airlines (IAG) which was up 23%.
The best performing shorts were Austrian semiconductor outfit AMS-Osram (AMS2:VIE) which fell 34%, and mRNA vaccine maker Moderna (MRNA:NASDAQ) which dropped 19%. The worst performing short was troubled US car rental group Hertz (HTZ:NASDAQ) which raced 68% higher. Ongoing charges on the fund are 0.86%.
These articles are provided by Shares magazine which is published by AJ Bell Media, a part of AJ Bell. Shares is not written by AJ Bell.
Shares is provided for your general information and use and is not a personal recommendation to invest. It is not intended to be relied upon by you in making or not making any investment decisions. The investments referred to in these articles will not be suitable for all investors. If in doubt please seek appropriate independent financial advice.
Investors acting on the information in these articles do so at their own risk and AJ Bell Media and its staff do not accept liability for losses suffered by investors as a result of their investment decisions.
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