Which global equity fund saw 30% returns in a pandemic?
‘Aggressive buying’ of stocks that would benefit from social distancing during the market downturn has helped the Lakehouse Global Growth fund to return 32% since the start of the year to 31 July, 2020.
According to data from FE Analytics, within the Australian Core Strategies universe, the fund was one of the best-performing funds in the global equity sector as the sector average was a loss of 3.6%.
Over one year, it returned 33% versus sector returns of 2%.
Manager and Lakehouse co-founder Joe Magyer said the fund had made the most of the opportunities presented by the market downturn as it was concerned the pandemic would be worse than people anticipated.
The fund held 14% in cash at the end of February but this fell to 7% the month later as the fund took advantage of the market downturn.
“We were aggressive buyers during the downturn, it was scary and you had to hold your nose because you didn’t know when the bottom would be but, at the same time, we are an active manager and if you didn’t buy during the downturn then you were not doing your job.
“We were early to realise the risks of the pandemic and social distancing and the opportunities it would bring. We thought it would be worse than people were saying so we were leaning into stocks that would be beneficiaries of social distancing.”
The fund was highly concentrated with only 20 holdings, including a large weighting to technology companies such as Amazon, Paypal and Facebook, which Maygel said gave the company a benefit of knowing its companies inside out.
“The fund is deliberately highly concentrated, if a position does not contribute to performance then it is a distraction. Some funds spread their bets during a downturn but we only saw a select number of stocks presenting an opportunity so we pushed our bets there.
“We know our companies really well so we can digest news faster than funds which hold a lot of stocks.
“Our bias is for high quality companies with strong balance sheets, people don’t pay enough attention to balance sheets but when the economy is struggling then it is those which have enough cash on their balance sheet that will really shine.”
AUTHOR
Laura Dew
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