Sizable outperformance by the Fund in its first year of operations


Fund Commentary
18 Jan 2016


After a satisfactory performance for two consecutive months with October at +8.08% and November at +2.81%, the European financial markets experienced a severe decline in December. The Fund’s benchmark, the Eurostoxx 600 Net Return ended the month with a -5.03% return dragged down by the first rate increase in the US, the persistent weakness in commodities price – oil being the most talked about – and renewed concerns about emerging economies.

In that context, the Fund was down by 0.51% in the month to 31st December, outperforming its benchmark by 4.52% despite investment exposure increasing from 85% towards the 90% mark at the month end. Tom Tailor was the most significant monthly contributor to the performance, followed by Aubay and Kendrion. At the other end of the spectrum, Ascom, GfK and SAF-Holland were the three main detractors. The Fund initiated three new positions during the month: Moncler, Andritz and Spie without exiting any existing holdings.

Over the fourth calendar quarter to 31st December, the Fund’s performance was +8.18%. This compares to +5.54% for the benchmark index and translates into a +2.65% outperformance. Since inception on May 5th and until December 31st, the Fund recorded a -0.71% performance versus -5.09% for the Eurostoxx 600 Net Return leading to a 4.38% outperformance for the first truncated year. This 4.38% outperformance was achieved despite a -1.79% underperformance on the day of the launch resulting for the market friendly outcome of the UK elections and the absence of UK investments in the Fund’s portfolio. Another notable piece of information is the gross performance of the portfolio which has been positive since inception despite a decline of 5.09% for the benchmark.

Needless to say, the Investment Adviser will strive to continue along the same path for 2016. As of 31st December 2015, consolidated multiples of the Portfolio for 2016 stand at 13.5x PE, 7.2x EV/EBITDA, with a Free Cash Flow Yield of 7.0% and a net debt/EBITDA ratio of 0.2x. The Investment Adviser finds those multiple reasonable for well managed businesses with sound balance sheets and recurring value creation characteristics.

The views and statements contained herein are those of Pascal Investment Advisers SA in their capacity as Investment Adviser to the Fund as of 13/01/16 and are based on internal research and modelling.