active, directly-held investments with complementary risks and returns for less volatility
‘active, directly-held investments with complementary risks and returns for less volatility’
EF Tellsons Endeavour™ Fund is a UCITS V open-ended investment company listed in London. This means the regulatory oversight, reporting requirements and investor protections afforded by this fund are of the highest level available under current UK legislation. The Authorised Corporate Director for the Fund is Elite Funds, part of Way Fund Managers Ltd, with over £1bn of funds under administration and they bring custodian and depositary Northern Trust and fund accountant Apex to bear on the strength of the fund structure and security of investors’ funds.
The Endeavour Fund seeks capital growth with less of the volatility of equities. Endeavour invests in global equities, bonds, unhedged currencies and various other instruments that may reduce the volatility of the fund affording some protection of capital in times of market stress. It is the only fund we invest at Tellsons and our money is invested in it.
So what kind of investment outcome might investors experience with Endeavour through the cycle?
What might ‘growth with less volatility’ look like?
The investment outcome we aim for over a full business cycle is to achieve a return 3-4% above the Fund’s benchmark and as close as we can get to the long-term return of equities. The benchmark is the average total return of short-dated government bonds and CPI inflation. From the experience of market returns over the past 80 years, this would suggest a relatively stable benchmark of around 3.5% and our aim to deliver an annualised return of 6-7% pa might be achievable.
How do we reduce volatility?
The equities in the Fund are invested alongside a range of other investments that behave very differently to equities most of the time. These other investments are said to diversify those equity risks and can include the following: government and corporate bonds, various forms of exposure to precious metals like gold, a limited amount of foreign currency exposure and the prudent use of hedging strategies (within the parameters of efficient portfolio management and as permitted in UCITS V regulations).
Since inception as a public fund, Endeavour has on average experienced only one fifth of peak to trough declines in equity market sell-offs, substantially protecting our investors from the worst of market stress (as at March 2020. N.B. past success cannot be relied on for the future as the Fund may perform better or worse in different phases of market stress).
Our investment philosophy and process
Our central belief is that sustainable returns are the key to all long-term returns: it is consistent dividends, contractual bond interest payments and consensus earnings estimates, at least as our starting point, that are amongst the most sustainable sources of long-term return. We also value the sustainability of the companies we invest in, both in terms of the long-term stability of their business models, and also the management cultures which prioritise the interests of the broadest stakeholder community. This includes but is not limited to the increasingly important environmental, social and governance standards of the conduct of business (ESG, see our Sustainability section for more detail). Above all, we aim for the Fund to be sustainable as our investors’ savings strategy of choice and what they can stay committed to over the long-term, something they can stick with through all the ups and downs and wild swings of the world’s investment markets – something they can understand, reliable, a source of reassurance to stay the course.
Our process is to invest predominantly in equities and bonds and other securities which can sometimes combine the attractive risk and return features of both. We call this ‘investing across the capital structure’. We have our own proprietary fundamental research and risk assessment process called PETRA where we are able to compare and combine the risk-adjusted return opportunities of individual securities across multiple asset classes. We use PETRA to identify a relatively concentrated selection of best ideas which are complimentary to each other and optimised for four different phases of the business cycle – Early, Middle, Late, End. At each phase, we seek to maximise the growth upside whilst seeking to protect against the potential downside.
We look for company investments where we believe the management teams and product lines of businesses give us the confidence they will endure and evolve to meet the challenges of their sectors across the business cycle. These companies are likely product leaders regionally or globally, with technology or process advantage, pricing power or cost leadership, infrastructure or intellectual property that makes it difficult for other companies to compete effectively with them.
How we work together…
The Managing Partners responsible for the Fund, Christoph, John and Joe each bring over 25 years of experience to bear from different corners of the the investment markets. They work side by side, combining their different skills and analytical approaches from their different asset classes into this one integrated process to combine higher risk equity investments with lower risk bond and other diversifying investments to seek growth upside whilst aiming to protect from the worst downside.
Valid as of April 2020. The IF (to be renamed A) and SP share classes respectively. © 2020 Morningstar. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results. For more detailed information about Morningstar Rating, including its methodology, please go to: http://corporate.morningstar.com/US/documents/MethodologyDocuments/MethodologyPapers/MorningstarFundRating_Methodology.pdf
Morningstar's Sustainability Rating as of March 2020. Sustainalytics provides company-level analysis used in the calculation of Morningstar's Sustainability Score. For more detailed information about Morningstar's Sustainability, including its methodology, please go to: http://corporate1.morningstar.com/SustainableInvesting/