active, directly-held investments with complementary risks and returns for less volatility
‘active, directly-held investments with complementary risks and returns for less volatility’
The Endeavour Fund seeks capital growth with less of the volatility of equities. The kind of growth the fund seeks to generate in real terms, above inflation is between 3-4%, so a total annualised return of around 6-7% in normal business cycles, with volatility less than the equity markets.
Endeavour invests in global equities for growth and income, bonds for income and protection, and currencies, precious metals and other strategies for diversifying and reducing risks and volatility overall. In this way, investors’ capital may be protected from losses in times of market stress. On average the Fund has experienced about half the volatility of equity markets and protected investors from 80% of peak-to-trough market losses since its beginning in 2012 whilst at the same time generating its target return over its inflation-adjusted benchmark (go to Fund Factsheets and periodic reports for more detailed information).
Endeavour is the only fund we manage at Tellsons and our money is invested in it.
What might ‘growth with less volatility’ actually look like as a long-term investment?
We combine high growth equity investments with lower more stable growth investments that normally pay dividends and bonds that tend to be uncorrelated with equities, behaving differently to them and diversifying the overall risks. We also make investments in what are called safe havens that literally give us shelter during bouts of market disruption, things like government bonds and exposures to precious metals. 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.
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 and rely on, a source of reassurance to stay the course for the long haul.
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, for equities as well as bonds for example. 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. At each phase, we seek to maximise the growth upside whilst seeking to protect against our best assessment of 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.
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Morningstar's Sustainability Rating: 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: https://corporate1.morningstar.com/SustainableInvesting/