between preservation and outright performance there is growth with income but less of the volatility of equity markets
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.
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 and limited unhedged foreign currency. The investment outcome we aim for over a full business cycle – typically maybe five to seven years – 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 global developed 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.
Please take a look at the Factsheets to see how the Fund is doing against these objectives of both return and volatility from month to month.
Four concentrated investment themes
The managers select four highly concentrated investment sub-portfolios to deliver the overall fund objective. These are between 10-20 best ideas for Secular Thematic Growth, Defensive Strength, Cyclical Leadership and Protective strategies. Different risk and return profiles within global equity investments combine with income-generating corporate and government bonds, ‘safe haven’ precious metals exposures and some limited unhedged foreign currency; these have lower and sometimes even negative correlations to growth equity investments – they can often move in different directions. That’s very much the plan as they can offset losses in equities when markets experience their frequent bouts of volatility and stress, those key moments in markets that can upset our best-laid investment plans and throw us off course. (EPM is the use of derivatives permitted for efficient portfolio management purposes to reduce risk)
Building the portfolio
The Managing Partners responsible for the Fund, Christoph, John, and Joe each bring over 27 years of experience to bear from different corners of the investment markets. They work side by side, supported by Ludo and Cranley, combining their different skills and analytical approaches from their different asset classes into the one integrated Endeavour process: to combine higher risk equity investments for growth upside with lower risk bond and other diversifying investments to protect from the worst market downside. They use a system called PETRA, Tellsons’ own in-house process, as a fundamental bottom-up framework for assessing risk-adjusted returns between investments and across asset classes through the business cycle.
Protecting to the downside
In this way, the managers try to achieve a steadier risk and return performance profile, a steadier journey that investors can more easily sustain for the long-term. In fact, the managers have been able to protect their fellow investors from almost 80% of the worst equity market losses on average since the public inception of the Fund in 2014, a period navigating some of the most volatile markets in generations.