Foord Asset Management, which prides itself on value-oriented long-term investing, is reaping the benefits of conservative approach amid an increasingly unpredictable global equities market – a bubble that was popped by Covid-19, Brian Arcese tells finews.asia in an interview.
Foord Asset Management, an independent, owner-managed investment boutique headquartered in Cape Town, was founded in 1997. It expanded to Singapore in 2012, with two funds in its global offering: the $1 billion Foord Global Equity Fund and the $1.5 billion Foord International Fund, the former being an equity-only product benchmarked against the MSCI ACWI index and the latter being a multi-asset class product designed to deliver returns in excess of USD inflation. Together, the funds represent about a quarter of the firm’s total assets.
The firm's Singapore-based portfolio manager Brian Arcese spoke to finews.asia about investing in global equities in the current market, and how Covid-19 has affected the firm's operations.
Brian Arcese, How has the Covid-19 outbreak affected Foord’s international operations and plans for the region?
Sitting in Singapore, we were a bit ahead of the rest of the world in recognizing that Covid-19 was likely to impact not only our firm but investment markets globally and the performance of the funds themselves. From an operations standpoint, when Singapore raised the outbreak alert level to orange, we split the key roles within the firm to limit contact among employees and ensure that we would be able to continue to manage the portfolios and service our clients.
Now that Singapore has enforced a «circuit breaker,» we’re all out of the office and working from home, but I think we’ve all made the transition to remote working reasonably well. We miss the daily interaction, but we’ve been organizing coffee meetings among the investment team once or twice a week informally outside of the investment meetings, just to keep up with that social interaction. In the back office, our operations team members have been able to work from home seamlessly as well, and we’re been backed up by our colleagues in South Africa.
How have Foord’s funds held up through 2020 so far?
Our two funds have held up reasonably well. It was interesting observing the market continue to reach new highs in January and February. When China first locked down Wuhan, then Hubei province, then the whole country, and as the virus spread all over the world, the market continued to make new highs. In that frame of time, we were able to put in a significant amount of protection into our multi-asset class product, primarily by puts on the S&P, as well as by shorting S&P futures.
So that product year-to-date is about 5 percent down on an absolute basis, in comparison to the wider market, which is down around 15.5 percent. In hindsight, we would be happy to take even more exposure off the table, but we’re happy with what we’ve done.
«We try to take calculated risks, and make sure that we’re getting paid for the risks we’re taking»
On the global equities side, the portfolio is down about 10.5 percent, but even then, it has outperformed the benchmark, which is down about 16 percent or so. The reason is that we’re conservative investors in general, and while we’re happy to take risks, we’re not risk-averse. We try to take calculated risks and make sure that we’re getting paid for the risks we’re taking. It’s unfortunate that it’s taken a pandemic to result in the outperformance of the fund, but I think its during these periods of volatility that we see our products outperform.
Where do you see opportunities amid the current pandemic?
The markets were less expensive a few weeks ago than it is today, so I find myself not as amazed as I was in January or February. But still, I’m surprised by how quickly the market has bounced back, so we are still quite conservatively positioned in our international fund. We’ve brought our equity exposure back up, but a significant portion of it is still hedged with S&P puts through June and the end of the year as well.
Despite that, there are some pockets of the market that have done well and will continue to do well. One of our largest positions, even before this, has been the shift to online purchasing, which I think will continue to accelerate. For example, Chinese online retailer JD.com has performed very well year-to-date, up 30 percent on a relative basis compared to the rest of the market. Other investments that have done well include Tencent, or Activision, which are beneficiaries of people being home.
As economies start to reopen, what sectors do you expect to do well?
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