Quality Growth Boutique

Investing in U.S. Equities: A Timeless or Timely Approach?

Viewpoint

Myths and misconceptions die hard. For as long as there have been financial markets, there have been investors who think they can time when to jump in and out to boost their returns and limit losses. In fact, there’s never a right time to time the market. History shows that staying invested pays off. Over the past decade, if you missed just the 15 highest-performing days of the S&P 500 Index, your cumulative returns would have plummeted.

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Taking the Long View: Bull vs. Bear

Investors tend to make decisions based on events that occurred in the most recent past. For example, a rising market or stock tempts investors to buy out of excitement, just as a declining market or stock entices investors to sell in fear. This common behavioral phenomenon is known as “recency bias” and can lead to emotionally-driven decisions that can have a detrimental impact on returns. No one can time the market – or at least not repeatedly. In our view, staying invested is the best defense against recency bias.

A look at equity market returns from 1926 through the first quarter of 2019 puts major market expansions and contractions into perspective. The data reveals that bull markets have outnumbered and outlasted bear markets and bull market cumulative returns have also vastly outpaced the average bear market cumulative loss: 333% vs. -38%.

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Staying Invested for Enduring Growth

Good performance over the long run doesn’t mean victory over every shorter term period. All investment styles go in and out of favor, sometimes unpredictably. As a result, disciplined fund managers with a clearly defined process, and who do not chase short-term trends, will periodically underperform. Investors must adopt a longer term perspective to benefit from their discipline.

We do not get caught up in changes in short term sentiment. The Vontobel Fund - U.S. Equity is concentrated in businesses that we believe are high quality and can grow earnings consistently year after year in any macro environment. Since earnings growth drives share prices, we believe we are well-positioned for enduring growth. And, due to the expected resiliency of our holdings, our strategy should protect our investors during periods of market decline.

Performance of our U.S. Equity Fund may appear random and somewhat volatile on a rolling three-month basis. However, over the extended five- and seven-year periods, our Fund offers smoother and more consistent performance, as illustrated below.

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How We Do It

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Succeeding in 2019 and Beyond

Volatility will likely intensify this year as we enter the latter stages of the business cycle for the U.S. economy. Over the past ten years, the markets have been swept along by momentum often misclassified as structural growth. With a potentially slowing economy, it is even more critical to identify growth driven by secular, rather than cyclical, forces.

Even if the cycle turns down, we see opportunities for structural growth to continue to drive earnings in our portfolio companies. We aim to position the U.S. Fund for durability by investing in companies with proven track records of growing cash flow through different economic cycles – an approach that is timeless, not timely.

A Uniquely Qualified Team

  • $2.93 billion in U.S. equities
  • 28 year track record managing the Vontobel Fund – U.S. Equity2 
  • 32 investment professionals averaging 24 years industry experience, including three investigative analysts who help quantify risk
  • 10 years average tenure working together

1As of 30 April 2019
2B-share class launch 1991

Fund characteristics

Share Class

Vontobel Fund – U.S. Equity I

Reference Index

S&P 500 Index TR

Currency

USD

Inception Date

16.3.2007

Reporting Period

16.3.2007 – 31.5.2019

Rolling 12-month net returns (in %)

 

 

 

PERIOD

01.06.2018-31.05.2019  

01.06.2017-31.05.2018  

01.06.2016-31.05.2017  

01.06.2015-31.05.2016  

01.06.2014-31.05.2015  

Vontobel Fund – U.S. Equity I

9.76

11.10

20.66

6.46

11.75

S&P 500 Index TR

3.78

14.38

17.47

1.72

11.81

Quality Growth Boutique
2020-02-27-staying-the-course-amid-the-coronavirus-epidemic-teaser
Market Update
COVID-19

Staying the Course Amid the Coronavirus Epidemic

The recent outbreak and spreading of the coronavirus (COVID-19) and the resulting quarantine will affect business and economic activity in the near term, but conditions should normalize. We do not believe investors should be overly concerned, but we continue to monitor the situation. Our investment horizon is naturally long-term and this is likely a short-term issue. Thus, we continue to be diligent and will look to take ad-vantage of any strong price dislocations that are not indicative of the long-term future earnings power of our quality growth investment universe.

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