Six Monthly Newsletter – for the six months to 31 March 2021
(All references to performance are in Sterling terms and for the T. Bailey funds are provided after all ongoing charges).
Over the six-month period to end-March 2021, the T. Bailey Growth Fund rose 14.17% net of all ongoing charges and the T. Bailey Dynamic Fund rose 11.21% net of all ongoing charges.
T. Bailey Funds
- Focus on diversification across longer-term themes.
- Aim to preserve and grow capital in real terms (above inflation) over the long-term.
The six months to end-March 2021 saw continued strong performance for asset markets, albeit not as strong as in the previous six-month period. A continuation of low interest rates and ample money supply provided a positive backdrop for financial markets. The Covid-19 virus and infection rates dominated investor sentiment. That sentiment was initially dented by the emergence of a new variant of the virus causing new lockdowns towards the end of 2020. However, investors were previously buoyed by the announcement of a vaccine on November 9th. This announcement helped investors to look beyond the immediate challenges of lockdowns to a time in 2021 when vaccine rollouts would permit economies to re-open. Consequently, many companies who had performed poorly since the outset of the pandemic had a significant rebound in their share prices, and in the process recovered some of the ground they had lost to the digital economy winners since end-March 2020.
Another notable event during the six-months to end-March 2021 was the US Presidential election where the final result took some time to be confirmed, although it made little difference to outgoing President Trump who refused to acknowledge his defeat. The incoming administration delivered a significant US$1.9 trillion stimulus to the US economy in early 2021 with the promise of more to come.
The cliff-hanger at the end of 2020 was the will there/won’t there be a Brexit withdrawal agreement before the year-end deadline? In the final days of 2020, an agreement was reached between the UK and the European Union. With the UK being among the leaders in vaccine rollouts and the Brexit risk diminished, UK equities, for so long unloved, found favour among UK and overseas investors.
Despite bouts of volatility, equity markets ended the six months well above where they started. Bond markets performed less well in the first quarter of 2021 as the cocktail of increased government supply, and rising inflation concerns, caused bond yields to increase sharply, albeit still ending the period at levels that offer little value.
Working from Home
The T. Bailey investment team continued to work from home successfully over the six months, as we did in the previous six months. Investors can be reassured that their investments have been managed without any operational issues over the past year.
September 2020 to March 2021
Some cash was put to work in October as equity markets pulled back from previously higher levels that reflected the digital economy inspired price surge from the previous six months. As thematic investors, our focus remained on those digital economy winners, but money was also put to work in newer themes such as clean energy. UK exposure was increased, reflecting the view that a cheap UK stock market would improve once the factors causing its previous relative underperformance had been significantly reduced. Indeed, the UK’s excellent vaccine rollout programme aided the UK’s relative stock market recovery versus other geographies.
The investment team have maintained their emphasis on long-term investment themes populated by companies with low leverage and good free cashflow in industries exhibiting a low dependence on high volumes, thin margins and debt.
The multi-asset Dynamic Fund continued to avoid bond markets where the borrower still has the upper hand over the lender.
Cumulative performance after all ongoing charges to last valuation point in March 2021.
Published CPI based on latest available data (produced 31 March 2021). Source FE: Total Return (Bid to Bid, Tax UK Net). Past performance is not a reliable indicator of future results. The formal performance benchmark for the T. Bailey Growth Fund is the IA Global Sector Mean. The formal performance benchmark for the T. Bailey Dynamic Fund is CPI+3% per annum. Please see Prospectus or KII documents for more details of fund objectives.