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Mid Monthly Update – December 2020

Thematic Investing – since 1999

On Sunday, December 13th, the T. Bailey Growth Fund celebrated its 21st anniversary.  While thematic investing has become more mainstream this year, the Growth Fund has adopted this approach since its inception.

Twenty-one isn’t a great age in human terms, but it is a decent length of time for a fund to be in existence.

As regular readers will know, the institutional and passive approaches of equity investing by geography and market capitalisation makes little sense to us.  Investors in the Growth Fund, many for a number of years, realise that relative returns may ebb and flow with the fortunes of the dominant US market but over long periods, the thematic, logical approach has worked and in this difficult year, the Growth Fund has demonstrated the benefits of its investment approach.

Overlap

Investors’ choice of thematic funds continues to broaden.  The Investment Association has recognised this development and is reviewing the Global (equity) sector to take account of specific themes that sit within it.  The investment community has a preference for clear demarcations, yet it is important to be aware of the overlaps that are prevalent in differing thematic funds as was once again underlined in some of our recent review meetings with managers the Growth Fund invests in.  The three themes of Artificial Intelligence (AI), Renewable Energy and Materials would appear to be quite distinct, yet the following two points from those meetings are evidence of their interlinkage:

  • By using its own DeepMind AI, Google was able to reduce its data centre cooling bill by 40%. Article here.
  • Some 40% of European CO2 emissions come from buildings. Greater use of modern, lightweight, ‘smart’ materials can result in a dramatic reduction in those emissions.  Europe’s green agenda will encourage building renovation in favour of ‘smart’ materials. Article here.

As many investors ponder the ‘growth’ versus ‘value’ rotation ahead of an expected broader global economic recovery in 2021, the inaccuracies of those labels result in overlooking the cyclical as well as secular benefits from a number of themes perceived to be in the ‘growth’ camp.

First and Foremost

For us at T. Bailey, investing is about putting investors first and thinking about their outcomes rather than asset gathering for the benefit of shareholders. Our business will grow by thinking like investors and being conscious of their objectives.

Thank you for your support over the past twenty-one years however long you have been with the Growth Fund whether it be years or months.

Working from home approaching Christmas

We would also like to wish you a Merry Christmas with your families, although whoever you are permitted to see, it is likely to be fewer than you might wish.  We hope you stay safe and well and look forward to an improving situation in the New Year as vaccines are rolled out.

Rather than send Christmas cards, we have donated the equivalent amount of money.  This year that donation has been made to Emmanuel House, a local charity supporting the homeless and vulnerable.

Activity

In the first half of December, we have used inflows to top up our industrial metals exposure in both funds.  We believe industrial metals will be a beneficiary of a broader economic recovery in 2021.