Cerno Capital

Thoughts on a Crisis: Jeny Zhu answers some questions

By |2020-07-02T11:43:17+00:00July 2nd, 2020|Cerno Capital, Cerno Capital Posts, Other Posts|

In this series, members of the Cerno team reflect on the crisis and provide detail on their work and domestic lives. For our next interview, we caught up with Jeny Zhu, Head of China Investment and Senior Fund Accountant, to hear how her role has had to adapt to challenges presented by the crisis, and what has kept her busy at home. Jeny, in one sentence please could you sum up your role at Cerno Capital. I work as the Senior Fund Accountant at Cerno, and my job involves many different functions. On any one day I might be working on fund factsheet production, accounting, trading, maintaining and developing counterparty relationships, client reporting as well as other adhoc work. You are also Head of China Investment at Cerno Capital. Have you seen any changes in Chinese investors during this time? I’ve seen a change in mindset towards investment through my discussions with a few potential Chinese investors based in the UK and overseas. Many Chinese investors value the importance of wealth preservation more as a result of the pandemic and economic downturn; they would prefer to have their money managed by professionals instead of self-trading within their accounts, particularly given [...]

Thoughts on a Crisis: Tom Milnes answers some questions

By |2020-07-02T12:56:56+00:00June 26th, 2020|Cerno Capital, Cerno Capital Posts, Other Posts|

In this series, members of the Cerno team reflect on the crisis and provide detail on their work and domestic lives. For our next interview, we caught up with Tom Milnes, Business Development Director, to hear how his role has had to adapt to challenges presented by the crisis, and what has kept him busy at home. Tom, have you reconnected with or tried a new hobby during this time? Perhaps it is the onslaught of mid-life, but I have been trying my hand at Pilates every morning with my wife since this episode began. This attempt at glorified stretching seems to be helping me to reach my shoelaces, and that cannot be a bad thing. This morning ritual is all too frequently interrupted by sniggering children bemused by their father’s lack of agility, and they are fiercely eager to join in. We have fashioned a table tennis table out of our dining table which has been a great source of distraction and I have recently joined the Datchet Sailing Club in West London (Yes, who knew?!) to get back into sailing and windsurfing. These are pastimes that I am keen for my kids to enjoy, but that have sadly [...]

Dividends: Please sir, can I have some more?

By |2020-06-16T15:16:58+00:00June 16th, 2020|Asset Class Returns, Cerno Capital, Cerno Capital Posts, General Investment, Sectors & Corporate Performance|

The legal relationship between the joint stock company and its shareholders deems that the only thing to which an equity investor is entitled is the dividend that a board of directors sees fit to declare. An equity investor in today’s environment is likely to be experiencing the immediate pain of dividend cuts or cancellations. This requires the equity holder to revisit the investment thesis – a task made more challenging by the lack of comparative periods on which to draw reference. While some businesses are able to continue to operate with modest levels of disruption in the current environment, others have experienced a complete halt in operational activities and attendant revenues. These companies must prioritise near term survival in capital allocation decisions. To be clear, the declaration of a dividend is a capital allocation decision. It matters not that a particular company has a long and aristocratic history of dividend payments. Each year, management must determine whether to retain all profits or whether to take a portion of profits that could be retained and spoon them into the begging bowls of shareholders. Readers of Dickens might compare some shareholders with Oliver Twist. The UK has one of the strongest dividend [...]

Style Performance

By |2020-06-14T08:42:26+00:00June 14th, 2020|Asset Class Returns, Cerno Capital, Cerno Capital Posts, General Investment, Other Posts, Sectors & Corporate Performance, Strategy|

The rally in equity markets has extended into June, having recovered substantially from the depth of the March sell-off: The global equity index is -6.3% from its peak and the S&P 500  -5.4%, whilst the NASDAQ index has made new all-time highs. Despite the deepest economic downturn since the Great Depression, a dislocation between financial markets and economies has opened up as governments’ blend of monetary and fiscal policy initiatives has underpinned prices. Markets were highly discerning in the initial sell-off, less so since. In the initial phase, they rewarded visibility and stability and punished the opposite. Cross sectional return dispersion in different markets spiked, and volatility of price moves reached the highs recorded in the Global Financial Crisis of 2008 before easing in the second quarter. The concentration of performance in two sectors – Tech & Health Care – gave rise to extreme narrow market breadth, with the median company in the S&P 500 still underperforming the index by 15.7% year to date as at the end of May. Defensive quality companies that offer investors consolation in the form of revenue growth, profit retention, and financial resilience in their balance sheets and cashflows outperformed the market during this period. [...]

In Conversation with Russell Napier – A Cerno Capital Webcast

By |2020-06-21T09:44:22+00:00June 10th, 2020|Cerno Capital, Cerno Capital Posts, General Investment, Other Posts, US|

We summarise below the Q&A section of our recent webcast with Russell Napier. The listener submitted live Q&A that ranged over a wide variety of market and investing topics. We think it is particularly pertinent to consider Russell’s views on the changing landscape for inflation. Previously an ardent deflationist, Russell now thinks an inflation is likely. What period in financial history does the current economic situation remind you of? The best playbook probably comes from 1966-1982. Inflation was over 200% for the period. Equities were highly priced going into the period, and it is a good reminder that “price is what you pay, but value is what you get.” Interest rates went higher, but profit margins did not keep pace. Gold outperformed and did significantly better than gold shares, and surprisingly oil failed to make a real return. Few sectors in the equity market generated a real return. Systems without debt problems didn’t have a need to pursue financial repression to inflate away World War II debts (e.g Switzerland, Hong Kong). Why do you think people in finance do not pay more attention to financial history? To quote Charlie Munger: “Show me the incentive, and I will show you the [...]

Thoughts on a Crisis: Joseph Joyce answers some questions

By |2020-06-09T12:45:38+00:00June 9th, 2020|Cerno Capital, Cerno Capital Posts, Other Posts|

In this series, members of the Cerno team reflect on the crisis and provide detail on their work and domestic lives. For our next interview, we caught up with Joseph Joyce, Finance Director, to hear how his role has had to adapt to challenges presented by the crisis, and what has kept him busy at home. Joseph, in one sentence please sum up your role at Cerno Capital. My job title is Finance Director, however in boutique firms like Cerno you often find that you tend to wear many hats. I regularly get involved in all aspects of the firm including finance, risk & compliance, fund accounting, client relations and marketing. How has your job changed during COVID-19? I am still just as busy as I was before! The most challenging part of not being in the office and not being able to meet people in person, has been dealing with new clients and investors. I’ve also found that most of our counterparties require “wet signature” versions of signed documents and are not always willing to accept scanned versions of passports. I’m hoping the current situation might lead to some progress in terms of bringing this part of the industry [...]

Thoughts on a Crisis: Ed Bonsor answers some questions

By |2020-06-03T09:12:14+00:00June 1st, 2020|Cerno Capital, Cerno Capital Posts, Other Posts|

In this series, members of the Cerno team reflect on the crisis and provide detail on their work and domestic lives. For our next interview, we caught up with Ed Bonsor, Private Client Director, to hear his thoughts on life during this time, and how he sees this crisis compare to previous cycles. What is the highlight of your day working from home? Strangely, I was thinking about this very question last week.  I concluded that my favourite time of day is breakfast with my kids. Somehow it was always an ordeal prior to the lock-down. The clock is ticking on the commute and the battle to the school gates, children are procrastinating, and parents are fighting over the kettle and who will organise the last minute spelling revision. Even getting the school uniform together seemed to ratchet up the pressure.  However, since working from home breakfast is the time of day just after my morning run, so my mood is perhaps better than usual.  Also, the conversation that creeps out of the mouths of a six year old and a four year old can be hysterical. There is nonsense interspersed with very occasional clarity. My son was suggesting we [...]

Thoughts on a Crisis: Nick Hornby answers some questions

By |2020-05-20T10:21:49+00:00May 20th, 2020|Cerno Capital, Cerno Capital Posts, General Investment, Other Posts|

In this series, members of the Cerno team reflect on the crisis and provide detail on their work and domestic lives. For our next interview, we caught up with Nick Hornby, Managing Partner to hear his thoughts on life during this time, and what the lasting consequences might be for the UK and wider societies. What do you think are the longer-term consequences for the UK as a result of this crisis? As humans, we are more than likely to go back to the way we were doing things before, and as it stands, I do think we will revert to how life was, but some things will clearly change for some time. I do think that we will live in a much more socialist world, in a good way, as we move out of this period. We will become more aware of the value to society that the cleaners, NHS frontline staff, bin people, bus and train drivers have. Indeed, all of those workers providing the crucial infrastructure that we rely upon to make our normal world possible. We are aware that the government is ultimately trying to set parameters for society going forward. There will be a feeling [...]

Thoughts on a Crisis: Fergus Shaw answers some questions

By |2020-05-11T16:04:42+00:00May 11th, 2020|Cerno Capital, Cerno Capital Posts, Other Posts|

In this series, members of the Cerno team reflect on the crisis and provide detail on their work and domestic lives. For our next interview, we caught up with Fergus Shaw, Partner and Co-Manager of TM Cerno Select to hear how he has been coping and adapting to life during this time. How has the Coronavirus impacted your family? My family were on holiday in the Philippines when isolation started and have been unable to return to the UK. My daughter is enjoying the constant attention from her mother’s family and is witnessing unpolluted skies over Cebu city which is definitely a rarity. Meanwhile I have taken the opportunity to turn our dining room into a workshop. In one line, sum up  your role at Cerno Capital. To identify assets that will deliver attractive returns over the long term and manage portfolios of these assets. What do you love most about working from home? As a frugal Scot who has never been keen on buying home furnishings, my home has become something of a collection of items scavenged from relatives. Knowing the history of the things I see from my desk induces a sense of permanency which I find calming, [...]

Thoughts on a Crisis: Fay Ren and Mike Flitton answers some questions

By |2020-04-30T13:56:53+00:00April 30th, 2020|Cerno Capital, Cerno Capital Posts, General Investment, Other Posts|

In this series, members of the Cerno team reflect on the crisis and provide detail on their work and domestic lives. For our next interview, we caught up with Fay Ren and Mike Flitton, Co-Portfolio Managers of TM Cerno Pacific, to hear how they have been coping and adapting to life during this time. FAY REN What do you love about working from home? I'm definitely not missing the morning commute (particularly on the Jubilee line!).  I quite like working from home in some cases as it's quite easy to multi-task. If you are in a Teams meeting with someone, you can just jot down points during the call and start actually working on the things you are discussing, so it ends up actually being an efficient way of working. We've been recently working on the quarterly Investment Reports, which requires a lot of writing and it's nice to not necessarily be distracted as much as you would be in the office. The ease of being able to switch around is also great - you work in the garden, or the kitchen - and be in your comfy clothes! Do you find you are making more changes to the portfolio [...]