Cerno Capital

Cerno Capital sponsors Team PCD in the Maidstone to Monaco Rally, 2018

By |2018-07-05T10:59:55+00:00July 5th, 2018|Cerno Capital, Cerno Capital Posts, Other Posts|

We were delighted to recently support David Bell, PCD Club, and Fraser Dyer, FED London, as they undertook the Maidstone to Monaco Rally in aid of the Parenta Trust, who build schools and provide education for pre-school children in Uganda.  Participants in the Rally have built 6 schools in the last 6 years, providing opportunities to some of the world’s poorest families. This year, the Rally group have raised £16,000 for the cause, which will provide education for 150 children. David and Fraser documented their journey over the Alps, which they share with us below: On Wednesday 27 June, 7 cars left Maidstone with a goal of getting to Monaco and back via the Swiss Alps in 5 days. The twist was that cars have to be bought for less than £500 and are decorated, coming in all shapes and sizes.  On our trip was an ancient Volvo covered in carpet; a Land Rover with 250,000 on the clock and a Vauxhall Corsa that was about to be scrapped.  Our car was a convertible 1997 MG MGF with 153,000 on the clock, easily the best car there!  We were kindly sponsored in our mission by Cerno Capital and a couple [...]

A short Investment Letter from Rome – May 2018

By |2018-06-01T08:27:41+00:00June 1st, 2018|Cerno Capital, Investment Letters|

The writer first visited Italy in 1983 and experienced the ochre strade of Florence on a tight budget. Caffè was taken al banco non al tavolo. A fruit cake from home served for lunch so an evening meal could be taken in a restaurant. It did no harm and sparked a deep affection for the place that will last this life. Italy is an effervescent place to visit but a deeply frustrating place to be a national of. It took many years and the wry books of Tim Parks to realise this. With more acquaintanceships, especially that of young Italians, the disfunction of the place became apparent. The narrowness of opportunity is a shock when compared to, for example, the UK. The most recent plot of youth unemployment was 31.7%, the second worst in the G20. Italians themselves will often point out that they have not been a country for long and in many respects the place still aligns to stati della città (city states). The preminent of which being Rome, where dark arts are practiced. Given the institutional stasis, ossified professional cabals and general sense that politics is a game for the rich played by the rich, it is [...]

Going, Going, Gold

By |2018-05-03T15:44:24+00:00May 3rd, 2018|Asset Allocation, Asset Classes, Cerno Capital, Cerno Capital Posts, General Investment, Other Posts, Strategy|

Our view on gold has changed recently and we have sold the positions in full across all portfolios. Gold has a few things going for it. It has had a prescribed value for thousands of years – stemming directly from the fact that it was, for much of the past three millennia, a medium of exchange, a savings product - in effect a currency. In 1971, when the US finally came off the gold standard, the direct link between paper currencies and gold was lost. Forty years is a relatively short time in a period measured in centuries, so institutional and personal memories of the linkage remain strong. However, Gold is an example of a putatively safe asset which is, on investigation, not reliable in all environments. Gold is not necessarily a beneficiary from higher inflation, as is commonly thought. The price of gold demonstrates no stable statistical relationship with the measured rate of inflation. No matter whose CPI series one adopts, the relationship is unstable by virtue of the very large swings in the gold price. The case for believing that gold offers a very long run store of value is not well constructed. In face of these inconvenient [...]

Further FAQs on the Cerno Global Leaders Fund

By |2018-04-30T08:45:47+00:00April 30th, 2018|Cerno Capital, Cerno Capital Posts, General Investment, Other Posts|

The Investment Team compiles questions and answers, asked at our Global Leaders Breakfasts on Wednesday 25th & Thursday 26th April 2018. Most of the information is public, what do you see in your stocks that others don’t? It is less a matter of seeking information advantage in the here and now but structuring our thoughts over sufficient long-time horizons where competition is scarcer. The arbitrage is largely in holding great companies for the long term and avoiding the usual pratfalls which are over-leverage and disruption. Does the hard rebalance contradict the proposition to hold stock in the long-term as you cut the winners? Rebalancing is consistent with our expectation of each company making a meaningful contribution to return and our time horizon given lower confidence in short term share price outcomes versus longer term fundamental performance. We expect rebalancing to equal weights will add value as it is the natural response of a long-term shareholder to the impact of stock market preferences on share prices. Cutting positions to maintain equal weighting is an important risk control given it minimises the portfolio of major industry disruption to any one position.  Our approach effectively deals with the situation of holding an outsized [...]

Investment Letter from Hong Kong March 2018

By |2018-05-15T09:39:40+00:00March 27th, 2018|Cerno Capital, Investment Letters|

At the National People’s Congress in Beijing, 2,958 of 2,963 cowed delegates approved the change in China’s constitution to allow the Presidency to be extended beyond the two-term limit set by Deng Xiaoping in 1982. Deng’s then reform was promulgated to prevent the repeat of the Maoism’s attendant madness. In a very large country, disastrous policies have terrible effects on millions. Back then in was murder and starvation, what might be the longer-range effects of a resuscitation of one-man rule in China? For surely all dictatorships go bad, even the ones that start out well? The possible outcomes need to be understood in a modern context. In today’s world, even in China where an invisible blanket of surveillance and censorship wraps its citizens, it is possible to lampoon the leaders. Xi’s avatar is Pooh Bear: the tubby fellow attaching himself to a pot of honey. “Find the thing you love and never let go.” When you rule by fear you do not know what your friends let alone your enemies think. All the problems that bestow China from the 12th of March onwards are Xi’s to own. Cadre may be fired, booksellers disappear, businessmen and women interned with impunity but [...]

Cerno Capital supports The Barn Theatre, Cirencester

By |2018-03-16T11:16:02+00:00March 16th, 2018|Cerno Capital, Cerno Capital Posts, Other Posts|

We are delighted to be supporting a new theatre: The Barn Theatre in the Cotswolds. Driven by a deep passion for theatre, Ian Carling and his wife Chrissie have created a bold theatrical legacy for Cirencester. A former 1940s Nissen hut has been transformed into a beautiful, state-of-the-art, air-conditioned auditorium for 200 theatre-lovers. With a studio rehearsal suite, dressing rooms, a green room, and an orchestra pit, audiences will experience entertainment that competes with the West End. The first performance produced by the theatre will be The Secret Garden, a new family musical based on the 1911 novel by Frances Hodgson Burnett. The musical will tell the powerful and inspiring story about how one small girl can turn everything around when she decides she ‘wants things to grow’. In support of the first performance, Dan Buckley of Thumbcrumble Design produced the following notice of their inaugural performance, which will appear in the programme. We are thrilled to be working with The Barn Theatre this year, and we look forward to supporting their future performances. The Barn Theatre Project is a registered charity. https://barntheatre.org.uk/

Investment Letter Feb 2018 Cobras in the Basket

By |2018-05-15T09:41:15+00:00February 5th, 2018|Asset Allocation, Cerno Capital, Cerno Capital Posts, General Investment, Investment Letters, Strategy|

Cobras in the Basket: Bonds, their curves, their relationship with equities and market tops In the last two months, we have seen a meaningful rise in bond yields. Key maturities in the US curve have crept up. The 2Y US Treasuries now stand at 2.15%, the 5s (5 years maturity) have moved up to 2.53% and the 10s to 2.73%. This has not been accompanied by any visible change in central bank policy or rhetoric. It is our belief that investors should take heed and begin to adjust their portfolios, if they have not already done so. This is not the first time in the post crisis period (a period that will soon be 10 years long) that bond yields have fluttered. During the so called “taper tantrum” that occurred between February 2013 and January 2014, those same maturities ran up considerably: 5s went from 0.63% to 1.86% and 10s 1.62% to 2.80%. There were other noticeable sell offs after the post 2008 low. The 10s moved from 2.0% points in early 2009 only to crest at 4.0% in 2010. As we can see, in those previous periods, yields then proceeded down, with the curve compressing to new lows. [...]

Outside In Artwork at Cerno Capital: ‘Crufts Dog Show’ by Michelle Roberts

By |2018-01-30T16:50:16+00:00January 30th, 2018|Cerno Capital, Cerno Capital Posts, Other Posts|

We were delighted to attend an exhibition held recently at Sotheby’s with Outside In. Outside In: Journeys brought together the diverse work of a number of the artists involved with Outside In, a charity that provides a platform for artists facing a barrier to the art world for reasons including health, disability, isolation or social circumstance. The exhibition epitomised the charity’s objective to create a fairer art world – challenging traditional values and institutional judgements about whose artworks can and should be displayed. The body of work varied hugely throughout the show and brought to life many of the stories and experiences from the artists. On the hugely busy opening night, every work visually captivated each guest. We were particularly taken with the work by Michelle Roberts, whose colourful work Crufts Dog Show (below), will shortly be hanging on our office walls. Crufts Dog Show, Michelle Roberts Michelle has drawn and painted throughout her life, and as a young girl she used to accompany her grandfather, a watercolour painter, who often worked outdoors. She spends much of her free time drawing small, intricately worked images in her sketchbooks, as well as ideas for the canvases she produces. Michelle [...]

2017 Performance Summary

By |2018-04-06T08:23:05+00:00January 8th, 2018|Cerno Capital, Cerno Capital Posts, Cerno Global Leaders, Global Leaders, Other Posts|

2017 Performance Summary Performance summaries for the main investment strategies, all numbers after fees. Note past performance is not a guide to future performance. Global Multi-Asset TM Cerno Select and its sister fund Cerno Unconstrained are global strategies investing across multiple asset classes with an unconstrained approach to asset allocation. The return target is UK CPI +3% by investing in an approved range of investment vehicles, including direct securities, passive funds and specialist active managers. Fund/Strategy 2017 3 Year Inception** Annualised since inception** TM Cerno Select +8.0% +18.9% +62.2% 4.9% CPI +3%* +5.7% +14.1% +71.5% 5.5% *Dec-17 CPI calculated using 3.0% YoY forecast**Strategy inception October 2007: EF Global prior to September 2013, TM Cerno Select thereafter Global Equity The Global Leaders Equity Strategy invests in global companies with sustainable competitive advantages delivering above average returns. Its target is to deliver performance above that of the MSCI World Total Return (GBP) Index on a 3-year rolling basis. The fund will hold 25-30 securities, equally weighted, selected according to a distinct investment thesis that accents industry structure, the sustenance of return on capital and secular growth. [...]

Turkey: You Better Not Look Down

By |2017-11-17T12:29:59+00:00November 17th, 2017|Cerno Capital, Cerno Capital Posts, General Investment, Other Posts|

Better not look down, Better not look down, If you want to keep on flying. Put the hammer down, Keep it full speed ahead. Better not look back Or you might just wind up cryin’. You can keep it moving, If you don't look down “Better Not Look Down”, Sample & Jennings, BB King, 1979 Perhaps your analyst has a cultural proclivity to look down too often. Certainly there have been no rewards in financial markets, at least since Q1 2016, for those not prepared to put the hammer down. Whether gauged by low cash levels in pension funds and mutual funds, high margin levels, low short interest levels or extinct volatility, all the evidence is that the hammer is down. Meanwhile, far below – so far it seems that even those occasionally glimpsing down cannot see it – a liquidity crisis is developing that is likely to become an emerging market debt crisis. Since Q1 2013 this analyst has been pointing out that the debtors of Turkey are likely to default. They may indeed be forced to do so if their government were to impose capital controls. Mass defaults have not occurred, though Turkey’s largest ever private sector default [...]