Cerno Capital

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 [...]

The Price Paid

By |2017-11-13T17:09:15+00:00October 10th, 2017|Cerno Capital, Cerno Capital Posts, General Investment, Other Posts|

It is rare for investment managers to write about investment management fees. Like the artist who struggles to describe his ceramic pot in monetary terms, high quality investment managers prefer to build portfolios that deliver client objectives while leaving fees to their business colleagues. Investment management services are typically charged for by one of two methods. The most common is to charge a fixed percentage of assets managed for example, 0.75% per annum. This fee is set at a level which covers the costs of the investment manager and which also delivering a profit to the owners of the business. Critics point out that the manager earns his fee, and presumably a profit, regardless of the success of the strategy. To determine this, one needs to be clear on the investment objective. All investment managers should be able to express what their investment objective is. Under a flat fee scale the value of the fee shrinks when portfolio values fall and rises on growth. If increasing the value of an investment portfolio is the objective, this way of charging seems to align interests quite well. The second way of charging is to explicitly tie the fee earned to the performance [...]

FAQs on the Cerno Global Leaders Fund

By |2018-04-26T11:31:58+00:00September 20th, 2017|Asset Allocation, Cerno Capital, Cerno Capital Posts, Cerno Global Leaders, General Investment, Global Leaders, Strategy|

Fay Ren compiles a glossary of questions asked in recent investor meetings and the related answers. Would you discuss your idea generation screen? Our permanent source of ideas is a screened universe of companies. We narrow the global universe of publicly listed companies by applying liquidity, size and profitability parameters. We also exclude banks, energy and basic materials companies given the leverage inherent in the former and commodity price sensitivity of the latter two groups. This screen provides a list of approximately 500 companies which are qualitatively reviewed for Global Leader characteristics. This list is not restrictive and analysts are free to generate ideas from multiple sources, however the screen ensures there is always a ready supply of ideas to work on. Do you have positive ESG filters?   We anticipate holding our companies for very long periods of time and therefore look for those businesses which embrace sustainable practices. While we have not set ethical screens, we have found that our positive screening rules out many of the sectors most associated with ethical screening, for example, our growth criteria rule the tobacco companies out of consideration. Do you invest in utility companies? We do not invest in utilities as [...]