BPVN Strategic Investment’s annual report for 2014.
The BPVN –VIS Luxemburg Sicav is managed according to the value investment philosophy through mutual funds. The Sicav is mainly focused on European Managers.
2014 proved to be a difficult year for investors as the world markets were much less correlated than in recent years so the performances varied wildly based on countries and sectors. Currencies had a huge impact too and even commodities, oil in particular, gave their strong contribution to market volatility.
BPVN Strategic Investment: Performance
We had a positive performance but we have been able to outperform just the Eurostoxx and the Hedge Fund indexes and we did much worse than the MSCI world denominated in euro(price index excluding dividends). As can be seen in the figure below we are still ahead of the indexes since we started operations in late 2007 and just the MSCI world has kept the pace but with much higher volatility.
As affirmed in last year letter we kept a prudent stance, we have held about 40-45 % of the fund assets in cash or equivalents for most of the year and of the remaining 55-60 % most was invested in long /short equity funds, so that our net exposure to stock markets was well under 50%.
We finished the year up 3.6% versus +16.2% for the Msci , 2.3% for the Eurostoxx and -0.6% for the HFRI .
Given our defensive stance it is much easier for us to beat the markets when they are in negative mood. As the markets continue to grow faster than the world economy we don’t plan to revert our approach. We are not macro guys but too much of quantitative easing is something never tried in modern economy and for sure there will be unintended results sooner or later.
In an environment like this it’s very difficult to have a right perception of risk because liquidity is abundant.
BPVN Strategic Investment: Interview with Kyle Bass
In a recent interview the hedge fund manager Kyle Bass reported that in the last 9 years the global debt increased from 80 trillion to 210 trillion a 12% annual increase. In the same period the global GDP grew at just 4%.
With so much volatility there was high dispersion of returns among fund managers and just a few outperformed the markets. But in the short term luck is more rewarded than skill and one year performance is not a good indicator of the quality of a manager.
Our task is to monitor the managers behavior and check that their interest is aligned with ours : in last year letter we made the case for our exit from the Bestinver Fund as it had become too large for the strategy. In June 2014 the Management of the fund and the Company owners clashed and decided to part their way .In our opinion this is what happens when gathering assets becomes more important than managing them. Now Bestinver has new fund managers with more ”institutional” experience and we expect a significant style drift in the quarters to come.
BPVN Strategic Investment: Odey, Ruffer and Parus represent 50% of our portfolio
Three managers account for close to 50% of our portfolio (Odey, Ruffer and Parus), all of them had positive performance but struggled to beat the indexes. They have different management style but they share some common traits that makes them very different from the crowd: the quality and focus of their research. They are aware of the challenging macro environment and the risks connected to operate in the digital age but they have a positive approach toward the comprehension of the impact of new disruptive technologies. They are all building a unique knowledge on how new markets are shaped and which companies have the best chances to become the new market leaders (to go long) and which ones will be the losers of the game (to short).
Building knowledge with a humble and stubborn approach is what we look for in managers.
The information contained in this document provides information about BPVN Strategic Investment Fund SICAV – VIS. The BPVN Strategic Investment Fund SICAV – VIS is a Luxembourg-based SICAV, and authorised for distribution in the following European countries: Luxembourg and Italy. The information available in this document is directed only to citizens / residents of the above-listed countries and to institutional investors. BPVN Strategic Investment Fund SICAV – VIS is not sold or offered in the United States of America or to United States persons. This document contains only general information about BPVN Strategic Investment Fund SICAV – VIS, which may not be considered as a solicitation of offer, or recommendation, to acquire shares of the SICAV – VIS. Any investment decision should be made on the basis of the Prospectus and the Simplified Prospectus, as well as the most recent Annual Report and of the Semi-annual Report where this is subsequent to the former. These reports are available upon request from the Management Company. Investors should be aware that past performance is no guarantee of future performance. The information available in this document, as well as any information or opinion which appears here, may change without prior notice. The Management Company bases the information available in this document on sources it considers reliable, but cannot guarantee that such information is correct.
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