Overall, the US stock market had a good 2014, despite giving back gains in the final weeks of the year. The S&P 500 rose 11.81% for the year, Dow Jones Industrials rose 8.16%, and the Nasdaq had the best performance of the three with a gain of nearly 14%. Despite the overall gain in the markets, hedge funds saw the highest rate of closures since 2009. In the first half of 2014 alone, before oil prices began their collapse, 461 hedge funds closed their doors, according to Hedge Fund Research Inc. While the average hedge fund return for 2014 was a measly 2%, activist hedge fund leaders such as Daniel Loeb, Bill Ackman, and Carl Icahn, were a few that posted superior returns for their investors.
However, the conservative portfolio management at Rothschild Wealth Management, helped side step the fate that other fund managers had during the year. While Rothschild did not post the lofty gains that the activist fund managers saw, Rothschild is founded on the principles of proper wealth management, patience, and an emphasis on beating the rate of inflation.
Rothschild’s fund posted 7.1% gain in 2014
Fund managers admit that despite a choppy year, they were able to take advantage of the fourth quarter, bringing in 5.1% returns to bring its full year 2014 performance to 7.1%. Managers attribute the fourth quarter gains to strength in the US Dollar, and solid gains from its equity positions; most notably a 8.7% gain from its Deere holdings and 6.6% gains from its American Express holdings. In terms of portfolio activity during the fourth quarter 2014, managers of the New Court Fund added to their Deere position and sold out of their Airbus holdings. Additionally, the fund swapped 2022 inflation-backed bonds for lower duration inflation protection bonds.
As I mentioned before, Rothschild certainly focuses on the long term and is more concerned with performance over a three to five year period. Being that the Rothschild’s New Court Fund has officially been in existence for three years, managers note that the fund has returned 30% from time of inception to December 2014.
Portfolio makeup and top equity holdings
Currently, the New Court Fund is currently made up of 66.3% equity holdings, 17.6% bonds, 8% cash, 4.4% alternative strategies, 3% gold, and 0.7% “portfolio protection”. Of the 66.3% in equities, the fund shows that it has a core of equity funds that make up 25.8% of their equity portfolio. Berkshire Hathaway, Egerton, and Pershing Square Holdings make up the largest amount in that core category. Continuing with their core holdings for individual equities, the fund holds a core group of individual stock equaling 12.7%, with largest holdings AB InBev, American Express, and Deere. Moving to their “special situations” equity fund holdings, the group makes up 16.1% of their equity holdings and has largest holdings in that category go to Technology Basket, Morant Wright Japan, and Odey European. Lastly, their “special situations” individual stocks equate to 11.6% of their equity portfolio with Wells Fargo, Lloyds and Ryanair as the top holdings in that category.
Overall, Rothschild focuses on beating the rate of inflation over the long term, rather than focusing and stressing about one and two year performance. Markets take a while to yield results in some cases, but Rothschild has shown that patience pays off.