Halton Fund Rothschild & Co WM SICAV SIF - Rothschild & Co
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
Halton Fund Rothschild & Co WM SICAV SIF Quarterly report | Issue 5 | January 2021
Cover: Our office at New Court. This is not a promotion or solicitation of the Rothschild & Co WM
The site has been home to the SICAV SIF – Halton Fund, which is not usually available to execution
business in London since 1809. only or advisory clients. When certain criteria are met discretionary
portfolios may hold the Fund, but only at Rothschild & Co’s discretion.
© Philippe Ruault/OMA 2012.
Values: All data as at 31 st December 2020 (except inflation which
Rothschild & Co is until 30 th November 2020 as December 2020 data figures are
Wealth Management not yet available). Sources of charts and tables: Rothschild & Co
New Court and Bloomberg, unless otherwise stated. Past performance is not
St. Swithin’s Lane indicative of future performance and investments and the income
London EC4N 8AL from them can fall as well as rise. Fund performance is shown in
+44 20 7280 5000 pounds sterling, after all fees, in total return, combining income
rothschildandco.com and capital growth. Returns may increase or decrease as a result of
© 2021 Rothschild & Co currency fluctuations.
Wealth Management Please ensure you read the Important Information section at the end
of this document.Fund manager’s review
The ongoing coronavirus pandemic and ensuing lockdowns posed a challenge as
winter approached, but positive vaccine news boosted investor confidence about
the global economic recovery during the fourth quarter.
Performance contributions Eurofins (2% position)
The strategy returned +16.9% in the fourth Eurofins is a laboratory testing business
quarter and has now returned +145.1% (after that focuses primarily on human health and
fees) since inception* (vs. +72.3% for US well-being. It operates in three markets:
inflation +5% annualised, our return objective). pharmaceuticals, food, and environment. Eurofins
This equates to an annualised return of +11.0% tests products for quality assurance and research
compared to inflation +5%**. and development for large clients like Nestlé,
Unilever, Pfizer, Johnson & Johnson and Novartis.
Equity markets continued their rebound well into
the fourth quarter as businesses and economies We believe the Eurofins business is competitively
reopened; accordingly, most of our stocks advantaged in that:
delivered strong performance.
• testing makes up less than 1% of the total
cost of products sold but is vital for product
innovation and product quality. Thus,
Equity markets continued relationships with large clients are enduring
and often last decades;
their rebound well into the
• the business has significant economies of scale
fourth quarter as businesses and operates in a very fragmented market;
and economies reopened; • food and pharmaceutical testing needs have
structural growth prospects – driven by the
accordingly, most of our stocks need for safety, innovation and regulation;
delivered strong performance. • Eurofins grows organically (taking share) and
inorganically (by buying up smaller players).
Our process Eurofins is run by Dr Gilles Martin – an
While we have had a good quarter, we tend to extraordinary entrepreneur who owns 36% of
not focus much on quarterly or even annual the business and has grown it from one lab
movements in share prices and instead focus to more than 800 labs worldwide over three
on the operating results of our businesses to decades. The firm has a unique decentralised
assess progress. As an example, Lloyds (+38.3%) and entrepreneurial culture which enables it to
and Wells Fargo (+28.9%) rallied strongly after grow and gain share.
the release of the news regarding the COVID-19 We believe that Eurofins can grow its intrinsic
vaccine. We do not believe that the intrinsic value at high single digits to low double digits
value of these businesses, which have existed over long periods of time. We have bought a
for more than 100 years, changed so much over starting position and will be monitoring it for
a quarter. As Ben Graham put it “the market is a future purchases.
* The Fund launched on 14th
November 2019. The investment voting machine in the short term and a weighing
strategy has an inception date
of 31st May 2012. The strategy’s machine in the long term”. We focus our time Constellation Software (5% position)
performance history is based and effort on identifying and owning businesses Constellation Software is a holding company that
on the company holdings within
a representative Rothschild & which we believe can generate attractive returns acquires, manages and builds small software
Co Wealth Management UK Ltd businesses. The software businesses that
Balanced portfolio, adjusted to over the long term.
account for US dollar reporting Constellation own are specialised to serve niche
and the fund’s 1% annual Changes to the Fund industries and are thus called vertical market
management fee and fund
operational costs of 0.20% Two businesses were added to the portfolio software (VMS) businesses. Constellation
annually.
in the fourth quarter. We have been carefully usually seeks VMS companies that have high-
** Annualised figures are
calculated on a compound basis researching these businesses for several recurring revenues, low customer churn and
to best represent the results of months to build our knowledge and conviction in good pricing power.
staying continuously invested
from inception of the strategy. their future economic prospects.
Halton Fund | January 2021 | Page 3In our view, Constellation has strong competitive Since we increased our position in March, we
advantages in acquiring businesses in the VMS have seen a 143.7% increase in the stock price.
space, driven by its scale, reputation for integrity We believe that Middleby is close to being fairly
and long-term ownership, as well as its ability to valued. Middleby’s management continues to
manage and improve the companies it acquires. execute very well against the backdrop of the
In addition, we believe that the growth runway disruption caused by COVID-19. As the discount
is still vast, with tens of thousands of potential between price and intrinsic value narrowed,
targets both in North America and Europe. expected forward returns came down and we
believed the capital could be redeployed into
Constellation is run by CEO Mark Leonard, who
better risk-adjusted return opportunities.
we regard as one of the best capital allocators
of recent times. Under his tenure, Constellation
has acquired more than 500 businesses serving The businesses we own are
a multitude of markets over the last 25 years
and has done so while achieving notoriously high competitively advantaged and
rates of return, usually in excess of 25%.
can grow their intrinsic value at an
We believe that Constellation can continue to
grow its business value in the mid-teens annually attractive rate for years to come,
over the next decade. which should result in positive
To fund the above two purchases, we reduced
our positions in Deere (from 8% to 4%) and
portfolio returns over time.
Middleby (from 7% to 2.3%).
As we end a year of economic turmoil, we
We have owned Deere since 2014 and have
believe that the small number of businesses
compounded our investment at 20.7% a year
we own have navigated the disruption well
for the last six and a half years (total 240%).
and have a line of sight to emerging stronger.
However, after the strong run up in price in 2020
The businesses we own are competitively
(+53%), the position reached 8% of the portfolio
advantaged and can grow their intrinsic value at Data sources: Rothschild & Co
and we believe that the valuation has become and Bloomberg
an attractive rate for years to come, which should
too expensive for a business which is quite Holdings are subject to change
result in positive portfolio returns over time. without notice. This document
cyclical. Hence, we decided to move capital into does not constitute a personal
other businesses which we feel can compound recommendation or an offer
or invitation to buy or sell
our capital at a better rate. We think Deere is securities or any other banking
or investment product. Past
an extremely well-run business with attractive performance is not indicative
long-term growth prospects and remains a core of future performance and
investments and the income
holding in the portfolio. from them can fall as well as rise.
Page 4 | Halton Fund | January 2021Fund performance
As at 31st December 2020, the net asset value per share was $13.29. The Fund size
was $78.3 million.
Performance since inception (%)*
Net
150
125
100
75
50
25
0
2013 2014 2015 2016 2017 2018 2019 2020
Halton Fund US Inflation (CPI) +5%
Performance comparison net of fees and costs (%)
Since
Q4 2020 2020 2019 2018 2017 2016 inception*
Halton Fund 16.9 6.7 31.7 -9.6 21.6 6.8 145.1
US inflation +5% 1.5 5.9 7.3 6.9 7.1 7.1 72.3
US inflation 0.2 0.9 2.3 1.9 2.1 2.1 14.0
Global equities (in USD) 14.7 16.3 26.6 -9.4 24.0 7.9 156.8
Dollar cashFund holdings
A concentrated portfolio of investments
Annualised 5-year
Date of Performance performance annualised Performance
Business initial since initial since initial growth in Market Weight this quarter
Holding Currency type purchase* purchase (%)* purchase (%)* intrinsic value (%) cap (bn) (%) (%)
Admiral GBP Property and 27/01/2015 189.2 19.6 12.81 8.6 2.2 11.3
casualty insurance
American USD Payments 20/02/2013 119.2 10.5 11.21 97.4 6.8 21.1
Express
Ashtead GBP Industrial services 03/12/2019 53.1 48.4 31.81 15.4 8.6 22.8
Berkshire USD Diversified 31/05/2010 228.7 11.9 9.2² 543.7 4.9 8.9
Hathaway financials
Cable One USD Cable & satellite 23/04/2017 245.3 39.9 32.9³ 13.4 2.3 18.3
Charter USD Cable & satellite 07/02/2017 104.6 20.2 n.a. 4
153.2 8.8 6.0
Communications
Comcast USD Cable & satellite 06/02/2017 51.6 11.3 14.83 239.7 10.0 13.9
Constellation CAD Information 18/11/2020 7.6 n.a. 26.0 35.0 5.3 12.4
Software technology
Deere USD Agricultural 09/03/2014 253.9 20.4 7.7¹ 84.3 4.0 21.7
equipment
Eurofins EUR Healthcare 11/11/2020 -6.1 n.a. 15.0 13.1 1.9 1.6
Fox USD Broadcasting 14/03/2019 -26.3 -15.6 n.a.4 17.3 7.2 4.6
Lloyds GBP Bank 28/06/2011 2.6 0.3 3.1 5
25.8 4.1 38.3
Mastercard USD Payments 06/11/2018 81.2 31.8 19.81 335.8 4.5 5.7
Middleby USD Food equipment 06/08/2018 23.2 9.1 8.93 7.2 2.3 43.7
Moody's Corp USD Ratings agency 25/09/2017 115.9 26.6 15.43 54.5 7.0 0.3
Ryanair EUR Airline 11/05/2011 416.4 18.6 15.6 1
18.6 9.5 43.4
S&P Global USD Ratings agency 11/02/2018 90.6 25.0 23.6³ 79.1 5.6 -8.7
Wells Fargo USD Bank 21/02/2013 8.5 1.0 9.05 124.8 4.7 28.9
Cash USD — — — — — — 0.5 —
Growth in intrinsic value calculations
1. For cyclical businesses, we believe that earnings per share averaged over five years is an appropriate measure.
2. For Berkshire Hathaway, we believe a combination of operating earnings plus investments is an appropriate measure.
3. For less cyclical businesses, we believe that free cash flow is an appropriate measure.
4. Charter and Fox do not yet have a five-year history; for Charter, a less cyclical business where we would use free cash flow,
the three-year number is 13% per year.
5. F
or banks, we’ve assessed intrinsic value growth based on tangible book value per share in order to normalise the annual
fluctuations in earnings.
* In Rothschild & Co Wealth Management UK Ltd client portfolios.
Holdings are subject to change without notice. Percentages may not add up to 100% due to rounding. This document does not constitute a personal recommendation or an offer or
invitation to buy or sell securities or any other banking or investment product. Past performance is not indicative of future performance and investments and the income from them
can fall as well as rise.
Page 6 | Halton Fund | January 2021The chart below shows the relative size of the fund holdings together with our
qualitative assessment of the business models and management and their
prospective returns.
Bubble size corresponds
to position weights
Ryanair
Lloyds 2%
Fox
Wells 8%
Fargo Halton 10%
portfolio
Comcast Constellation
Forward returns
American Cable
Eurofins
Express One S&P
Berkshire Global
Charter Hathaway
Middleby
Ashtead
Admiral
Deere
Moody's
Mastercard
Business and management
This is not a promotion or solicitation of the Rothschild & Co WM SICAV SIF – Halton Fund, which is not usually available to execution only or
advisory clients.
Source: Rothschild & Co.
Halton Fund | January 2021 | Page 7Fund allocations
The Fund is invested across global regions and currencies.
Geographic exposure by company revenue Company listing currency
0.6%
0.8% 0.4% 11.3%
6.0%
13.1%
14.8%
10.7% 68.4%
73.8%
North America Japan Pound sterling Euro
UK Latin America US dollar
Europe Africa
Asia
Percentages may not sum to 100% due to rounding.
Source: Bloomberg.
Page 8 | Halton Fund | January 2021Supporting information
Rothschild & Co WM SICAV SIF – Halton Fund
Type of fund The Halton Fund is a sub-fund of a Luxembourg Société d’Investissement à Capital
Variable (“SICAV”).
Legal structure Public limited company subject to SIF Law and Company Law with a Board of Directors.
Objective The Sub-Fund’s objective is to achieve long-term capital growth predominantly through a
worldwide portfolio of equities in any economic sector.
The Sub-Fund will principally invest in equities or equity-related securities (such as
equity funds, ETFs and derivatives) and tracking stocks.
Launch date 14th November 2019
Base currency US dollar
Synthetic OCF* 1.20%. This includes the manager’s fee (1.00%) and other fund expenses (0.20%).
Pricing Valuation day for subscriptions: each business day
Valuation day for redemptions: each Thursday
Settlement period: usually T+3
Front end load Up to 5% (waivable for Rothschild & Co clients)
Back end load Up to 5% (waivable for Rothschild & Co clients)
Comparators US CPI +5%
Financial year-end 31st December
Investment manager Rothschild & Co Wealth Management UK Limited
Share classes Accumulation, income and gross income
Management company Rothschild & Co Investment Managers
Fund administrator, registrar Northern Trust Global Service SE
and transfer agent
Depositary and paying agent Northern Trust Global Service SE
Auditor Ernst & Young SA, Luxembourg
Regulator Commission de Surveillance du Secteur Financier (“SCCF”)
Tax UK reporting status is available
* Based on UKREP Inc C share class. Details for other share classes available on request. The Ongoing Charges Figure (OCF) is the ratio of the
share class’ total disclosable costs (excluding overdraft interest) to the average net assets of the share class. It is intended to provide a reliable
figure that gives the most accurate measure of what it costs to invest in the Fund.
Halton Fund | January 2021 | Page 9Notes
At Rothschild & Co Wealth Management we offer an objective long-term
perspective on investing, structuring and safeguarding assets, to preserve
and grow our clients’ wealth.
We provide a comprehensive range of services to some of the world’s
wealthiest and most successful families, entrepreneurs, foundations
and charities.
In an environment where short-term thinking often dominates, our long-
term perspective sets us apart. We believe preservation first is the right
approach to managing wealth.
Important information
Rothschild & Co Wealth Management UK Limited offers This document is distributed in the UK by Rothschild & Co Wealth
discretionary portfolio management services to its prospective Management UK Limited. Law or other regulation may restrict the
clients and clients. We may, at our discretion, sometimes deliver distribution of this document in certain jurisdictions. Accordingly,
our balanced portfolio for clients using a fund vehicle where it recipients of this document should inform themselves about and
matches your requirements. We do not solicit potential investors observe all applicable legal and regulatory requirements. For the
with materials for funds: you should only read this document avoidance of doubt, neither this document nor any copy thereof
having already been provided with materials for our standalone may be sent to or taken into the United States or distributed in
discretionary investment management services. This document the United States or to a US person. References in this document
does not constitute promotion or solicitation of the Rothschild & to Rothschild & Co are to any of the various companies in the
Co WM SICAV SIF – Halton Fund which is not usually available for Rothschild & Co Continuation Holdings AG Group operating/
purchase on an execution only or advisory basis. trading under the name “Rothschild & Co” and not necessarily
to any specific Rothschild & Co company. None of the Rothschild
This document is strictly confidential and produced by Rothschild
& Co companies outside the UK are authorised under the UK
& Co for information purposes only and for the sole use of the
Financial Services and Markets Act 2000 and accordingly, in
recipient. Save as specifically agreed in writing by Rothschild &
the event that services are provided by any of these companies,
Co, this document must not be copied, reproduced, distributed
the protections provided by the UK regulatory system for retail
or passed, in whole or part, to any other person. This document
customers will not apply, nor will compensation be available
does not constitute a personal recommendation or an offer
under the UK Financial Services Compensation Scheme. If you
or invitation to buy or sell securities or any other banking or
have any questions on this document, your portfolio or any
investment product. Nothing in this document constitutes legal,
elements of our services, please contact your client adviser.
accounting or tax advice.
The Rothschild & Co Group includes the following businesses
The value of investments, and the income from them, can go
(amongst others): Rothschild & Co Wealth Management UK
down as well as up, and you may not recover the amount of your
Limited. Registered in England No 4416252. Registered office:
original investment. Past performance should not be taken as
New Court, St Swithin’s Lane, London, EC4N 8AL. Authorised
a guide to future performance. Investing for return involves the
and regulated by the Financial Conduct Authority. Rothschild
acceptance of risk: performance aspirations are not and cannot
& Co Bank International Limited (No 1088). Registered office:
be guaranteed. Should you change your outlook concerning your
St Julian’s Court, St Julian’s Avenue, St Peter Port, Guernsey,
investment objectives and/or your risk and return tolerance(s),
GY1 3BP. Licensed and regulated by the Guernsey Financial
please contact your client adviser. Where an investment involves
Services Commission for the provision of Banking and
exposure to a foreign currency, changes in rates of exchange may
Investment Services. Rothschild & Co Bank AG. Registered office:
cause the value of the investment, and the income from it, to go
Zollikerstrasse 181, 8034 Zurich, Switzerland. Authorised and
up or down. Income may be produced at the expense of capital
regulated by Eidgenössischen Finanzmarktaufsicht FINMA.
returns. Portfolio returns will be considered on a “total return”
basis meaning returns are derived from both capital appreciation Investment returns and the principal value of an investment
or depreciation as reflected in the prices of your portfolio’s will fluctuate and may be volatile. An investment in the Fund
investments and from income received from them by way of involves significant risks, including the risk of loss of capital. The
dividends and coupons. Holdings in example or real discretionary Rothschild & Co WM SICAV SIF – Halton Fund is suitable only
portfolios shown herein are detailed for illustrative purposes for sophisticated investors and requires the financial ability and
only and are subject to change without notice. As with the rest of willingness to accept the risks inherent in an investment in the
this document, they must not be considered as a solicitation or Rothschild & Co WM SICAV SIF – Halton Fund. No assurance can
recommendation for separate investment. be given that the Rothschild & Co WM SICAV SIF – Halton Fund’s
investment objectives will be achieved. Account valuations of
Neither MSCI nor any other party involved in or related to
individual investors may vary and such historical returns may not
compiling, computing or creating the MSCI data makes any
reflect the performance of any one investor.
express or implied warranties or representations with respect
to such data (or the results to be obtained by the use thereof), There can be no assurance that an investment will achieve
and all such parties hereby expressly disclaim all warranties of returns at levels comparable to the returns reflected herein. An
originality, accuracy, completeness, merchantability or fitness for investors’ return may be different than that of the Rothschild &
a particular purpose with respect to any of such data. Without Co WM SICAV SIF – Halton Fund because of, among other things,
limiting any of the foregoing, in no event shall MSCI, any of its differences in the amount of capital at risk, diversification, risk
affiliates or any third party involved in or related to compiling, tolerance and portfolio turnover.
computing or creating the data have any liability for any direct,
No independent party has audited the performance results shown
indirect, special, punitive, consequential or any other damages
herein, nor has any independent party undertaken to confirm that
(including lost profits) even if notified of the possibility of such
such results reflect the trading method under the assumptions or
damages. No further distribution or dissemination of the MSCI
conditions of Rothschild & Co’s investment process.
data is permitted without MSCI’s express written consent.
The indices referenced herein are well-known market indices
Although the information and data herein are obtained from
which are included merely to show the general trend in the
sources believed to be reliable, no representation or warranty,
markets for the periods indicated and are not intended to imply
expressed or implied, is or will be made and, save in the case
that the pro-forma returns were comparable to the indices
of fraud, no responsibility or liability is or will be accepted by
either in composition or element of risk or that the Rothschild
Rothschild & Co as to or in relation to the fairness, accuracy
& Co WM SICAV SIF – Halton Fund’s portfolio is benchmarked
or completeness of this document or the information forming
to the indices. The indices are unmanaged, may or may not
the basis of this document or for any reliance placed on
be investable, have no expenses and reflect reinvestment
this document by any person whatsoever. In particular, no
of dividends and distributions. Index data is provided for
representation or warranty is given as to the achievement or
comparative purposes only. A variety of factors may cause an
reasonableness of any future projections, targets, estimates or
index to be an inaccurate benchmark for a particular fund and
forecasts contained in this document. Furthermore, all opinions
the index does not necessarily reflect the actual investment
and data used in this document are subject to change without
strategy of the Rothschild & Co WM SICAV SIF – Halton Fund.
prior notice.
R&CO WM/HF/01/21You can also read
