This time last year I said I’d sack myself if our returns didn’t improve. In the 12 months since, the Value Fund has returned 35%* to investors. The power of incentives, perhaps?
We have been trying our darndest all along, I promise. Although I really like this job and don’t want to lose it, the incentive hasn’t been any stronger this past year than those prior.
I do think we’re better investors than we were three years ago. Experience helps. And, whereas we didn’t have much luck in year one, we’ve had a few things go our way of late. Above all else, though, any one year’s return is subject to the variability you would expect from a concentrated portfolio like this (it is also subject to selective reference points – September 2011 was an all-time low for the Value Fund unit price).
It was a bit hard to say this after two mediocre years but, in any five year period, I’d expect a couple of years below average, a couple above average and, every now and then, a cracker of a year. In hindsight, I’m glad the big year didn’t arrive first. Exuberant expectations don’t help anyone. But I’m also glad we didn’t have to test your patience for five years.
Now everyone (particularly those who are interested but haven’t invested yet) wants to know what’s due next – is it back to mediocre or another cracking year?
The return since inception is still only 7% per annum. While that’s 4% a year better than the index, it’s still well short of our own expectations for the returns we should be delivering from a relatively small fund like this. The portfolio is still full of attractive stocks. And we’ve got three or four good ideas sitting on the sideline waiting for value to be realised elsewhere.
But, as for whether the returns are going to be generated in the next 12 months or a few years’ time, your guess is as good as mine.
Download the September quarterly report for a detailed look at the stocks driving the Fund’s returns and some reflections on the past three years.
*Past returns are no guarantee of future returns, but I’m guessing you know that.
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