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Valuations not Events

Last week we refrained from writing a Crescendo. Russia had just invaded Ukraine and we felt we had nothing of value to add to the many commentaries being sent around. You will note that our skillset lies not in macroeconomic forecasting or geopolitical analysis. You will also know that our investment process is disciplined and responds to changes in valuations rather than macro or geopolitical events, which is why our portfolios are always well diversified to limit exposure to any one potential scenario.  Thus, when a crisis that no-one predicted hit markets (most respected analysts reporting the probability of invasion as being very low indeed), our portfolios were not positioned in a way that our investors need be unduly worried.

The significant allocation to physical gold and gold mining companies has been a positive contributor, while the diversified nature of our currency exposure is also proving beneficial with the US dollar strengthening against sterling. Furthermore, the Funds have significant exposure to real assets, many of which march to their own beat, exhibiting low economic sensitivity and low correlation with other financial markets. Whilst the current situation might have a short-term effect on the share prices of the investment trusts we use to access these alternatives, we are confident that it should not impact underlying return drivers. As such we are alert to any opportunities that might materialise within the alternative investment trusts, should share prices become detached from their attractive long-term fundamentals.  Any changes to the portfolios will be very selective given the volatility that may persist for some time but, repeating the message of recent months, we remain very excited by the prospects of attractive returns from the Funds over the coming years.

Meanwhile, the events of the last few weeks remind us yet again of the importance of humility. There are certain things that we can’t predict. There is discipline in recognising this and ensuring your investment process doesn’t flip flop around in the effort to constantly react to events. We are well aware of what we can’t do, and our investment process reflects that.

Ben Conway – Head of Fund Management

Ben Conway

This financial promotion is issued by Hawksmoor Fund Managers which is a trading name of Hawksmoor Investment Management (“Hawksmoor”). Hawksmoor is authorised and regulated by the Financial Conduct Authority. Hawksmoor’s registered office is 2nd Floor Stratus House, Emperor Way, Exeter Business Park, Exeter, Devon EX1 3QS. Company Number: 6307442. This document does not constitute an offer or invitation to any person, nor should its content be interpreted as investment or tax advice for which you should consult your financial adviser and/or accountant. The information and opinions it contains have been compiled or arrived at from sources believed to be reliable at the time and are given in good faith, but no representation is made as to their accuracy, completeness or correctness. Any opinion expressed in this document, whether in general or both on the performance of individual securities and in a wider economic context, represents the views of Hawksmoor at the time of preparation and may be subject to change. Past performance is not a guide to future performance. The value of an investment and any income from it can fall as well as rise as a result of market and currency fluctuations. You may not get back the amount you originally invested. FPC140

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