Portfolio positioning in turbulent times

Market Insight
March 25, 2020

Both the CC Sage Capital Absolute Return Fund and the CC Sage Capital Equity Plus Fund have outperformed their respective benchmarks in the current environment.

As at 23 March 2020, the CC Sage Capital Absolute Return Fund has returned +6.98%* month to date and +8.35%* since its inception in 20 August 2019, delivering significant positive returns, uncorrelated with equity markets. This has been achieved by moving quickly to a defensive positioning in the portfolio with an early recognition of the spread of COVID-19 outside of China and the economic and financial impact of shutdown measures that were likely to be used to combat it.

We have been broadly underweight stocks with direct travel and tourism exposure as well as those with financial leverage or exposure to falling cash rates. We have maintained overweights across healthcare, consumer staples and telecommunications where we have some confidence in the ability of companies to maintain or grow profitability.

This strategy has been very successful to date, but there is now an extreme divergence in relative performance as well as an explosion in underlying volatility in the market. We’re focused on controlling this risk and have been steadily cutting gross exposure and locking in some profits in the portfolios.

While we remain defensively positioned, we are also thinking about the shape of the recovery when it comes and see a lot of opportunity to benefit from this. We are currently in the grips of panic and there are likely some dark days ahead, but we have complete confidence in the ability of the human species to adapt and persevere. These challenges will eventually be overcome and another bull market lies ahead of us.

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* Performance is based on the unit price as at 23 March 2020 and is after tax. Past performance is not indicative of future performance.