So far, so good, so Appian.
Investors in the Appian Equity Fund have enjoyed a great 12 months as the fund has delivered a return of over 21% in the period up to March 1st this year. Indeed all the Appian Funds have enjoyed a very healthy start to 2015:
Appian Equity Fund +11.2%
Appian Value Fund +6.5%
Appian Small Companies +9.6%
(Performance Jan 1st to March 1st 2015, net of all fees)
Global stock markets have posted good numbers in the past 12 months but the period hasn’t been without incident. Early in 2014 markets were beset by fears over a US economy which had literally frozen to a halt. So called “Geo-political” fears surfaced in the Middle East and Ukraine throughout most of the year. The oil price halved providing both relief and stress albeit not in equal measure. The second half of the year saw concerns emerging over deflation in the Eurozone and its overall cohesion in the face of renewed Greek uncertainty. Volatility in government bond markets surged to levels never experienced before. We also faced concerns over the Ebola outbreak mostly in Liberia, Guinea and Sierra Leone, but with reported cases in the US, UK and Europe.
The Appian Equity Fund navigated a successful path through this uncertainty. The fund’s characteristics remain a solid foundation for its longer term performance. Our stock filters continue to target those companies with solid balance sheets, excellent and sustainable free cash flow, trading at attractive valuations. Our due diligence then helps to identify the management teams that can translate these fundamentals into solid share price performance. Critically our focus on these quality factors results in a portfolio that has significantly lower volatility than benchmark indices. A recent study compared the Appian Equity Fund with close to 800 global equity funds and demonstrates how Appian can generate above average returns while taking on a lower level of risk. The fund sits comfortably in the North West quadrant – lower volatility/higher return.
This means a superior outcome for our investors.
The fund invests, as always, in a spread of high quality highly liquid stocks around the world. Typically we look to hold between 40 and 45 individual stocks across a good range of sectors. We are not driven by benchmarks but by opportunity. Our funds display a high “active share” which underlines how we are conviction stock pickers and not just “hugging” some benchmark.
Some of the stock ideas which have worked well for us in the past 12 months include Humana in the US, the managed healthcare company, which has risen close to 50% and Unilever, the Dutch based giant which brings us amongst others Magnums, Comfort Fabric Conditioner and Dove, and has grown in value by one third.
We believe our combination of rigorous stock screens and investment judgement makes for a process that is robust and repeatable and while no doubt financial markets over the next twelve months will serve up bouts of volatility, the Appian approach will continue to deliver solid risk adjusted returns over meaningful time periods.