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At the Helm


Recent weeks and months have certainly seen an uptick in volatility and unease in financial markets. The prime source of this continues to be developments in Greece and whether its future lies within or without the Eurozone, or indeed the broader EU. Politics as much as economics are dominating day to day moves in markets, and present a challenge to investors seeking to navigate a course through the noise.

These are demanding times for investors due to the confluence of several factors, any one of which on their own would normally command full attention. The European Central Bank continues with its programme of quantitative easing, buying up huge swathes of sovereign bonds and will not be deterred from that by market conditions or any consequences. This partly has forced bond yields down to unsustainably low levels which then unleashed savage volatility in fixed income assets as markets sold off, and the underlying illiquidity in some of these issues became apparent. Policy makers in the US are considering the timing of their first interest rate increase since 2006, and investors are divided on precisely how markets may respond. Into this mix we then add Greece and its future as a Eurozone member, with all the implications that has, not only for Greece but for the Eurozone as a whole, especially in an election-filled year.


How are we at Appian approaching this uncertainty in markets? Our core investment principles are constant. We seek to build and compound solid returns over time while always looking to secure these returns by protecting on the downside when we feel we should. 

Our current positioning in the Appian Value Fund and our dynamic approach to asset allocation demonstrates how we have kept a firm hand on the tiller as we steer a course through, what are at times, uncharted waters.

  • We are close to our minimum weighting in bonds. Strategically it has been our view for some time that this asset class is fundamentally expensive and didn’t offer value. We also harbour concerns over the true underlying liquidity in fixed income markets.
  • Within our bond allocation we have much lower duration than standard bond portfolios, meaning we are less sensitive to, and more protected from, severe changes in market conditions. Our duration measure is less than half of a typical bond portfolio.
  • Tactically we had already significantly reduced our exposure to equity markets given the progress made in recent years. We currently hold about 35% of the Value Fund in equities compared to a figure of close to 60% in early 2014.
  • Within our equity portfolios, rather than a broad-brush approach, we invest in a select number of stocks which meet our demanding quality criteria on issues such as return on invested capital and sustainable free cash flow, and are attractively priced. These characteristics can provide a “buffer” at times of market stress.
  • We have built up our exposure to assets such as forestry, property, and infrastructure – asset classes which can provide the long term returns we seek without the day to day volatility that other financial assets possess.
  • Finally we have built up our cash reserves within the fund and this currently comprises about 30% of the fund.


We believe that the Appian Value Fund is well set for the current stormy conditions and just as importantly has the potential, given our significant current allocation to cash, to take advantage of any significant market set-backs as conditions improve.
 

Fund Performance Year to Date 30.06.2015

Appian Value Fund

+6.62%

Appian Equity Fund

+12.6%

Appian Small Companies Opportunities Fund

+19.8%


 
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WARNING: The value of your investment may go down as well as up. Past performance is not a reliable guide to future performance. These investments may be affected by changes in currency exchange rates.

Appian Asset Management is regulated by the Central Bank of Ireland. No part of this document is to be reproduced without our written permission. This document has been prepared and issued by Appian Asset Management on the basis of publicly available information, internally developed data and other sources believed to be reliable. It does not constitute an offer or an invitation to invest, or the provision of investment advice. No party should treat any of the contents herein as advice in relation to any investment. While all reasonable care has been given to the preparation of the information, no warranties or representation express or implied are given or liability accepted by Appian Asset Management or its affiliates or any directors or employees in relation to the accuracy fairness or completeness of the information contained herein. Any opinion expressed (including estimates and forecasts) may be subject to change without notice. 

Appian Unit Fund Prices  
1 July 2015 

Appian Value Fund          140.41                  
Appian Equity Fund         164.30   
Appian Small Companies Opportunities Fund      176.25
Appian Liquidity Fund    106.45


For more detailed information on each of our funds click here
 

Patrick J Lawless
Managing Director
John Mattimoe
Head of Equity Analysis
 
Eugene Kiernan
Head of Investment Strategy
Gareth Henson
Portfolio Manager
 
Pat Kilduff
Head of Economic Analysis
Frank O’Brien
Consultant
Click here for more information about our Investment Team
Conor Fleming
Business Development Manager
Tel: (01) 662 3988 direct
Click here to email Conor
John Flavin
Senior Relationship Manager
Tel: (01) 662 4053 direct
Click here to email John
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