It’s been a tough year for investors, with 15-year gilts, the MSCI World Index and the NASDAQ all down by more than 20% since the beginning of January, says Gary Reynolds, Courtiers CIO. Although “mindful” that anyone holding Courtiers Multi-Asset Funds and comparing the value of their portfolio today with its value on January 1 will see it has fallen, compared with the general performance of markets across the world, “with the exception of the FTSE, we’ve done a lot better than those figures,” says Gary.
Since 1 January, the Growth Fund is off just over 8%, the Cautious Fund is down just over 3% and the Balanced Fund has declined by just under 6%.
Being long-term investors, Gary says that Courtiers investors are aware that the price to pay for above average returns and returns in excess of cash and safer assets is volatility. “We cannot shield them from volatility, but what we try to do is to make sure that in the long-run they’ll hit their objective and that when we do get a fall in markets like this, we’ll fall significantly less.”
Gary says that Courtiers has been following a very deliberate strategy of investing in what he describes as “reasonable companies”. These are companies with decent balance sheets and priced to provide ‘a margin of safety’ to withstand difficult times. Generally, he says, Courtiers buys into companies at Price-to Earning or P/E ratios “that are less than the market average”. (The Price-to-Earnings ratio is a commonly used way of valuing a company. It is calculated by dividing the price of a company’s shares by its earnings per share. It can also be used in aggregate form to value a particular stock market or even a fund.)
Gary gives the example of Courtiers UK Equity Fund, which is trading on a historic price earnings ratio of 8.7, predicted to fall to 8.2 next year. In comparison the S&P Index has been trading at above 20 times earnings. The decision not to hold long-dated gilts has also paid off, and is why the Cautious Fund and Balanced Fund “have done so extremely well compared to their peer groups.”
Compared to 2020 when markets collapsed in response to the pandemic, “and there were loads of great opportunities”, Gary says that in today’s market it pays to be more selective. “There are lots of businesses that are not going to justify their very high valuations in the long run, you don’t want to be invested in those.”
Gary predicts that it’s going to be a tough time for the economy, with a plethora of difficulties and challenges, including rising inflation, further interest rate rises, the continuing impact of the conflict in Ukraine, as well as huge disruptions in global supply chains aggravated by tension between the US and China.
Although the economy is in for “a tough time” he refuses to be “a doomster” and is holding firm to his belief that “we’re not going to get a big recession”.
Looking ahead, he says “there are lots of very positive things going to happen to the world economy, particularly “the revolution in creating green energy that is going to create tremendous opportunities for lots of businesses, both directly and indirectly.”