There may be investors in the Gryphon multi asset funds that are currently a little perplexed by the shift in the relative performance of the funds, particularly if they are not familiar and comfortable with the funds’ philosophy and process. We have received some enquiries from investors asking interesting and useful questions and, as a result, we thought we’d consolidate the information in an article.
GRYPHON PRUDENTIAL FUND PERFORMANCE VERSUS ITS BENCHMARK
We see investing as a continuous action. While short term performance is relevant, we consider protecting capital as paramount for longer term performance; it’s by protecting investors’ capital that inflation-beating returns are made possible. This is the reason the multi asset funds are positioned as they are; zero exposure to equities currently as a result of concerns for the volatility and valuation of the market. Sometimes this has made us look good relative to our peers, and sometimes it means that we lag in the performance rankings. It is for this reason we suggest investors measure ‘fund performance versus benchmark’ over a rolling three-year period. This allows the time and space for the philosophy of the fund to deliver the expected performance. As you’ll see from the chart below, the Prudential Fund has delivered on its objective over its history.
THE FUND WAS HEAVILY INVESTED IN BONDS FROM APRIL 2020 UNTIL MID-MAY 2021 – WHY DID YOU SELL OUT?
Attached please find links to two articles that should assist with this explanation. The first article offers insight into the reasons we held bonds at the time and our expectations around that; the second details the motivation for the move out of bonds.
WHAT IS THE RATIONALE FOR YOUR CURRENT EXPOSURE?
Having considered all options outside of equities, our investment decision has been to move into cash – local cash (60%), offshore cash (Swiss Franc – 30%) – and gold (10 %). This move illustrates our view of de-risking in mitigation of this stage where we consider markets/risky assets (including the Rand) to be priced for perfection.
While we are aware that cash is currently a low-yielding asset, it offers investors downside protection. This decision supports the objective of the multi asset funds which is to protect investors’ capital in order to make inflation-beating returns more likely. It also means we keep our powder dry to be able to take advantage of opportunities which can suddenly appear in volatile markets like these (i.e. shift back into equities or bonds swiftly if the indicators signal this).
HOW CAN I BE COMFORTABLE WITH THE CURRENT PERFORMANCE RANKING POSITION?
Although the investment horizon for these funds is medium- to longer-term, human nature constantly wants to check-in, with the result that we constantly complete and compare. Understanding the nature of the fund, its objective and behaviour is critical. While we like to consider ourselves ‘competitor agnostic’, we are aware of the vulnerabilities of investors. Our commitment is not to relative performance – we cannot assure investors of any position in the ranking table, and that is not the objective of the fund. Our objective is to protect and grow investor’s capital thus making inflation-beating returns over the longer term more likely. But, as you can see, over the longer term, the funds find themselves very comfortably positioned near the top.
Ranking tables are a snapshot in time. The table below illustrates how the relative position of the Gryphon Prudential Fund bounces like a shot cat without any significant decline in the funds NAV (net asset value). It is simply the consequence of our peers rising and falling with the tide of the market.
Furthermore, while the funds have delivered pleasing performance since their inception, another factor that should also be considered besides performance, is the diversification offered compared to the peers. This article offers some detailed insight into that perspective: Correlation Conversation.
The following articles may also be useful reading for additional insight to understanding what to expect of the funds:
- This article explores the myth that markets cannot be timed: Can Markets Be Timed?
- This piece offers detailed insight into the data-based indicators: Simple but not Easy
- This is a more recent piece on the difficulty of over-riding emotion/the risk of FOMO: One Trick Pony or Dark Horse
- This is the link to other articles on our website that you might want to have a look at: Gryphon Speaks
We have utmost confidence in our process and would gladly spend some time with any investors to offer additional insights thus enabling you to feel fully vindicated in the trust and confidence that you have placed in the Gryphon team.
Finally, Gryphon’ approach to investing is quite different to the mainstream; we are available and committed to any investor that has the curiosity and courage to consider incorporating our funds into their portfolios. Please let us know if you’d like to arrange an opportunity for us to engage with you at any time.