The fund has a fairly short track record, having only launched in October 2014. FE Analytics shows in the year to June 14 2016 the fund has returned 5.4 per cent to investors, compared to the IA Targeted Absolute Return sector average of -0.60 per cent, while its benchmark, the Libor GBP 3 months, is up 0.6 per cent over the same period. Mr Moore points out over the year to the end of May 2016 the fund generated a 6 per cent return, putting it in the top quartile of its peer group and ahead of a 0.2 per cent return from its cash benchmark.
He says it is difficult to generalise about the factors that contributed to this outperformance. Instead, he notes: “In broad terms, the fund’s strong risk-adjusted returns have been derived from good stock selection and portfolio construction, with the long book making a larger contribution than our short positions.”
The manager does not name individual short positions but says the fund has benefited from shorts in a number of traditional “bricks and mortar” stores.
“Retail square footage is growing at a much faster rate, with the result the US now has more than twice the amount per capita of the next most ‘stored’ country,” he confirms. “The other side of this trade has been a successful long position in Amazon, which captured more than 40 cents out of every extra dollar spent last Christmas in the US. More importantly, it has greatly improved its ability to generate free cashflow from those sales,” Mr Moore says.
But he concedes he was too early taking long positions in Seagate Technology and Western Digital. “We spotted an emerging source of demand from the owners of the vast server farms that underpin the rapid shift to cloud computing and storage. While we still believe this insight will eventually produce attractive returns, there is too much capacity in the near term.”