16 Oct Hidden Champions Fund October Updates
Dear Clients and Partners,
Achieving Investment Resilience Together with Hidden Champions – YTD Over 20%
An update on the 2nd anniversary of our Hidden Champions Fund – our YTD 2017 returns (net after fees) is over 20%, with our Fund benefiting from the flight-to-quality effect as the overall market retreats while we see a 7.9% gain in the month of September, bringing our total absolute returns to over 37% since our inception in September 2015. Please click to download our latest Hidden Champions Fund Factsheet as at end September 2017.
We like our clients to ask us tough questions to make intelligent decisions. Our first HNW client who invested $1 million with the Fund in June 2017 after asking tough questions, and in the process appreciated the high-conviction investing approach to achieve investment resilience, is up over 18% in returns since our initial launch offering event that we held four months ago in June. We also have had existing clients subscribing additional capital into the Fund. Thus far, since obtaining our Registered Fund Management Company (RFMC) license from the Monetary Authority of Singapore (MAS) in April 2017, we have raised over $5.5 million from external clients, generated over $8 million in absolute profit, bringing our total asset under management to over $35 million.
We will be extending our Founding Partnership Cash Bonus till the end of October for both existing and prospective clients before our Fund soft closed. For investors who like to participate in the long-term non-linear growth of the underappreciated emerging Hidden Champions, we like to invite you to our office over the next two weeks till the end of the month to find out about the subscription process. Please drop us an email at firstname.lastname@example.org.
We have also made some improvements to our website www.hiddenchampionsfund.com which includes a section of “Business Builders of Asian Hidden Champions – Hall of Fame” to map out a selected group of Asian entrepreneurs whom we have monitored over the decade plus and admire and respect them. Please let us know of your valuable comments and who else do you admire in Asia and would like us to include in the Hall of Fame, as well as share with us which Asian entrepreneur do you like most.
We are careening towards the end of the bull market. At the Hidden Champions Fund, we aim to protect and grow capital by positioning for and capitalizing on the upcoming downturn in the global/economic business cycle. How do we prepare for crisis? Time the market? Buy put options? Buy “safe haven” bonds? In Issue 2 of our Upward Toiling newsletter, we shared the insightful empirical research “The Best Strategies for the Worst Crises”. Evidence was reported that an investment strategy in quality stocks benefit from a “flight to quality” effect during crises: “While quality stocks logically deserve a higher price-to-book ratio, in reality they do not always exhibit such a premium. Towards the end of the bull market, quality stocks often looked underpriced. Then, when the market has a drawdown, these stocks have outperformed, benefiting from the so-called flight-to-quality effect.” Specifically, the quality factor delivered 43.7% returns when markets were down -45.3% in crisis periods.
At the Hidden Champions Fund, we expect to outperform when the market retreats as our Hidden Champions benefit from the flight-to-quality effect in which investors flee their speculative yield and cyclical bets to seek shelter in companies with higher quality fundamentals and long-term growth prospects. our Fund tends to do better when the overall market is tepid and lacklustre. For instance, in 2016, when MSCI and Singapore STI index were flattish to down at +2.5% and -0.1% respectively, the Hidden Champions Fund is up 14.3%.
With the Value-to-Quality (VQ) ratio of our Hidden Champions Fund presently over 170% superior than the market comparable, we believe that the Fund is significantly undervalued to its intrinsic value and the downside risks are limited to protect investors. As the CIO & CEO of the Hidden Champions Fund, a significant part of my personal savings is invested in the Fund along the same terms and fees as the incoming external client.
During the investment process, many investors are led astray by shortcuts. It’s hard to see how it could be otherwise when the experts and thought leaders wily talk us with shortcuts, hacks and tricks that optimize for quick and obvious success. How to build something that last through time and crises is a lifelong fascination and a calling for us at the Hidden Champions Fund where we seek to invest in the perennial compounders that last the distance to generate sustained returns.
The Hidden Champions Fund is not for everyone. Only for investors who see themselves in the Hidden Champions – their struggles, how they are misunderstood and overcome the odds with persistence, and the non-linear triumphs – that we invest in with high-conviction when the reward-to-risk and value-to-quality metrics are compelling. Only for investors who want to go the right way, not the easy way.
It’s easy to be good when things are good. It’s easy to be cheerful and generous with the wind at your back. It’s easy to stick with a philosophy when all is well. Things will not always go well. You will be driven back upon yourself. It could be today. It could be tomorrow. It could be for a short time or it could be years in the so-called wilderness.
Are you ready for that? Are you sure you’re going to like what you find there? Because if you’re not, now is the time to do that work—that “hard winter training” that the Stoics talk about. Do it now before it’s too late. We hope that you will be inspired by the lessons in business building and life of what the Hidden Champions have to share with us in how they overcome adversity in harsh conditions, rebound forward stronger to achieve resilience, sustainable growth and serenity.
To our clients, we are thankful and grateful for your trust and support in us all this while – and we will live and die and breathe our art and science into investing in Hidden Champions to protect your dreams because you protect ours.
KEE Koon Boon | Chief Investment Officer & CEO
Hidden Champions Fund