Gold and cash to the fore for COR as fund ‘crushes’ ASX 200 Index
The Melbourne-based boutique fund manager Cor Capital has posted a strong performance for financial year ending June 30, 2020, beating the ASX 200 Accumulation Index by more than 17 percent, for its flagship fund, the Cor Capital Fund, which is approved for superannuation across various platforms.
The Fund, a multi-asset real return fund with an absolute return objective, posted a return of +9.5% net of fees for the 12-months to June 30, 2020 and +4.9% net of fees for the first six months on the calendar year.
Davin Hood, founder of Cor Capital, commented the Fund was established to meet a demand from investors with a ‘keep me wealthy’ mindset.
“The Cor Capital Fund is positioned as an ‘all weather’ investment fund that seeks to generate stable positive returns, regardless of prevailing economic or financial market conditions. We find it is commonly used by investors as a core holding, or to improve traditional equities, bond and balanced strategies,” says Hood.
The Fund portfolio is highly liquid and diversified. A hallmark of the fund is an unconventional portfolio structure which, from a downside perspective, comprises equal weights of developed-market equities, precious metals, fixed interest and cash.
He adds: “This quartile asset allocation reflects complete agnosticism to inflation, growth, and financial system outcomes over our investment time horizon. The Fund is systematically rebalanced to maintain this ‘4 quarters’ asset ratio. The Fund also employs an active derivative strategy which asymmetrically tilts exposures and aims to add return.
“If rebalanced properly, non-correlated assets held in equal weightings generate better portfolio compound returns, particularly when price volatility is high,” says Hood.
“The 25% cash allocation is sometimes queried by observers. However, it is essential if we are to achieve our goal of avoiding losses over any rolling 12-month period and has been a significant contributor to the success of the Fund since inception in 2012,” says Hood.
“Over the life of the Fund gold has been the main component of our precious metals holding and was the largest contributor to performance over the year, accounting for 66 percent of the Fund’s gross return of +10.6%. Precious metals contributed a further 17 percent of the gross return both via rebalancing effects and within the options overlay strategy.
“Also of note was the positive 12-month contribution of equities during a period where the Australian stock benchmark including dividends fell by -7.7%.
“The absolute approach to diversification that we chose for the Fund at its genesis aligns well with the unchartered waters we are currently in. We have significant exposure to assets that should do relatively well whether the ongoing money printing causes inflation or whether the fiscal support tap is turned off too early.
“Regardless, we are positioned with cash and sovereign bonds for a deep recession or deflation, and gold and commodity exposure for inflation. High volatility and modest-to- low returns are common elements in many current forecasts and we feel prepared for that scenario too.
“This is a time for cool heads and robust structures. Managed investments that combine this criteria with a track record of delivering absolute returns are rare. Whether investors employ the Cor Capital Fund as a liquid alternative investment or a core holding, we are confident the Fund will play a role in managing the prevailing global challenge,” says Hood.
The Fund sits in the top decile over one, three and 5-year timeframes, and on Morningstar’s Australia ‘multi asset – balanced’ database of 131 funds, the Cor Capital Fund was the #1 performer over 1 year, and #2 over 3 and 5 years, as at 30 June 2020.