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| Quarter | Letter Date | Fund Name | QTD | YTD | Tickers | Themes | Quick Take |
|---|---|---|---|---|---|---|---|
Buyside Digest is not affiliated with, and does not endorse, Farrer 36 Asset Management. This analysis is provided for institutional research purposes only and is not investment advice.
"Strong quarter with 13.75% returns as key holdings proved their business models. eDreams subscription program reached profitability, Sea Limited achieved surprise earnings turnaround, and Evolution maintained 30%+ growth."
Farrer Wealth's Managed Solution delivered strong Q3 FY2023 performance with 13.75% returns versus 6.15% benchmark, driven by gains in Evolution, eDreams, and Sea Limited. The portfolio focuses on 12-20 positions in small-to-mid cap businesses growing market share in expanding markets, emphasizing companies undergoing transformational change early in their maturity. Key holdings showed solid progress: eDreams proved its Prime subscription model with 5% EBITDA margins, Sea Limited achieved profitability ahead of schedule after aggressive cost-cutting, and Evolution continued strong growth despite Asia market concerns. The manager reduced cash to 5.36% to capitalize on market weakness while maintaining put option hedges. Risks include high Brazilian interest rates affecting Assaí's debt service and potential AI disruption to TaskUs's BPO business. With many positions unfairly sold off in 2022 now showing strong earnings, the manager remains highly optimistic about the portfolio's future despite ongoing macro uncertainties.
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Algorithmic conviction, macroeconomic posture, and risk appetite signals extracted from this quarterly letter with qualitative explanations.
Market Conviction
Portfolio concentrated in 12-20 positions with detailed thesis explanations for each major holding. Manager provides specific position sizing context (top ten positions mentioned) and demonstrates willingness to add to existing positions during weakness. However, hedged language around some risks and use of protective options prevents higher scoring.
Growth Outlook
Manager acknowledges macro challenges including bank failures, rate hikes, and inflation but views them as isolated incidents rather than systemic threats. Describes market performance as strong despite headwinds, suggesting cautiously positive but not bullish outlook.
Risk Appetite
Reduced cash position from higher levels to 5.36% to take advantage of market weakness, indicating moderate risk-on positioning. However, continues using put options for portfolio protection, showing measured rather than aggressive risk appetite.
Capital Deployment
Cash position reduced to 5.36% as manager took advantage of market weakness to augment existing positions. No new positions added but capital allocated to existing holdings. Moderate deployment activity focused on adding to conviction names rather than broad-based expansion.
Forward Guidance
Manager states remaining highly optimistic for portfolio future and continues deploying capital into existing positions. However, acknowledges macro uncertainty and maintains hedging strategies, indicating selective deployment rather than aggressive expansion.
Language Signal
Language includes positive terms like strong performance, solid results, and highly optimistic, but balanced with risk discussions around debt loads, AI threats, and macro live wires. Net positive but measured tone throughout.
Perceived Risk
Manager identifies specific risks including bank failures, high Brazilian rates, AI disruption to BPO, and regulatory concerns in Indonesia. However, characterizes bank failures as isolated incidents and maintains generally constructive view. Moderate risk acknowledgment without alarm.
Opportunity Density
Manager continues evaluating new ideas but chose to allocate to existing positions rather than add new names, suggesting selective but available opportunities. Focus on adding to existing conviction positions indicates reasonable opportunity set within current holdings.
Time Horizon
Explicitly states goal of holding businesses for three-to-five years to allow companies to go through business cycles. Emphasizes long-term portion makes up 90%+ of portfolio and focuses on businesses early in maturation cycle. Clear multi-year investment horizon with patience for thesis development.
