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Quarter	Letter Date	Fund Name	QTD	YTD	Tickers	Themes	Quick Take

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Farrer 36 Asset Management 2023 Q2 Investor Letter | Buyside Digest

Back to Fund Profile (Farrer 36 Asset Management)

Primary Source Intelligence • Q2 2023 Letter Analysis

Farrer 36 Asset Management Quarterly Analysis

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.

Fund Returns

QTD+1.16%

Annualized-14.31%

Positioning StanceConstructive

GeographyGlobal

Digest Analysis

Quick Take

"Farrer Wealth's concentrated global equity strategy underperformed in Q4 FY2023 but showed strong momentum in June. The manager added high-quality UK kitchen supplier Howden Joinery at attractive valuations while trimming HDFC Bank."

Executive Summary

Farrer Wealth's Managed Solution returned 1.16% in Q4 FY2023 versus 8.30% for the benchmark, bringing full-year returns to 4.40% versus 13.05% for the benchmark. Since inception in July 2021, the portfolio has returned -40.11% versus -0.96% for the benchmark. The quarter was uneven with weakness in April and May as AI-linked stocks were favored, but June saw a strong 9.34% gain that outperformed the benchmark. The manager added Howden Joinery, a UK kitchen supplier with 40%+ market share, 60%+ gross margins, and trading at less than 10X EBIT despite strong fundamentals. HDFC Bank was sold due to merger overhang and full valuation. The macro environment appears to be improving with US inflation cooling and the rate-hiking cycle nearing an end. The manager has begun reducing cash and adding to positions, expressing optimism about portfolio prospects. The portfolio's top holdings are growing revenues and earnings significantly faster than the benchmark while trading at reasonable valuations.

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Institutional Meta Strategy

Meta Strategy Gauges

Algorithmic conviction, macroeconomic posture, and risk appetite signals extracted from this quarterly letter with qualitative explanations.

Signal Matrix

Market Conviction

72%

CautiousHigh

High Conviction (72%)

High conviction evidenced by concentrated portfolio of 12-20 positions, detailed analysis of individual holdings like Howden Joinery with specific financial metrics, clear thesis articulation, and willingness to hold through volatility. The manager provides specific position sizing context and demonstrates deep research into portfolio companies.

Growth Outlook

25%

BearishBullish

Bearish (25%)

The manager expresses cautious optimism about macro conditions, noting US inflation in the rear-view mirror and cooling inflation globally, but acknowledges a US recession is still expected and weak economic conditions in UK and other regions.

Risk Appetite

40%

DefensiveAggressive

Defensive (40%)

The manager is selectively adding to positions and reducing cash balance, indicating increased risk appetite, but maintains a measured approach with only one new position added and one position sold during the quarter.

Capital Deployment

35%

De-riskingDeploying

Net Neutral (35%)

The manager explicitly states they have 'started to rundown our cash balance as we add to current and new positions,' indicating moderate deployment activity. One new position was added (Howden Joinery) and one was sold (HDFC Bank), suggesting selective capital rotation rather than aggressive deployment.

Forward Guidance

50%

CautiousExpansionary

Neutral (50%)

The manager states they are optimistic and confident for the next year and onward, actively deploying cash into current and new positions, and sees a good runway ahead for many positions.

Language Signal

30%

BearishBullish

Bearish (30%)

Language is balanced with positive terms like 'optimistic,' 'confident,' and 'good runway' offset by risk acknowledgments including expected recession, weak UK economy, and the need for patience over 3-5 years.

Perceived Risk

45%

Low RiskElevated

Moderate Risk (45%)

Moderate risk perception with acknowledgment of expected US recession, weak UK economy, and various macro uncertainties, but risks are not central to the discussion and are balanced with improving conditions narrative.

Opportunity Density

60%

ScarceAbundant

Selective (60%)

The manager sees selective opportunities, adding one new position while maintaining focus on existing holdings. Describes Howden Joinery as a rare opportunity and expresses confidence in portfolio prospects, suggesting moderate opportunity density in their focused approach.

Time Horizon

75%

Short-TermLong-Term

Decade+ (75%)

Explicitly long-term oriented with statements that 'investments need to be made over a minimum of three-years and ideally five-years.' The manager emphasizes patience and waiting for the market to recognize value embedded in holdings, indicating a multi-year investment horizon.